-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Faum0Wl61IwQRgTAVP1tjsSkQ22wvEcmcrNW5T6Z+vcBTR59ZkQF4MWlo8+41jvZ EaxmxXMEqVJGu9JikKQ2zg== 0001047469-08-007882.txt : 20080701 0001047469-08-007882.hdr.sgml : 20080701 20080701081847 ACCESSION NUMBER: 0001047469-08-007882 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 20080331 FILED AS OF DATE: 20080630 DATE AS OF CHANGE: 20080701 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VYYO INC CENTRAL INDEX KEY: 0001104730 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATIONS EQUIPMENT, NEC [3669] IRS NUMBER: 943241270 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-30189 FILM NUMBER: 08927705 BUSINESS ADDRESS: STREET 1: 6625 THE CORNERS PARKWAY STREET 2: SUITE 100 CITY: NORCROSS STATE: GA ZIP: 30092 BUSINESS PHONE: 6782828011 MAIL ADDRESS: STREET 1: 6625 THE CORNERS PARKWAY STREET 2: SUITE 100 CITY: NORCROSS STATE: GA ZIP: 30092 10-K 1 a2186625z10-k.htm 10-K
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2008

Commission File Number 000-30189

VYYO INC.
(Exact Name of Registrant as Specified in Its Charter)

Delaware (State or Other Jurisdiction of Incorporation or Organization)		94-3241270 (IRS Employer Identification No.)
6625 The Corners Parkway, Suite 100 Norcross, Georgia (Address of Principal Executive Offices)		30092 (Zip Code)

Registrant's Telephone Number, Including Area Code: (678) 282-8000

Securities Registered Pursuant to Section 12(b) of the Act: None

Securities Registered Pursuant to Section 12(g) of the Act: Common Stock, $0.0001 Par Value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes ý No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ý Yes o No

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ý Yes o No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o

Accelerated filer o

Non-accelerated filer o
(Do not check if a smaller
reporting company)

Smaller reporting company ý

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). o Yes ý No

Aggregate market value of the voting stock held by non-affiliates of the registrant as of June 25, 2008 (computed by reference to the closing price of the registrant's Common Stock as quoted on the Pink Sheets quotation system on such date): approximately $1,169,119.

The number of shares outstanding of the registrant's Common Stock, $0.0001 par value per share, as of June 25, 2008, was 18,701,012.

VYYO INC.

2008 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

		Page
PART I
	Forward-Looking Statements	3
Item 1.	Business	4
Item 1A.	Risk Factors	9
Item 1B.	Unresolved Staff Comments	24
Item 2.	Properties	24
Item 3.	Legal Proceedings	24
Item 4.	Submission of Matters to a Vote of Security Holders	24
PART II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	25
Item 6.	Selected Financial Data	26
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	26
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	42
Item 8.	Financial Statements and Supplementary Data	42
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	42
Item 9A(T).	Controls and Procedures	42
Item 9B.	Other Information	43
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	44
Item 11.	Executive Compensation	49
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	60
Item 13.	Certain Relationships and Related Transactions and Director Independence	63
Item 14.	Principal Accountant Fees and Services	65
PART IV
Item 15.	Exhibits and Financial Statement Schedules	66
SIGNATURES		67

Forward-Looking Statements

The matters discussed in this Annual Report on Form 10-K, with the exception of the historical information presented, contain forward-looking statements involving risks and uncertainties, as well as assumptions that, if they do not fully materialize or prove incorrect, could cause our business and results of operations to differ materially from those expressed or implied by such forward-looking statements. Such forward-looking statements include:

•: our belief that our ability to continue as a going concern will depend upon our ability to raise additional capital during the next three months;
•: our belief that failure to secure additional capital in the very short term or to expand our revenue base in the longer term will result in depleting our available funds and not being able to pay our obligations when they become due;
•: our expectation regarding the charges and reduction of expenses we expect will result after implementation of our restructuring plan;
•: our belief that our most critical accounting policies include policies related to revenue recognition, impairment of long-lived assets and intangible assets, stock-based compensation; inventory, short-term investments, fair value of financial instruments, debt issuance costs and extinguishment of debt;
•: our expectation regarding the amount of debt extinguishment loss we will record related to repayment of the 2007 Goldman Note and the 2005 Syntek Note;
•: our belief that adoption of SFAS 110 and SFAS 160 will not have a material impact on our consolidated financial statements;
•: our anticipation that our gross margins will continue to fluctuate based on our product and customer mix, revenue level and inventory valuations;
•: our anticipation that our research and development costs will decrease in the future due to our restructuring efforts;
•: our anticipation that our sales and marketing expenses will continue to decrease in future;
•: our anticipation that general and administrative expenses will decrease in future periods given our reduction in workforce and facilities as a result of our restructuring efforts;
•: our expectation that the losses of our Israeli subsidiaries will offset certain future earnings of the subsidiaries, if attained, during the tax-exempt period (provided under Israeli law); and
•: our belief as to the payment of purchase obligations that are expected to become payable at various times through 2008.

You can identify these and other forward-looking statements by the use of words such as "may," "will," "should," "could," "intend," "expect," "plan," "estimate," "project," "anticipate," "believe," "potential," "continue," or the negative of such terms, or other comparable terminology. The risks, uncertainties and assumptions referred to above that could cause our actual results to differ materially from the results expressed or implied by such forward-looking statements include those set forth in Item 1A in this Annual Report on Form 10-K and the risks, uncertainties and assumptions discussed from time to time in our other public filings and public announcements. All forward-looking statements included in this Annual Report on Form 10-K are based on information available to us as of the date hereof, and we assume no obligation to update these forward-looking statements.

PART I

Item 1. Business

Overview

Vyyo Inc. and its wholly-owned subsidiaries (collectively, "we," "us" or "our") provide extended bandwidth solutions for cable system operators ("MSOs"). Our UltraBand® Spectrum Overlay technology expands MSOs' typical hybrid-fiber coax ("HFC") network capacity in the "last mile" by up to two times in the downstream and up to four times in the upstream. Our results also includes operations of Xtend Networks Ltd., an Israeli company, and its wholly-owned, United States-based subsidiary, Xtend Networks Inc. (collectively, "Xtend").

We have experienced significant losses and negative cash flows from operations since our incorporation. For the year ended March 31, 2008, we incurred a net loss of $29,939,000 and had an accumulated deficit of $305,554,000. These matters raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern will depend upon our ability to raise additional capital during the next three months. We are pursuing raising additional capital to fund our operations although there is no assurance that such capital will be available to us. We also are seeking to expand our revenue base by adding new customers and to further reduce expenses, beyond the reductions realized in the restructuring plan discussed below. Failure to secure additional capital in the very short term or to expand our revenue base in the longer term will result in depleting our available funds and not being able to pay our obligations when they become due. See "Liquidity, Capital Resources and Going Concern Considerations."

Since our acquisition of Xtend in 2004, we had operated in two segments: the cable solutions segment and the wireless solutions segment. Beginning in 2007, we announced that our primary focus and dedication of resources was in our cable solutions segment. In July 2007, we implemented a cost reduction program that reduced our workforce, including workforce in our wireless solutions segment. In the three months ended March 31, 2008, we simplified our structure by further streamlining our corporate organization and reducing operating costs to better address market needs and revenue opportunities in the cable market. As part of this restructuring plan, we ceased the marketing and support efforts for, and terminated all employees dedicated to, our wireless solutions segment in March 2008. Accordingly we have no current wireless operations. For a discussion of our 2008 restructure plan, see note 1 of our fiscal 2008 annual Consolidated Financial Statements.

The reductions of workforce and outsourced services and contractors implemented in 2007 and 2008 impacted all company functions, both in Israel and the United States, and included management and non-management positions. As of June 30, 2008, all functions performed in Israel except research and development have been moved to the United States. These actions are consistent with our previous disclosures concerning operating cost reductions and exit from the wireless business. We continue to evaluate additional opportunities to reduce operating costs.

On June 13, 2008, we completed a financing which resulted in $4,500,000 of new funding. See Management's Discussion and Analysis of Financing Condition and Results of Operations—Subsequent Events."

We were incorporated in Delaware in 1996. Effective December 3, 2007, we changed our fiscal year end from December 31 to March 31. Reference to a particular fiscal year means the period beginning April 1 and ending March 31 of the stated year.

Cable Solutions

Our focus and dedication of resources is now entirely on our cable solutions and the cable market. In fiscal year 2007 and 2008, we strengthened our efforts to penetrate the cable industry and expect to

continue this strategy in fiscal year 2009 and beyond. We believe this renewed focus and dedication of our internal resources on our cable solutions will enhance our prospects and thereby increase stockholder value.

Our Spectrum Overlay solution is a radio frequency ("RF") family of products with node, amplifier, splitter and passive elements targeted to the coaxial portion of existing cable infrastructure. Our solution is designed to enable the layer-one expansion of available spectrum in a typical cable HFC network, which in turn allows MSOs to provide more bandwidth-intensive services to their customers.

Our cable solutions provide MSOs with the opportunity to increase raw bandwidth on their legacy HFC network. Our advanced technology has the potential to help MSOs develop new sources of revenue by (a) providing residential subscribers with the enhanced "quadruple play" of voice, data, video and wireless services; (b) increasing capacity for high definition television, video-on-demand, network-based digital video recording, high definition video-on-demand, peer-to-peer gaming and peer-to-peer video conferencing; and (c) enabling residential and commercial high-speed symmetrical data services.

Our solutions are designed to be "backwards compatible" with the existing network equipment so as not to affect existing residential services. This is accomplished by overlaying spectrum in parallel to current networks which allows the utilization of pre-existing digital equipment. We designed our solutions to pass through all of the legacy services and overlay the expanded services without interfering with MSOs' traditional services. The products provide a compatible architecture, through Block Division Multiplexing™ technology, that, for example, enables the continued use of existing, standardized equipment, such as DOCSIS® (Data Over Cable Service Interface Specifications) cable modem termination systems, cable modems and digital set-top units.

Solutions and Technology

We have developed a broad range of Spectrum Overlay solutions to increase the bandwidth of existing cable television networks and have optimized our solutions for residential applications. Our Spectrum Overlay solution consists of the following elements:

Node Products: XHUB. The XHUB is located at the fiber node and converts the HFC network standard frequency band to the coaxial plant's extended bands. Our Spectrum Overlay XHUB 3006 is a block multiplexer and frequency converter which multiplexes two downstream blocks, each carrying a different content, onto a single cable coaxial plant while demultiplexing five upstream blocks.

Trunk Amplifiers: Xtendifier and XBridger. The Xtendifier is the amplification and gain control element of the overlaid coaxial plant. The Xtendifier is installed along the coaxial line, in parallel to existing line extenders. Our XFR 3000 is a bi-directional, wide-band amplifier which operates in conjunction with the legacy amplifier. The XBridger performs the same functions, but is placed in conjunction with a multiple output legacy XBridger amplifier.

Passive Elements. Our 3GHz passive elements replace the existing passive elements (taps, splitters, line power inserters and line equalizers). The XSP replaces existing splitters and directional couplers; the XFFT and XPTF replace existing taps; the XLPI replaces existing power line inserters and the XLEQ replaces existing line equalizers, all providing bandwidth performance supporting the increased frequencies used with the Spectrum Overlay solution.

Customer Premise Equipment Device: XTB. The Spectrum Overlay XTB is a block division multiplexer and frequency converter that interfaces with existing standard customer premise equipment devices, enabling subscribers to enjoy true quadruple play services.

Customers

We sell our cable solutions directly to MSOs. We generally sell our solutions based on individual purchase orders; accordingly, customers are not obligated by long-term contracts. Our customers can generally cancel or reschedule orders upon short notice and can discontinue using our solutions at any time.

To date, we have not recognized significant revenue from our cable solutions, and these revenues have been generated by only a small number of customers. We continue to expect that a relatively small number of customers will account for a large percentage of our revenues.

Sales and Marketing

Our direct sales force in the United States targets domestic MSOs of all sizes. We promote our products through direct personal contact, presentations at trade shows, expositions, seminars and lectures and public relations efforts. Our current strategy also includes pursuing strategic licensing and technology transfer agreements with cable equipment vendors, which could include licensing our intellectual property associated with our passive and active solutions. These strategic relationships will allow for broader customer acceptance and multiple supply channels while increasing our revenues from licensing fees. We believe that such strategic relationships will facilitate future product development and accelerate deployment of our solutions. We also believe that the licensing of complementary technologies to third parties with specific expertise is an effective means of expanding the features and functionality of our products and range of offerings.

We are an approved vendor with Cox Communications for our Spectrum Overlay solution. In addition, our Spectrum Overlay solution is being evaluated at different levels at other leading MSOs in North America.

Suppliers and Manufacturing

We are dedicated to establishing long-term relationships with our suppliers and manufacturers. Through these relationships, we benefit from new innovations, higher quality, reduced lead times, smoother/faster manufacturing ramp-up of product introductions and lower total costs of doing business.

We outsource manufacturing to contract manufacturers that have the expertise and ability to respond quickly to customer orders while maintaining high quality standards. Any inability of these manufacturers to provide the necessary capacity or output could result in significant production delays that could harm our business. We purchase components for our solutions on a purchase order basis and do not rely in a material way on guaranteed supply or long-term contracts with any suppliers. In addition, some of the components used in our solutions are obtained from a single source or limited group of suppliers. The partial or complete loss of such suppliers could increase our costs, delay shipments or require redesigns of our solutions.

Research and Development

Our research and development activities are focused on responding to the needs of MSOs and technological changes in the cable market. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Research and Development" for a description of our research and development expenses.

Competition

The market for cable equipment vendors is competitive, rapidly evolving and subject to rapid technological change. The principal competitive factors in this market include:

•: product performance and features;
•: price of competitive products;
•: reliability and stability of operation;
•: ability to develop and implement new services and technologies;
•: compliance with industry standards; and
•: sales capability, technical support and service.

Our cable solutions compete with technologies such as higher modulation over cable (1024QAM) and high-end encoding/compression (e.g., MPEG-4), Switched Digital Video, the upgrading of coaxial networks to 1GHz and fiber optic solutions. MSOs have partial alternatives to our technology for increasing bandwidth on their systems, including fiber-based solutions and node-splitting. In addition, MSOs themselves face competition from the high bandwidth solutions offered by satellite providers and incumbent telecommunications operators, including digital subscriber line ("DSL") technology, and from fiber-to-the-home/curb technologies.

Many of our competitors have substantially greater financial, technical, distribution, marketing and other resources than we have and, therefore, may be able to respond more quickly to new or changing opportunities, technologies and other developments. In addition, many of our competitors have longer operating histories, greater name recognition and established relationships with MSOs. These competitors may also be able to undertake more extensive marketing campaigns, adopt more aggressive pricing policies and devote substantially more resources to developing new products. Our primary competitors are currently Cisco Systems, Inc.; Motorola, Inc.; BigBand Networks, Inc.; C-Cor Incorporated; Arris Group, Inc.; Aurora Networks and Harmonic Inc. Most of these competitors have existing relationships with one or more of our prospective customers. We may not be able to compete successfully against current and future competitors and competitive pressures may seriously harm our business.

Employees

As of June 30, 2008, we have 28 employees in the United States and Israel, all but one of whom are full-time employees. Our United States employees are not represented by a labor union and we have not experienced any work stoppages.

Our Israeli subsidiaries are subject to Israeli labor laws and regulations with respect to their employees. These laws principally concern matters such as paid annual vacation, paid sick days, length of work day and work week, minimum wages, pay for overtime, insurance for work related accidents, severance pay, prior notice and other conditions of employment.

Our Israeli subsidiaries are subject to provisions of certain collective bargaining agreements by order of the Israeli Ministry of Labor and Welfare. These provisions principally concern wages, cost of living expenses and other conditions of employment. We provide our Israeli employees with benefits and working conditions above the required minimums. Our Israeli employees are not represented by a labor union and we have not experienced any work stoppages.

Government Regulation

We are subject to export control laws and regulations with respect to certain of our products and technology. Additional export control requirements could be imposed in the future on product classes that include solutions exported by us, which would result in additional compliance burdens and could impair the enforceability of our contract rights.

Intellectual Property

We rely on a combination of patent, copyright and trademark laws, trade secrets and confidentiality and other contractual provisions to establish and protect our proprietary rights, each of which is vital to our business. We have two issued patents in the United States and 31 patent applications pending worldwide, including 10 in the United States, related to our cable solutions. We have 13 issued patents, all in the United States, and five patent applications pending worldwide, including one in the United States, related to our wireless technology.

Our success depends in part on our ability to protect our proprietary technologies. Our pending or future patent applications may not be approved and the claims covered by such applications may be reduced. If allowed, our patents may not be of sufficient scope or strength, and others may independently develop similar technologies or products. Further, patents held by third parties may prevent the commercialization of products incorporating our technologies or third parties may challenge or seek to narrow, invalidate or circumvent any of our pending or future patents. We also believe that foreign patents, if obtained, and the protection afforded by such foreign patents and foreign intellectual property laws, may be more limited than that provided under United States patents and intellectual property laws. Litigation, which could result in substantial costs and diversion of effort by us, may also be necessary to enforce any patents issued or licensed to us or to determine the scope and validity of third-party proprietary rights. Any such litigation, regardless of outcome, could be expensive and time-consuming, and adverse determinations in any such litigation could seriously harm our business.

We also rely on unpatented trade secrets and know-how and proprietary technological innovation and expertise which are protected in part by confidentiality and invention assignment agreements with our employees, advisors and consultants and non-disclosure agreements with our suppliers and distributors. These agreements may be breached, we may not have adequate remedies for any breach or our unpatented proprietary intellectual property may otherwise become known or independently discovered by competitors. Further, the laws of certain foreign countries may not protect our products or intellectual property rights to the same extent as do the laws of the United States.

From time to time, third parties, including our competitors, may assert patent, copyright and other intellectual property rights to technologies that are important to us. We expect that we will be subject increasingly to license offers and infringement claims as the number of products and competitors in our market grows and the functionality of products overlaps.

Patents of third parties may be determined to be valid, or some or all of our products may ultimately be determined to infringe those patents. Patent holders may pursue litigation with respect to these or other claims. The results of any litigation are inherently uncertain. In the event of any future adverse result in any litigation with respect to intellectual property rights relevant to our products, we could be required to obtain licenses to the infringing technology, to pay substantial damages under applicable law, to cease the manufacture, use and sale of infringing products or to expend significant resources to develop non-infringing technology. Licenses may not be available from third parties, either on commercially reasonable terms or at all. In addition, litigation frequently involves substantial expenditures and can require significant management attention, even if we ultimately prevail. Accordingly, any infringement claim or litigation against us could significantly harm our business, operating results and financial condition.

Environmental Matters

We lease all of our facilities. Accordingly, compliance with federal, state and local environmental laws and regulations has not had, nor do we expect it to have, a material effect on our capital expenditures, earnings or competitive position.

Cessation of Wireless Business

During 2007, we began to focus substantially all of our efforts and internal resources on our cable solutions business. In March 2008, we ceased our marketing and support efforts for, and terminated all employees dedicated to, our wireless solutions business. In addition, we wrote off our wireless inventory valued at $1,067,000 in the three months ended March 31, 2008.

In 2006, we signed an equipment purchase agreement with Arcadian Networks, Inc. ("ANI"), a service provider to the utilities industry. ANI accounted for a significant portion of our revenues in the 2008 fiscal year. Following cessation of our wireless operations, we entered into a lease agreement with ANI for the rental of test equipment related to our wireless business. Notwithstanding this lease agreement, we continue to own all of our intellectual property, including patents and patent applications, related to our wireless solutions. See note 4 of our fiscal 2008 annual Consolidated Financial Statements for a description of this relationship.

Item 1A. Risk Factors

Our business is subject to substantial risks, including the risks described below.

We have insufficient capital to continue as a going concern.

On June 13, 2008, we received $4,500,000 of new funding after closing a financing of $41,000,000, which included $38,000,000 from Goldman Sachs Investment Partners Master Fund, LP ("Goldman") and $3,000,000 from Syntek Capital AG ("Syntek), as further described in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Subsequent Events—2008 Financing" (the "2008 Financing"). In the 2008 Financing, we delivered to Goldman a $38,000,000 20% Senior Secured Convertible Note, payable on December 13, 2008 (the "2008 Goldman Note"), $35,000,000 of which we used to payoff the outstanding $35,000,000 5% Convertible Note due March 28, 2012 (the "2007 Goldman Note") issued to Goldman in the financing completed in March 2007. We also delivered a $3,000,000 20% Senior Secured Convertible Note, payable on December 13, 2008, to Syntek (the "2008 Syntek Note," and collectively with the 2008 Goldman Note, the "2008 Notes"), $1,500,000 of which we used to payoff the remaining outstanding principal on the amended promissory note, dated December 16, 2005, issued to Syntek (the "2005 Syntek Note"). Concurrent with the 2008 Financing, we paid approximately $400,000 to Goldman and Syntek for accrued interest on the 2007 Goldman Note and the 2005 Syntek Note, which resulted in approximately $4,000,000 of cash available for general corporate purposes (after debt issuance costs). Our obligations under the 2008 Notes are guarantied by certain of our subsidiaries and secured by a security interest in substantially all of our assets and those of our subsidiaries. Notwithstanding the 2008 Financing, we need additional capital to continue as a going concern and to execute our business plan. If we are unsuccessful in securing additional cash in the next three months, either through additional equity and/or debt financings, we will not be able to continue as a going concern.

We have a history of significant losses, expect future losses and may never achieve or sustain profitability.

We have incurred significant losses since our inception, and we expect to continue to incur losses for the foreseeable future. We incurred losses of $29,939,000 for the year ended March 31, 2008 and as of that date our accumulated deficit was $305,554,000. Our revenues and gross margins may not grow

or even continue at their current levels and could decline. If our revenues do not rapidly increase, or if our expenses increase at a greater pace than our revenues, we will never become profitable.

Our substantial level of secured debt could adversely affect our financial condition and ability to execute our business plan.

We have substantial secured debt totaling $41,000,000. This debt could have important consequences and significant effects on our business. For example, it could:

•: make it more difficult for us to satisfy our obligations under the 2008 Notes;
•: limit our ability to obtain additional financing for working capital, capital expenditures and other activities;
•: limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
•: result in an event of default if we fail to satisfy our obligations under the 2008 Notes, which could result in all of our debt becoming immediately due and payable and could permit our lenders to foreclose on our assets securing such debt;
•: require us to dedicate a substantial portion of our cash flow from our business operations to pay our debt, thereby reducing the availability of cash flow to fund working capital, capital expenditures, development projects, general operational requirements and other purposes;
•: increase our vulnerability to general adverse economic and industry conditions or a downturn in our business; and
•: place us at a competitive disadvantage compared to competitors that are not as highly leveraged.

Any of these factors could have a material adverse effect on our business, financial condition and results of operations and our ability to meet our payment obligations under the 2008 Notes.

If we fail to generate sufficient cash flow from future operations, we may have to attempt to refinance all or a portion of our debt or seek to obtain additional financing.

Our shares of common stock have been de-listed from The Nasdaq Global Market; stocks traded on the over-the-counter markets are subject to greater market risks than those of exchange-traded stocks.

Our shares of common stock were de-listed from The Nasdaq Global Market effective April 21, 2008 due to our failure to maintain minimum capitalization requirements in accordance with Nasdaq Marketplace Rules. Since that time, our common stock has been quoted on the OTC Bulletin Board and, currently, on the Pink Sheets. Securities traded in over-the-counter markets are, for the most part, thinly traded and generally are not subject to the level of regulation imposed on securities listed or traded on Nasdaq or other national securities exchanges. As a result, an investor may find it difficult to dispose of our common stock or to obtain accurate quotations as to its price.

De-listing has negatively impacted the value of our common stock, as our common stock is less liquid. We also have lost support from certain institutional investors, brokerage firms and market makers that historically bought and sold our stock. Given the de-listing, we may find it difficult to obtain future financing for the continuation of our operations or to use our stock in acquisitions. Further, de-listing could result in the loss of confidence by our suppliers, customers and employees. Any of these results could negatively impact our business.

Our obligation to file periodic reports under the Securities Exchange Act of 1934 (the "Exchange Act") has been suspended.

On April 24, 2008, we filed Form 15 certifying that our common stock was held by 300 or fewer record holders as of the beginning of the 2008 fiscal year. This action suspended our reporting obligations under the Exchange Act. We do not intend to continue to file periodic reports on Forms 8-K, 10-Q and 10-K. Because the quantity and timeliness of information about us, our financial condition and our operations will be reduced, our common stock will be less attractive to investors, analysts and market-makers. Trading activity in our common stock may be reduced, and our investors may find it difficult to execute transactions in our stock.

Stockholders in our common stock may suffer significant dilution if the holders of the 2008 Notes convert such notes into shares of our common stock.

The aggregate principal and accrued interest under the 2008 Notes may be converted, at the option of Goldman and Syntek, into an aggregate of 8,826,531 shares of our common stock in accordance with the terms of the 2008 Notes. If the holders elect to the convert the 2008 Notes, our stockholders would experience significant dilution of our common stock.

Our success depends on future demand for additional bandwidth by MSOs and their customers and the willingness and ability of MSOs to substantially increase available bandwidth on their networks using our alternative technology solution.

Because our cable solutions expand available bandwidth over existing infrastructure, demand for these solutions depends on demand for additional bandwidth by MSOs and their customers. The scope and timing of customer demand for additional bandwidth is uncertain and hard to predict. The factors influencing this demand include competitive offerings, applications availability, pricing models, costs, regulatory requirements and the success of initial roll-outs.

For our cable solutions to be sold in significant quantities, MSOs also must be willing and able to substantially increase the available bandwidth on their networks. MSOs may not be willing or able to develop additional services and revenue streams to justify the deployment of our technology. If the future demand for bandwidth is insubstantial, is addressed by alternative technologies or does not develop in the near future, our prospects would be adversely affected.

If we fail to achieve significant market penetration and customer acceptance of our cable solutions, our prospects would be substantially harmed.

The market for broadband products in the cable industry is extremely competitive, subject to drastic technological changes, changes in capital expenditure budgets and highly fragmented. Our cable solutions are new and relatively unknown; accordingly, we have not generated significant revenue in this business. We have only relatively recently shipped our first commercial orders for our UltraBand solution to various systems of a MSO. There can be no assurance that installations of our cable solutions will be successful. As some of our cable solutions continue to be in a development stage, we may face challenges such as market resistance to new products, perceptions regarding customer support and quality control.

Since we have recently significantly reduced our workforce, our research and development efforts will be harmed.

In the three months ended March 31, 2008, we simplified our structure by streamlining our corporate organization and reducing operating costs to better address market needs and revenue opportunities in the cable market. A significant portion of the costs of the restructuring plan were

related to our continuing strategy to focus exclusively on the cable market, to consolidate our facilities in the United States and to eliminate resources related to our wireless business.

The reduction of approximately 78% of our workforce (when compared to the workforce levels as of January 31, 2008) impacted all company functions, both in Israel and the United States, and included management and non-management positions. These reductions were in addition to a cost reduction program implemented in July 2007 that reduced our workforce by approximately 16% (when compared to the workforce levels as of June 30, 2007). The largest effect of these reductions was on our research and development activities. Our ability to further develop and market our solutions may be limited if we have not accurately predicted the appropriate workforce requirements for our research and development efforts.

We will generate significant sales only if we are able to penetrate the market and create market share in the cable market. If we are unable to do so, our business would be harmed and our prospects significantly diminished.

We have written down and may need to further write-down our inventory in the future if our sales levels do not match our expectations, or if selling prices decline more than we anticipate, which could adversely impact our operating results.

We operate in an industry that is characterized by intense competition, supply shortages or oversupply, rapid technological change, unpredictable sales patterns, declining average selling prices and rapid product obsolescence, all of which make it more challenging to effectively manage our inventory. In addition, some of the components we require have long lead-times and we are required to order or build inventory well in advance of the time of anticipated sales.

Our inventory is stated at the lower of cost or market value. Determining market value of our inventory requires numerous judgments, including, but not limited to, judgments regarding average selling prices and sales volumes for future periods. We primarily utilize estimated selling prices for measuring any potential declines in market value below cost. When market value is determined to be below cost, we make appropriate allowances to reduce the value of inventories to net realized value. We may reduce the value of our inventory when we determine that inventory is slow moving, obsolete or excessive or if the selling price of the product is insufficient to cover product costs and selling expenses.

In the past, our inventory increased given that our sales were substantially less than our anticipated demand and we were required to make advance inventory purchase commitments for anticipated sales. Accordingly, we recorded a $424,000 write down of inventory for the year ended December 31, 2006 and a $1,250,000 write down of inventory for the year ended March 31, 2008.

If our sales do not increase, the sales price of our products decrease or we are otherwise unable to control inventory levels consistent with actual demand, we may be required to write down additional inventory. Any such write-down would adversely affect our operating results in future periods.

We have not yet produced or deployed our cable solutions in high volumes.

We have not yet produced our UltraBand solutions in high volumes and there may be challenges and unexpected delays, such as quality control issues, in our attempts to increase volume and lower production costs. Our long-term success depends on our ability to produce high quality solutions at a low cost and, in particular, to reduce the production cost of our cable solutions designed for residential use.

Because we have not yet deployed our UltraBand solutions in high volumes, there is significant technology risk associated with any such future deployment. We cannot be sure that any such high volume deployment would be successful.

Our future growth depends on market acceptance of several emerging broadband services, on the adoption of new broadband technologies and on several other broadband industry trends.

Future demand for our broadband products will depend significantly on the growing market acceptance of various broadband services, including digital video, video-on-demand, high definition television, very high-speed data services and voice-over-internet protocol ("VoIP") telephony. The effective delivery of these services will depend in part on a variety of new network architectures, such as fiber-to-the premises networks, video compression standards such as MPEG-4 and Microsoft's Windows Media 9, the greater use of protocols such as IP and the introduction of new consumer devices, such as advanced set-top boxes and digital video recorders. If adoption of these emerging services and/or technologies is not as widespread or as rapid as we expect, our net sales growth would be materially and adversely affected.

Furthermore, other technological, industry and regulatory trends will affect the growth of our business. These trends include the following:

•: convergence, or the desire of certain operators to provide a combination of video, voice and data services to consumers, also known as the "triple play;"
•: the use of digital video by businesses and governments;
•: the privatization of state owned telecommunication companies in other countries;
•: efforts by regulators and governments in the United States and abroad to encourage the adoption of broadband and digital technologies; and
•: the extent and nature of regulatory attitudes toward such issues as competition between operators, access by third parties to networks of other operators and new services such as VoIP.

If, for instance, MSOs do not pursue the triple play as aggressively as we expect, our net sales growth would be materially and adversely affected. Similarly, if our expectations regarding these and other trends are not met, our net sales could be materially and adversely affected.

We will need to develop distribution channels to market and sell our cable solutions.

Our UltraBand solutions are in the early stages of commercialization. We currently have limited relationships with potential customers and distributors as well as limited sales staff. We will be successful only if we are able to develop distribution channels to market and sell our cable solutions in sufficient volumes.

To develop such channels and market and sell our cable solutions, we may need to grow our sales and marketing team at the same time that we have drastically little cash. It may be difficult for us to hire and retain additional qualified personnel. We currently have limited exposure to global business opportunities, and cannot be able to take advantage of meaningful potential global demand for our solutions unless and until we are able to develop meaningful global distribution channels and strategies.

Because of our long product development process and sales cycle, we may continue to incur substantial expenses without sufficient revenues that could cause our operating results to fluctuate.

A customer's decision to purchase our solutions typically involves a significant technical evaluation, formal internal procedures associated with capital expenditure approvals and testing and acceptance of new systems that affect key operations. For these and other reasons, the sales cycle associated with our solutions can be lengthy and subject to a number of significant risks, over which we have little or no control. Because of the growing sales cycle and the likelihood that we may rely on a small number of customers for our revenues, our operating results would be seriously harmed if such revenues do not materialize when anticipated, or at all.

We depend on cable industry capital spending for our revenue and any decrease or delay in such spending would adversely affect our prospects.

Demand for our products will depend on the size and timing of capital expenditures by MSOs. These capital spending patterns are dependent upon factors including:

•: the availability of cash or financing;
•: budgetary issues;
•: regulation and/or deregulation of the cable industry;
•: competitive pressures;
•: alternative technologies;
•: overall demand for broadband services, particularly relatively new services such as VoIP;
•: industry standards;
•: the pattern of increasing consolidation in the industry; and
•: general consumer spending and overall economic conditions.

If MSOs and telecommunications service providers do not make significant capital expenditures, our prospects would be adversely affected.

Competition may result in lower average selling prices, and we may be unable to reduce our costs at offsetting rates, which may impair our ability to achieve profitability.

There has been significant price erosion in the broadband equipment field. We expect that continued price competition among broadband access equipment and systems suppliers will reduce our gross margins in the future. We anticipate that the average selling prices of broadband access solutions will continue to decline as product technologies mature. We may be unable to reduce our manufacturing costs in response to declining average per unit selling prices. Our competitors may be able to achieve greater economies of scale and may be less vulnerable to the effects of price competition than we are. These declines in average selling prices will generally lead to declines in gross margins and profitability for these solutions. If we are unable to reduce our costs to offset declines in average selling prices, we may not be able to achieve or maintain profitability.

If the communications, Internet and cable television industries do not grow and evolve in a manner favorable to our business strategy, our business may be seriously harmed.

Our future success depends upon the growth of the communications industry, the cable television industry and, in particular, the Internet. These markets continue to evolve rapidly because of advances in technology and changes in customer demand. We cannot predict growth rates or future trends in technology development. It is possible that cable operators, telecommunications companies or other suppliers of broadband services will decide to adopt alternative architectures or technologies that are incompatible with our current or future products. If we are unable to design, develop, manufacture and sell solutions that incorporate or are compatible with these new architectures or technologies, our business will suffer. Also, decisions by customers to adopt new technologies or products are often delayed by extensive evaluation and qualifications processes and can result in delays of current products.

In addition, the deregulation, privatization and economic globalization of the worldwide communications market, which resulted in increased competition and escalating demand for new technologies and services, may not continue in a manner favorable to us or our business strategies. In

addition, the growth in demand for Internet services and the resulting need for high-speed or enhanced communications products may not continue at its current rate or at all.

The loss of one or more of our key customers would result in a loss of a significant amount of our revenues and adversely affect our business.

A relatively small number of customers account for a large percentage of our revenues. We expect that we will continue to depend on a limited number of customers for a substantial portion of our revenues in future periods. The loss of a major customer could seriously harm our ability to sustain revenue levels, which would seriously harm our operating results. A significant portion of our revenues in the year ended March 31, 2008 was from sales of our wireless products, a business for which we have ceased all marketing and support functions. In this regard, our future revenues must be derived from our cable solutions.

If we do not effectively manage our costs, our business could be substantially harmed.

We will need to continue to monitor closely our costs and expenses. If the market for our cable solutions does not expand or takes longer to develop than we expect, we may need to further reduce our operations.

If we do not adequately protect our intellectual property, we may not be able to compete and our ability to provide unique products may be compromised.

Our success depends in part on our ability to protect our proprietary technologies. We rely on a combination of patent, copyright and trademark laws, trade secrets and confidentiality and other contractual provisions to establish and protect our proprietary rights. Our pending or future patent applications may not be approved and the claims covered by such applications may be reduced. If allowed, our patents may not be of sufficient scope or strength, and others may independently develop similar technologies or products. Litigation, which could result in substantial costs and diversion of our efforts, may also be necessary to enforce any patents issued or licensed to us or to determine the scope and validity of third party proprietary rights. Any such litigation, regardless of the outcome, could be expensive and time consuming, and adverse determinations in any such litigation could seriously harm our business.

Similarly, our pending or future trademark applications may not be approved and may not be sufficient to protect our trademarks in the markets where we either do business or hope to conduct business. The inability to secure any necessary trademark rights could be costly and could seriously harm our business.

We regularly evaluate and seek to explore and develop derivative products relating to our cable solutions. We may not be able to secure all desired intellectual property protection relating to such derivative products. Furthermore, because of the rapid pace of change in the broadband industry, much of our business and many of our products rely on technologies that evolve constantly and this continuing uncertainty makes it difficult to forecast future demand for our products.

We may not be able to successfully operate businesses that we may acquire, in a cost-effective and non-disruptive manner and realize anticipated benefits.

We may explore investments in or acquisitions of other companies, products or technologies, including companies or technologies that are not complementary or related to our current solutions. We ultimately may be unsuccessful in operating and/or integrating an acquired company's personnel, operations, products and technologies into our business. These difficulties may disrupt our ongoing business, divert the time and attention of our management and employees and increase our expenses.

Moreover, the anticipated benefits of any acquisition may not be realized or may not be realized in the time period we expect. Future acquisitions could result in dilutive issuances of equity securities, the incurrence of debt, contingent liabilities or amortization expenses related to goodwill and other identifiable intangible assets and the incurrence of large and immediate write-offs, any of which could seriously harm our business. In addition, we could spend significant resources in searching for and investigating new business opportunities, and ultimately may be unsuccessful in acquiring new businesses.

Our participation or lack of participation in industry standards groups may adversely affect our business.

We do not participate in the standards process of the Cable Television Laboratories, Inc., a cable industry consortium that establishes cable technology standards and administers compliance testing. In the future, we may determine to join or not join other standards or similar organizations. Our membership in these organizations could dilute our proprietary intellectual property rights in our products while our failure to participate in others could jeopardize acceptance of any of our products that do not meet industry standards.

Product standardization, as may result from initiatives of MSOs, could adversely affect our prospects.

Product standardization initiatives encouraged by MSOs and telecommunications companies may adversely affect revenues, gross margins and profits. In the past, standardization efforts by major MSOs have negatively impacted equipment vendors by leading to equipment obsolescence, commoditization and reduced margins. If our solutions do not comply with future standards, our prospects could be adversely affected.

Our quarterly operating results fluctuate, which may cause our share price to further decline.

Our quarterly operating results have varied significantly in the past and are likely to vary significantly in the future. These variations result from a number of factors, including:

•: the uncertain timing and level of market acceptance for our solutions and the uncertain timing and extent of rollouts of broadband access equipment and systems by the major service providers;
•: the fact that we often recognize a substantial proportion of our revenues in the last few weeks of each quarter;
•: the ability of our existing and potential direct customers to obtain financing for the deployment of broadband access equipment and systems;
•: the mix of solutions sold by us and the mix of sales channels through which they are sold;
•: reductions in pricing by us or our competitors;
•: global economic conditions;
•: the effectiveness of our system integrator customers in marketing and selling their network systems equipment;
•: changes in the prices or delays in deliveries of the components we purchase or license; and
•: any acquisitions or dispositions we may effect.

A delay in the recognition of revenue, even from one customer, could have a significant negative impact on our results of operations for a given period. Also, because only a small portion of our expenses vary with our revenues, if revenue levels for a quarter fall below our expectations, we would

not be able to timely adjust expenses accordingly, which would harm our operating results in that period. We believe that period-to-period comparisons of our results of operations are not meaningful and should not be relied upon as indicators of future performance. If our operating results fall below the expectations of investors in future periods, our share price would likely decline.

Because we rely on international suppliers, we are exposed to additional risks which could cause our operations to suffer.

Our reliance on international suppliers exposes us to foreign political and economic risks, which may impair our ability to generate revenues. These risks include:

•: economic, inflation and political instability;
•: terrorist acts, international conflicts and acts of war;
•: changes in regulatory requirements and licensing frequencies to service providers;
•: import or export licensing requirements and tariffs;
•: labor shortages or stoppages;
•: trade restrictions and tax policies; and
•: limited protection of intellectual property rights.

Any of the foregoing difficulties of conducting business internationally could seriously harm our business.

Because we do not have contracts with our customers, our customers can discontinue purchases of our solutions at any time, which could adversely affect future revenues and operating results.

We generally sell our cable solutions based on individual purchase orders. Our customers are not obligated by agreements to purchase our solutions, and the agreements we have entered into do not obligate our customers to purchase a minimum number of solutions. Our customers can generally cancel or reschedule orders on short notice and discontinue using our solutions at any time. Further, having a successful field system trial does not necessarily mean that the customer will order large volumes of our solutions. The reduction, delay or cancellation of orders from one or more of our customers could seriously harm our operating results.

Competition may decrease our market share, net revenues and gross margins.

The market for broadband access equipment and systems is intensely competitive, rapidly evolving and subject to rapid technological change. The main competitive factors in our markets include:

•: product performance, features and reliability;
•: price;
•: stability;

•: scope of product line;
•: sales and distribution capabilities;
•: technical service and support;
•: relationships, particularly those with system integrators and operators; and
•: industry standards.

Certain of our competitors and potential competitors have substantially greater financial, technical, distribution, marketing and other resources than we have and, therefore, may be able to respond more quickly to new or changing opportunities, technologies and other developments. In addition, many of our competitors have longer operating histories, greater name recognition, broader product lines and established relationships with system integrators and service providers. Our primary competitors are Cisco Systems, Inc.; Motorola, Inc.; BigBand Networks, Inc.; C-Cor Incorporated; Arris Group, Inc.; Aurora Networks and Harmonic Inc. Most of these competitors have existing relationships with one or more of our prospective customers. Our cable solutions face competition from technologies such as digital set-top boxes, high-end compression technologies and DVRs. Furthermore, the move toward open standards may increase the number of operators who will offer new services, which in turn may increase the number of competitors and drive down the capital expenditures per subscriber deployed. We may not be able to compete successfully against our current and future competitors, and competitive pressures could seriously harm our business.

Hardware defects or firmware errors could increase our costs and impair the market acceptance of our solutions, which would adversely affect our future operating results.

Our solutions occasionally contain certain defects or errors. This may result either from defects in components supplied by third parties or from errors or defects in our firmware or hardware that we have not detected. We have in the past experienced, and may experience from time-to-time, defects in new or enhanced solutions after shipments, or defects in deployed solutions. This could occur in connection with stability or other performance problems. Our customers integrate our solutions into their networks with components from other vendors. Accordingly, when problems occur in a network system, it may be difficult to identify the component that caused the problem. Regardless of the source of these defects or errors, we will need to divert the attention of our very limited engineering personnel from our product development efforts to address the defect or error. Given the significant reductions we have made to our research and development department, we may not be successful in efficiently addressing any such defect or error. We have incurred in the past and may again incur significant warranty and repair costs related to defects or errors, and we also may be subject to liability claims for damages related to these defects or errors. The occurrence of defects or errors, whether caused by our solutions or the components of another vendor, may result in significant customer relationship problems and injury to our reputation and may impair the market acceptance of our solutions.

We depend on contract manufacturers and third party equipment and technology suppliers, and these manufacturers and suppliers may be unable to fill our orders or develop compatible, required technology on a timely basis, which would result in delays that could seriously harm our results of operations.

We currently have relationships with a limited number of contract manufacturers for the manufacturing of our products, substantially all of whom are located in Taiwan. These relationships may be terminated by either party with little or no notice. If our manufacturers are unable or unwilling to continue manufacturing our solutions in required volumes, we would have to identify qualified alternative manufacturers, which would result in delays causing our results of operations to suffer. Our relatively limited experience with these manufacturers and lack of visibility as to the manufacturing

capabilities of these companies if our volume requirements significantly increase does not provide us with a reliable basis on which to project their ability to meet delivery schedules, yield targets or costs. If we are required to find alternative manufacturing sources, we may not be able to satisfy our production requirements at acceptable prices and on a timely basis, if at all. Any significant interruption in supply would affect the allocation of solutions to customers, which in turn could seriously harm our business.

In addition to sales to system integrators, we also sell in some instances directly to service providers. Such direct sales require us to resell equipment to service providers manufactured by third party suppliers and to integrate this equipment with the solutions we manufacture. We are particularly dependent on third party radio suppliers in selling our 3GHz and other solutions. We currently have limited relationships with third party suppliers. If we are unable to establish meaningful relationships with suppliers, or if these suppliers are unable to provide equipment that meets the specifications of our customers on the delivery schedules required by our customers, and at acceptable prices, our business would be substantially harmed.

Our UltraBand solutions are implemented over the HFC plant and, as such, they interface and integrate with existing products from multiple other vendors. Future offerings by these vendors may not be sufficiently compatible with our UltraBand solutions. In addition, we depend on the continuous delivery of components by various manufacturers of electronic connectors, filters, boards and transistors.

Furthermore, we have produced certain of our solutions only in limited quantities. If demand for these solutions increases significantly, we will need to implement and address additional processes, procedures and activities necessary to support increased production. If we are unable to do so, our business would be substantially harmed.

We obtain some of the components included in our solutions from a single source or a limited group of suppliers, and the loss of any of these suppliers or delay or shortages in the supply of components could cause production delays and a substantial loss of revenue.

We currently obtain key components from a limited number of suppliers, and some of these components are obtained from a single source supplier. We generally do not have long-term supply contracts with our suppliers. Further, we have experienced delays and shortages on more than one occasion. These factors present us with the following risks:

•: delays in delivery or shortages in components could interrupt and delay manufacturing and result in cancellation of orders for our solutions;
•: suppliers could increase component prices significantly and with immediate effect;
•: we may not be able to develop alternative sources for components, if or as required in the future;
•: suppliers could discontinue the manufacture or supply of components used in our solutions. In such event, we might need to modify our solutions, which may cause delays in shipments, increased manufacturing costs and increased prices; and
•: we may hold more inventory than is immediately required to compensate for potential component shortages or discontinuation.

The occurrence of any of these or similar events would harm our business. Our inability to obtain adequate manufacturing capacity at acceptable prices, or any delay or interruption in supply, could reduce our revenues or increase our cost of revenue and could seriously harm our business.

Third parties may bring infringement claims against us that could harm our ability to sell our solutions and result in substantial liabilities.

Third parties could assert, and it could be found, that our solutions infringe their proprietary rights. We could incur substantial costs to defend any litigation, and intellectual property litigation could force us to do one or more of the following:

•: obtain licenses to the infringing technology;
•: pay substantial damages under applicable law;
•: cease the manufacture, use and sale of infringing solutions; or
•: expend significant resources to develop non-infringing technology.

Any infringement claim or litigation against us could significantly harm our business, operating results and financial condition.

Government regulation and industry standards may increase our costs of doing business, limit our potential markets or require changes to our business model and adversely affect our business.

The emergence or evolution of regulations and industry standards for broadband products, through official standards committees or widespread use by operators, could require us to modify our solutions, which may be expensive and time-consuming, and to incur substantial compliance costs.

Some of our solutions and technology are subject to export control laws and regulations. We are subject to the risk that more stringent export control requirements could be imposed in the future on product classes that include solutions exported by us, which would result in additional compliance burdens and could impair the enforceability of our contract rights. We may not be able to renew our export licenses as necessary from time to time. In addition, we may be required to apply for additional licenses to cover modifications and enhancements to our products. Any revocation or expiration of any requisite license, the failure to obtain a license for product modifications and enhancements, or more stringent export control requirements could seriously harm our business.

Transfers of our securities may be restricted by virtue of state securities "blue sky" laws which prohibit trading absent compliance with individual state laws. These restrictions may make it difficult or impossible to sell shares in those states.

Transfers of our common stock may be restricted under the securities or securities regulations laws promulgated by various states and foreign jurisdictions, commonly referred to as "blue sky" laws. Absent compliance with such individual state laws, our common stock may not be traded in such jurisdictions. Because the securities held by stockholders generally have not been registered for resale under the blue sky laws of any state, the holders of such shares and persons who desire to purchase them should be aware that there may be significant state blue sky law restrictions upon the ability of investors to sell the securities and of purchasers to purchase the securities. These restrictions may prohibit the secondary trading of our common stock. Investors should consider the secondary market for our securities to be a limited one.

We are subject to the penny stock rules and these rules may adversely affect trading in our common stock.

Our common stock is a "penny stock" security under rules promulgated under the Exchange Act. In accordance with these rules, broker-dealers participating in transactions in such securities must first deliver a risk disclosure document that describes the risks associated with such stocks, the broker-dealer's duties in selling the stock, the customer's rights and remedies and certain market and other information. Furthermore, the broker-dealer must make a suitability determination approving the

customer for low-priced stock transactions based on the customer's financial situation, investment experience and objectives. The effect of these restrictions may decrease the willingness of broker-dealers to make a market in our common stock and may decrease the liquidity of our common stock.

Our success depends significantly on Davidi Gilo, our Chairman of the Board of Directors, and Wayne H. Davis, our Chief Executive Officer, the loss of either of whom could seriously harm our business.

Our future success depends in large part on the continued services of our senior management and key personnel. In particular, we significantly depend on the services of Davidi Gilo, our chairman of the board of directors, and Wayne H. Davis, our chief executive officer. We do not carry key person life insurance on our senior management or key personnel. Any loss of the services of Messrs. Gilo or Davis or other members of senior management or other key personnel could seriously harm our business.

Recent regulations related to equity compensation could adversely affect earnings, affect our ability to raise capital and affect our ability to attract and retain key personnel.

Since our inception, we have used stock options as a fundamental component of our employee compensation packages. We believe that our stock option plans are an important tool to link the long-term interests of stockholders and employees, especially executive management, and serve to motivate management to make decisions that will, in the long run, give the best returns to stockholders. FASB has adopted changes to generally accepted accounting principals in the United States that require us to record a charge to earnings for employee stock option grants, as well as other equity based awards. The change has negatively impacted our earnings and, if such impact is material in the future, could affect our ability to raise capital on acceptable terms. To the extent these regulations make it more difficult or unacceptably expensive to grant stock options to employees, we may incur increased compensation costs, change our equity compensation strategy or find it difficult to attract, retain and motivate employees, each of which could materially and adversely affect our business.

The government programs and benefits we receive require us to satisfy prescribed conditions. These programs and benefits may be terminated or reduced in the future, which would increase our costs and taxes and could seriously harm our business.

Certain of our capital investments have been granted "approved enterprise" status under Israeli law providing us with certain Israeli tax benefits. The benefits available to an approved enterprise are conditioned upon the fulfillment of conditions stipulated in applicable law and in the specific certificate of approval. If we fail to comply with these conditions, in whole or in part, we may be required to pay additional taxes for the period in which we enjoyed the tax benefits and would likely be denied these benefits in the future. From time to time, the government of Israel has considered reducing or eliminating the benefits available under the approved enterprise program. These tax benefits may not be continued in the future at their current levels or at all. The termination or reduction of these benefits would increase our taxes and could seriously harm our business. As of the date hereof, our Israeli subsidiaries have accumulated loss carry forwards for Israeli tax purposes and therefore have not enjoyed any tax benefits under current approved enterprise programs.

In the past, we have received grants from the government of Israel for the financing of a portion of our research and development expenditures for previous products in Israel. The regulations under which we received these grants restrict our ability to manufacture products or transfer technology outside of Israel for products developed with this technology. Furthermore, these grants may not be available to us in the future.

As of April 1, 2005, the government of Israel eliminated the ability of companies to submit new applications for approved enterprise status. This change in the government policy may hinder us in the future with respect to any benefits we may have received for new undertakings which would have been entitled to "approved enterprise" status.

We may lose our United States income tax net operating loss carryforwards if we experience a significant change in ownership.

The utilization of net operating loss carryforwards may be subject to substantial annual limitations if there has been a significant "change in ownership." Any "change in ownership," as described in Section 382 of the Internal Revenue Code, may substantially limit our ability to utilize the net operating losses carryforwards. As of March 31, 2008, we had United States federal net operating loss carryforwards of approximately $94,148,000, which will expire between 2011 through 2028 and state net operating loss carryforwards of approximately $75,046,000 which will expire between 2008 through 2018.

Several of our directors and certain officers have relationships with Davidi Gilo and his affiliated companies that could be deemed to limit their independence.

Several members of our board of directors, Lewis Broad, Neill Brownstein (who resigned effective as of June 26, 2008), Avraham Fischer, Samuel Kaplan and Alan Zimmerman, have had professional relationships with Davidi Gilo, our chairman of the board of directors and former chief executive officer, and his affiliated companies for several years. These members of our board of directors previously served on the boards of directors of DSP Communications, Inc. and/or DSP Group, Inc., of which Mr. Gilo was formerly the controlling stockholder and the chairman of the board. In addition, Avraham Fischer is a senior partner of the law firm of Fischer, Behar, Chen & Co., which represents us on matters relating to Israeli law, is an investor and co-chief executive officer of an Israeli investor group in which Mr. Gilo was an investor until October 2005, and is co-chief executive officer and a director of Clal Industries and Investments, Ltd., which has made a significant investment in ANI, a related party of our company. The long-term relationships between these directors and officers and Mr. Gilo and his affiliated companies could be considered to limit their independence.

Because our management has the ability to control stockholder votes, the premium over market price that an acquirer might otherwise pay could be reduced and any merger or takeover could be delayed.

As of March 31, 2008, our management collectively owned approximately 33.95% of our outstanding common stock (based on the number of shares owned by these individuals and the number of shares issuable upon exercise of options within 60 days of March 31, 2008). As a result, these stockholders, acting together, will be able to control the outcome of all matters submitted for stockholder action, including:

•: electing members to our board of directors;
•: approving significant change-in-control transactions;
•: determining the amount and timing of dividends paid to themselves and to our public stockholders; and
•: controlling our management and operations.

This concentration of ownership may have the effect of impeding a merger, consolidation, takeover or other business consolidation involving us, or discouraging a potential acquirer from making a tender offer for our shares. This concentration of ownership could also negatively affect our stock's market price or decrease any premium over market price that an acquirer might otherwise pay.

Because stock markets are likely to continue to experience extreme price and volume fluctuations, the price of our stock may decline.

The market price of our shares has been and likely will continue to be highly volatile and could be subject to wide fluctuations in response to numerous factors, including the following:

•: actual or anticipated variations in our quarterly operating results or those of our competitors;
•: announcements by us or our competitors of new products or technological innovations;
•: introduction and adoption of new industry standards;
•: changes in financial estimates or recommendations by securities analysts;
•: changes in the market valuations of our competitors;
•: announcements by us or our competitors of significant acquisitions or partnerships; and
•: sales of our common stock.

Many of these factors are beyond our control and may negatively impact the market price of our common stock, regardless of our performance. In addition, the stock market in general, and the market for technology and telecommunications related companies in particular, have been highly volatile. Our common stock may not trade at the same levels compared to shares of other technology companies and shares of technology companies, in general, may not sustain their current market prices.

To date, the trading volume in our common stock generally has been relatively low and significant price fluctuations can occur as a result. If the generally low trading volumes experienced to date continue, such price fluctuations could continue in the future and the sale prices of our common stock could decline significantly. Investors may therefore have difficulty selling their shares.

In the past, securities class action litigation has often been brought against a company following periods of volatility in the market price of its securities. We could become the target of similar litigation in the future. Securities litigation could result in substantial costs and divert management's attention and resources, which could seriously harm our business and operating results.

Provisions of our governing documents and Delaware law could discourage acquisition proposals or delay a change in control.

Our Fifth Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws contain anti-takeover provisions that could make it more difficult for a third party to acquire control of us, even if that change in control would be beneficial to stockholders. Specifically:

•: our board of directors has the authority to issue common stock and preferred stock and to determine the price, rights and preferences of any new series of preferred stock without stockholder approval;
•: our board of directors is divided into three classes, each serving three-year terms;
•: super majority voting is required to amend key provisions of our Fifth Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws;
•: there are limitations on who can call special meetings of stockholders;
•: stockholders are not able to take action by written consent; and
•: advance notice is required for nominations of directors and for stockholder proposals.

In addition, provisions of Delaware law and our stock option plans may also discourage, delay or prevent a change of control or unsolicited acquisition proposals.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

The following table sets forth information concerning the properties that we lease. We believe these properties are suitable for their intended purposes and adequate to meet our requirements for the foreseeable future. We do not own any real property.

Location	Major Activity	Leased Space (square footage)	Expiration of Current Lease
Norcross, Georgia	Corporate headquarters; sales and marketing, finance, technical customer support and administration	14,654	January 2012
Denver, Colorado	Executive and sales	3,558	August 2010
Modi'in District of Israel	Research and development and warehousing	17,050	April 2011

Item 3. Legal Proceedings

We are involved from time to time in litigation incidental to the ordinary course of our business activities. While the results of any such litigation cannot be predicted with certainty, we do not believe that the final resolution of any such matters will have a material adverse effect on our consolidated financial position or results of operations.

Item 4. Submission of Matters to a Vote of Security Holders

None.

PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Historically, our common stock was traded on The Nasdaq Global Market under the symbol "VYYO." Effective April 21, 2008, our common stock was de-listed from The Nasdaq Global Market. Following this de-listing, our common stock is quoted on the Pink Sheets quotation service.

The following table presents the high and low sales prices of our common stock in each quarter of fiscal years ending March 31, 2008 and 2007, as reported by The Nasdaq Global Market:

		Price Range of Common Stock
		High		Low
Year Ended March 31, 2008
	First Quarter	$	8.02	$	5.51
	Second Quarter		7.18		5.28
	Third Quarter		6.04		3.12
	Fourth Quarter		3.17		0.30
Year Ended March 31, 2007
	First Quarter	$	7.97	$	5.12
	Second Quarter		6.45		4.25
	Third Quarter		4.57		3.21
	Fourth Quarter		8.44		4.09

On March 31, 2008, the closing price of our common stock as reported on The Nasdaq Global Market was $0.41 per share. As of March 31, 2008, there were approximately 192 holders of record of our common stock.

Dividend Policy. We have never declared or paid any cash dividends on shares of our common stock. We presently intend to retain any future earnings to fund the development and expansion of our business, and do not anticipate paying cash dividends on our common stock in the foreseeable future.

Through our Israeli subsidiaries we participate in the "alternative benefits program" under the Israeli law for the Encouragement of Capital Investments, 1959, under which we realize certain tax exemptions. If an Israeli subsidiary distributes a cash dividend to us from income which is tax exempt, other than in connection with the subsidiary's complete liquidation, it would be taxed at the corporate rate applicable to such income (currently between 10% to 25%). Pursuant to Article 12 of the Income Tax Treaty between Israel and the United States, if we were to receive a dividend from an Israeli subsidiary from income derived during any period for which the subsidiary is entitled to the reduced tax rate applicable to an approved enterprise, then that subsidiary would be required to withhold 15% of the gross amount of the dividend payable to us under certain conditions.

Securities Authorized for Issuance under Equity Compensation Plans. The following chart sets forth certain information as of March 31, 2008, with respect to our outstanding stock options granted under our 1996 Equity Incentive Plan and Fourth Amended and Restated 2000 Employee and Consultant Equity Incentive Plan (the "2000 Plan"). We only grant stock options under our 2000 Plan, and as of a current date there are no stock options outstanding under the 1996 Equity Incentive Plan.

Each of our plans has been approved by our stockholders. The number of shares reserved for issuance under the 2000 Plan automatically increases on the first day of each fiscal year by the lesser of

(i) 1,500,000 shares, or (ii) 10% of the number of shares of our common stock outstanding on the last day of the immediately preceding fiscal year.

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted-average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders	7,848,325	$	2.63	213,800
Equity compensation plans not approved by security holders	None		None	None
Total	7,848,325	$	2.63	213,800

Item 6. Selected Financial Data

Not applicable.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

You should read this Management's Discussion and Analysis of Financial Condition and Results of Operations in conjunction with our fiscal 2008 annual Consolidated Financial Statements and accompanying notes appearing in this Annual Report on Form 10-K. The matters addressed in this Management's Discussion and Analysis of Financial Condition and Results of Operations, with the exception of the historical information presented, contain forward-looking statements involving risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth in Item 1A above and elsewhere in this report.

Overview

Our focus is now entirely on our cable solutions as we have ceased our marketing and support activities in our wireless business and have terminated all employees dedicated to those efforts. All of our internal resources are currently focused on enhancing our visibility in and penetration of the cable market. See note 1 of our fiscal 2008 annual Consolidated Financial Statements.

We have experienced significant losses and negative cash flows from operations since our incorporation. For the year ended March 31, 2008, we incurred a net loss of $29,939,000 and had an accumulated deficit of $305,554,000. These matters raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern will depend upon our ability to raise additional capital during the next three months. We are pursuing raising additional capital to fund our operations although there is no assurance that such capital will be available to us. We also are seeking to expand our revenue base by adding new customers and to further reduce expenses, beyond the reductions realized in the restructuring plan discussed below. Failure to secure additional capital in the very short term or to expand our revenue base in the longer term will result in depleting our available funds and not being able to pay our obligations when they become due. See "—Liquidity, Capital Resources and Going Concern Considerations."

Since our acquisition of Xtend in 2004, we had operated in two segments: the cable solutions segment and the wireless segment. Beginning in 2007, we announced that our primary focus and dedication of resources was in our cable solutions segment. In July 2007, we implemented a cost reduction program that reduced our workforce, including workforce in our wireless solutions segment. In the three months ended March 31, 2008, we simplified our structure by further streamlining our

corporate organization and reducing operating costs to better address market needs and revenue opportunities in the cable market. As part of this restructure plan, we ceased the marketing and support efforts for, and terminated all employees dedicated to, our wireless solutions segment in March 2008. Accordingly, we have no current wireless operations.

In this regard, we recorded a restructuring charge in the three months ended March 31, 2008 of $2,356,000. This charge is being utilized to cover additional severance payments and other employee-related costs of approximately $2,102,000 associated with the involuntary termination of approximately 100 employees, and impairment of long lived assets and other expenses of approximately $254,000. In connection with the cessation of our wireless business and the significant reduction of our Israeli operating activity, we wrote-off inventory of approximately $1,067,000 and we expect to accrue additional expenses of approximately $300,000 to $450,000 due to vacating building leases in Israel. For a discussion of our 2008 restructuring, see note 1 of our fiscal 2008 annual Consolidated Financial Statements.

The reductions of workforce and outsourced services and contractors implemented in 2007 and 2008 impacted all company functions, both in Israel and the United States, and included management and non-management positions. These actions are consistent with our previous disclosures concerning operating cost reductions and exit from the wireless business. All functions currently performed in Israel except research and development have been moved to the United States and we are currently exploring our options to mitigate our affected real estate lease obligations. We also expect to record other costs related to the consolidation of our operations at our Georgia facility, but at this time we are unable to estimate the costs expected to be incurred and whether these costs will be material. We continue to evaluate additional opportunities to reduce operating costs.

We completed the restructuring plan in the three months ended June 30, 2008 and expect to reduce annual operating expenses by approximately $20,000,000, after payment of the severance costs described above.

On March 23, 2006, we closed the private placement of shares of common stock, a convertible note, a senior secured note and warrants to purchase common stock with Goldman, Sachs & Co. (an affiliate of Goldman) in exchange for $25,000,000 (the "2006 Financing"). In the 2006 Financing we issued (a) 1,353,365 shares of our common stock, (b) a $10,000,000 10% Convertible Note (the "$10,000,000 2006 Note"), (c) a $7,500,000 9.5% Senior Secured Note (the "$7,500,000 2006 Note"), and (d) warrants to purchase 298,617 shares of our common stock, all of which were exercised in 2006. Our net proceeds from the 2006 Financing were $23,400,000.

On March 28, 2007, we received $35,000,000 from Goldman under the $35,000,000 5% Convertible Note due March 28, 2012 (the "2007 Goldman Note"), which included $17,500,000 of new funding and $17,500,000 of which we used to pay off the $10,000,000 2006 Note and $7,500,000 2006 Note described above.

On June 13, 2008, we received $4,500,000 of new funding after closing a financing of $41,000,000, which included $38,000,000 from Goldman and $3,000,000 from Syntek (the "2008 Financing"). The proceeds in the 2008 Financing redeemed the 2007 Goldman Note and the 2005 Syntek Note. See "—Subsequent Events—2008 Financing" and note 17 of our fiscal 2008 annual Consolidated Financial Statements.

Effective April 21, 2008, our common stock was de-listed from The Nasdaq Global Market. Currently, our common stock is quoted on the Pink Sheets. On April 24, 2008, we filed Form 15 with the SEC which suspended our reporting obligations under the Exchange Act.

On March 4, 2008, we implemented a repricing program for all outstanding options previously granted to current employees, including executive officers, and our chairman and vice chairman of the board of directors. The options, all of which had been previously granted under our Fourth Amended

and Restated 2000 Employee and Consultant Equity Incentive Plan were repriced to $1.40 per share, the closing price of our common stock on The Nasdaq Global Market on the date of the repricing. The other terms of the options, including vesting schedules and term, remain unchanged as a result of the repricing.

The repriced options had originally been issued with exercise prices ranging from $3.35 to $8.43 per share, which prices reflected the then current market prices of our common stock on the original grant dates. See note 12 of our fiscal 2008 annual Consolidated Financial Statements.

Critical Accounting Policies

This discussion and analysis of our financial condition and results of operations is based upon our fiscal 2008 annual Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported assets and liabilities, revenues and expenses and related disclosure of contingent assets and liabilities at the date of the financial statements. Actual results may differ from these estimates, judgments and assumptions under different conditions.

Our critical accounting policies are described in the notes to our fiscal 2008 annual Consolidated Financial Statements as of and for the year ended March 31, 2008. We determined these critical policies by considering accounting policies that involve the most complex or subjective decisions or assessments. We believe our most critical accounting policies include the following:

Revenue Recognition

Substantially all of our revenue is generated from sales of our solutions. As of March 31, 2008, our revenues from services were not significant. Our solutions are off-the-shelf products, sold "as is," without further adjustment or installation. When establishing a relationship with a new customer, we also may sell our solutions together as a package, in which case we typically ship solutions at the same time to the customer.

We record revenues from our solutions when (a) persuasive evidence of an arrangement exists; (b) delivery has occurred and customer acceptance requirements have been met, if any, and we have no additional obligations; (c) the price is fixed or determinable; and (d) collection of payment is reasonably assured. Our standard sales terms generally do not include customer acceptance provisions. However, if there is a right of return, customer acceptance provision or uncertainty about customer acceptance, we defer the associated revenue until we have evidence of customer acceptance.

Emerging Issues Task Force ("EITF") No. 00-21, "Revenue Arrangements with Multiple Deliverables," addresses when and how an arrangement involving multiple deliverables should be divided into separate units of accounting. Our multiple deliverables arrangements are those arrangements with new customers in which we sell our solutions together as a package. Because we deliver these off-the-shelf solutions at the same time, the four revenue recognition criteria discussed above are met.

We recognize revenues related to the exclusivity provisions contained in the equipment purchase agreement with ANI described in note 4 of our fiscal 2008 annual Consolidated Financial Statements on a straight line basis, over the 10-year term of that agreement.

Impairment of Long-Lived Assets and Intangible Assets

Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"), requires that long-lived assets, including finite intangible assets to be held and used or disposed of by an entity, be reviewed for impairment whenever

events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Under SFAS 144, if the sum of the expected future cash flows (undiscounted and without interest charges) of the long-lived assets is less than the carrying amount, we would recognize an impairment loss and would write down the assets to their estimated fair values.

Employee Stock-Based Compensation

Effective January 1, 2006, we adopted SFAS No. 123 (revised 2004), "Share-based Payment" ("SFAS 123(R)"). SFAS 123(R) supersedes APB 25 "Accounting for Stock Issued to Employees" and related interpretations and amends SFAS No. 95, "Statement of Cash Flows." SFAS 123(R) requires that awards classified as equity awards be accounted for using the grant-date fair value method. The fair value of stock options is determined based on the number of shares granted and the price of our common stock, and determined based on the Black-Scholes, Monte Carlo and the binomial option-pricing models, net of estimated forfeitures. We estimate forfeitures based on historical experience and anticipated future conditions. We use the Monte Carlo valuation model only for stock options granted to executives in 2005, 2006 and repriced in 2008 where vesting is subject to specific stock price performance.

We recognize compensation cost for options granted with service conditions that have graded vesting schedules using the graded vesting attribution method.

We adopted the modified prospective transition method permitted by SFAS 123(R). Under this transition method, we implemented SFAS 123(R) as of the first quarter of 2006 with no restatement of prior periods. The valuation provisions of SFAS 123(R) apply to new awards and to awards modified, repurchased or cancelled after January 1, 2006. Additionally, we recognize compensation cost over the remaining service period for the portion of awards for which the requisite service has not been rendered using the grant-date fair value of those awards as calculated for pro forma disclosure purposes under SFAS 123 "Accounting for Stock-Based Compensation."

We account for equity instruments issued to third party service providers (non-employees) in accordance with the fair value based on an option-pricing model, pursuant to the guidance in EITF 96-18 "Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling Goods or Services." We revalue the fair value of the options granted over the related service periods and recognize the value over the vesting period, using the Black-Scholes model.

Inventory

We regularly monitor inventory quantities on hand and record a provision for excess and obsolete inventory based primarily on our estimated forecast of future product demand and production requirements. Although we make every effort to ensure the accuracy of our forecasts of future product demand, any significant unanticipated changes in demand or technological developments would significantly impact the value of our inventory and reported operating results. If actual market conditions are different than our assumptions, additional provisions may be required. Our estimate of future product demand may prove to be inaccurate, in which case we may have understated or overstated the provision required for excess and obsolete inventory. If we later determine that our inventory is overvalued, we would be required to recognize such costs in our costs of sales at the time of such determination. If we later determine that our inventory is undervalued, we may have overstated our costs of sales in previous periods and would be required to recognize additional operating income only when the undervalued inventory was sold. During the year ended March 31, 2008, the three-month transition period ended March 31, 2007 and the year ended December 31, 2006, we recorded an inventory valuation write-down of approximately $1,250,000, $0 and $424,000, respectively.

We adopted the provisions of FASB Statement No. 151, "Inventory Costs" ("FASB 151"), as of January 1, 2006, which did not have a material effect on our financial statements. Under FASB 151 we are required to recognize abnormal idle facility expenses as current-period charges, and to allocate fixed production overhead expenses to inventory based on normal capacity of the production facility.

Short-Term Investments

We have designated our investments in debt securities as available-for-sale. Available-for-sale securities are carried at fair value, which is determined based upon the quoted market prices of the securities, with unrealized gains and losses reported in accumulated other comprehensive income (loss), a component of stockholders' equity until realized. Realized gains and losses and declines in value judged to be other-than-temporary on available-for-sale securities are included in interest income, net. We view our available-for-sale portfolio as available for use in our current operations. Accordingly, we have classified all investments as short-term under "short-term investments," even though the stated maturity date may be one year or more beyond the current balance sheet date. Interest, amortization of premiums, accretion of discounts and dividends on securities classified as available-for-sale are included in interest income, net.

We recognize an impairment charge when the decline in the fair values of these investments below their cost basis is deemed to be other-than-temporary. We consider various factors in determining whether to recognize an impairment charge, including the length of time and the extent to which the fair value has been below the cost basis, the current financial condition of the investee and our intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.

Fair Value of Financial Instruments

The fair value of our financial instruments included in working capital approximates carrying value. The 2005 Syntek Note described in note 7 of our fiscal 2008 annual Consolidated Financial Statements is presented in the Balance Sheet for the year ended March 31, 2008 as "Current Liabilities." This note is presented in the Balance Sheet for the three-month transition period ended March 31, 2007 and the year ended December 31, 2006 as "Long-Term Liabilities." The 2007 Goldman Note delivered in the 2007 Financing and the $10,000,000 2006 Note and $7,500,000 2006 Note (each as described in note 10 of our fiscal 2008 annual Consolidated Financial Statements) are presented in the Balance Sheets as "Long-Term Liabilities," at their estimated fair value.

Debt Issuance Costs

Costs incurred in the issuance of the 2007 Goldman Note consisted of cash payments to legal advisors in the transition period ended March 31, 2007. Costs incurred in the issuance of the $10,000,000 2006 Note and the $7,500,000 2006 Note included warrants to purchase shares of our common stock issued to our financial advisor and cash payments made to legal and financial advisors in the year ended December 31, 2006. In the year ended December 31, 2006, we determined the fair value of the warrants based on the Black-Scholes option-pricing model. Issuance costs are deferred and amortized as a component of interest expense over the period from issuance through the first redemption date.

Costs incurred in the issuance of the 2008 Notes consists of cash payments to legal advisors and other miscellaneous expenses estimated to be $100,000.

Extinguishment of Debt

In the 2007 Financing we repaid the $10,000,000 2006 Note and the $7,500,000 2006 Note. We accounted for this repayment as "extinguishment of debt" under Emerging Issues Task Force 96-19,

"Debtor's Accounting for a Modification or Exchange of Debt Instruments" ("EITF 96-19"). We initially recorded the 2007 Goldman Note at its estimated fair value, and we used that amount to determine the debt extinguishment loss of $3,263,000 resulting from recognition of $2,231,000 in unamortized accretion and $1,032,000 in unamortized issuance expenses related to the $10,000,000 2006 Note and the $7,500,000 2006 Note.

The 2008 Notes were used to repay the 2007 Goldman Note and the 2005 Syntek Note. We expect to record a debt extinguishment loss of approximately $115,000 related to these repayments.

Recent Accounting Pronouncements

In March 2008, FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133" ("SFAS 161"). SFAS 161 requires enhanced disclosures regarding derivatives and hedging activities, including: (a) the manner in which a company uses derivative instruments; (b) the manner in which derivative instruments and related hedged items are accounted for under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities;" and (c) the effect of derivative instruments and related hedged items on a company's financial position, financial performance and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. We are evaluating the impact, if any, that adoption of SFAS 161 will have on our financial statements.

In December 2007, the SEC issued Staff Accounting Bulletin No. 110 ("SAB 110"), relating to the use of a "simplified" method in developing an estimate of the expected term of "plain vanilla" share options. SAB 107 previously allowed the use of the simplified method until December 31, 2007. SAB 110 permits the extension, under certain circumstances, of the use of the simplified method beyond December 31, 2007. We believe that adoption of SAB 110 will not have a material impact on our consolidated financial statements.

In December 2007, FASB issued SFAS No. 141 (revised 2007), "Business Combinations" ("SFAS 141(R)"), which changes the accounting for business combinations. Under SFAS 141(R), an acquirer will be required to recognize all of the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with limited exceptions. SFAS 141(R) will change the accounting treatment and disclosure for certain specific items in a business combination. SFAS 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. SFAS 141(R) will impact us if we complete any future acquisition.

In December 2007, FASB issued SFAS No. 160, "Non-controlling Interests in Consolidated Financial Statements—an amendment of Accounting Research Bulletin No. 51" ("SFAS 160"). SFAS 160 establishes new accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 is effective for fiscal years beginning on or after December 15, 2008. We do not believe that SFAS 160 will have a material impact on our consolidated financial statements.

In February 2007, FASB issued SFAS 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS 159"). SFAS 159 permits companies to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS 159 will be effective for us beginning January 1, 2008. We are currently evaluating the impact that adoption of SFAS 159 would have on our consolidated financial statements.

In September 2006, FASB issued SFAS 157, "Fair Value Measurements" ("SFAS 157"). SFAS 157 defines fair value, establishes a framework and gives guidance regarding the methods used for measuring fair value, and expands disclosures about fair value measurements. SFAS 157 is effective for

financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Subsequent to the issuance of SFAS 157, FASB issued FASB Staff Positions 157-1, "Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13" ("FSP 157-1") and FSP 157-2 "Effective Date of FASB Statement No. 157" ("FSP 157-2"). FSP 157-1 excludes, in certain circumstances, SFAS 13 and other accounting pronouncements that address fair value measurements for purposes of lease classification or measurement under Statement 13 from the provision of SFAS 157. FSP 157-2 delays the effective date of SFAS 157 for nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. We are currently assessing the impact that SFAS 157 will have on our consolidated financial statements.

Results of Operations

In 2007 we changed our fiscal year end from December 31 to March 31. The following discussion compares our audited March 31, 2008 annual financial statements to our audited December 31, 2006 annual financial statements. We also compare the results for our three-month transition period ended March 31, 2007 to the three months ended March 31, 2006.

Year Ended March 31, 2008 Compared to Year Ended December 31, 2006

Revenues

Revenue fluctuates from quarter to quarter depending on our customer's needs and requirements. Revenues were $7,667,000 and $8,000,000 for the years ended March 31, 2008 and December 31, 2006, respectively. Revenue for the year ended March 31, 2008 consisted of $4,561,000 of revenue from sales of our wireless solutions sold to ANI, a related party as discussed in note 4 of our fiscal 2008 annual Consolidated Financial Statements. We ceased marketing and support efforts for, and terminated all employees dedicated to, our wireless solutions segment in March 2008. Our revenue has shifted from sales of wireless solutions to sales of cable solutions. Revenue from sales of cable solutions increased from $1,084,000 for the year ended December 31, 2006 to $3,047,000 for the year ended March 31, 2008. These revenues were generated primarily from sales to one top-five MSO.

Our revenue is concentrated among relatively few customers, as set forth in the following table. Though our principal revenue-generating customers are likely to vary on a quarterly basis, we anticipate that our revenues will remain concentrated among a few customers for the foreseeable future.

	Year Ended				Three-Month Transition Period Ended
	March 31, 2008		December 31, 2006		March 31, 2007
Customer A (related party)	59	%	84	%	26	%
Customer B	39	%	13	%	72	%

Sales to customer A were of our wireless solutions. See note 4 of our fiscal 2008 annual Consolidated Financial Statements for a description of this relationship. Customer B is an MSO.

Cost of Revenues

Cost of revenues was $8,232,000 and $5,824,000 for the years ended March 31, 2008 and December 31, 2006, respectively, and consisted of component and material costs, direct labor costs, warranty costs and overhead related to manufacturing our solutions.

The increase in cost of revenues for the year ended March 31, 2008 compared to the year ended December 31, 2006 related to (a) an increase in inventory valuations and write-downs from $424,000 in the year ended December 31, 2006 to $1,250,000 in the year ended March 31, 2008, resulting from our cessation of sales and support of our wireless products and (b) reimbursement of $710,000 in insurance proceeds in the year ended December 31, 2006 for damage to certain of our inventory that we had written down in previous years compared to $101,000 in the year ended March 31, 2008.

We took these inventory write-downs to account for excess inventory resulting from longer than expected sales cycle and customer acceptance of our solutions. Based on our experience in prior years in which we sold inventory that was previously written down, it is possible that in the future we may sell some or even a significant portion of the written-down inventory. However, due to the fact that we cannot predict when, if ever, such inventory will be sold given the lack of visibility and lack of acceptable predictability into our sales cycle, we have determined to record the write-down described above.

We anticipate that our gross margins will continue to fluctuate based on our product and customer mix, revenue level and inventory valuations.

Research and Development

Our research and development expenses were $10,776,000 and $11,216,000 for the years ended March 31, 2008 and December 31, 2006, respectively. These expenses consisted primarily of personnel, facilities, equipment and supplies. All of our internal research and development activities are conducted in our facility in Israel and are charged to operations as incurred.

We anticipate that our research and development expenses will decrease in the future due to our restructuring efforts. We have no ongoing research and development of wireless products and a greatly reduced research and development staff for cable solutions.

Sales and Marketing

Sales and marketing expenses were $7,941,000 and $9,261,000 for the years ended March 31, 2008 and December 31, 2006, respectively. Sales and marketing expenses consisted of salaries and related costs of sales and marketing employees, consulting fees and expenses for travel, trade shows, market research, branding and promotional activities. Expenses decreased due to our restructuring efforts in 2007 and 2008. Following the termination of all employees dedicated to the wireless business, we no longer have sales and marketing expenses for our wireless business.

Given our reduction in workforce as a result of our restructuring efforts, we anticipate that our sales and marketing expenses will continue to decrease in future periods.

General and Administrative

General and administrative expenses were $9,306,000 and $8,710,000 during the years ended March 31, 2008 and December 31, 2006, respectively. General and administrative expenses consisted primarily of personnel and related costs for general corporate functions, including finance, accounting, Sarbanes-Oxley Act of 2002 related implementation, strategic and business development and legal.

The increase in general and administrative expenses during the year ended March 31, 2008 compared to the year ended December 31, 2006 resulted from (a) an increase of $875,000 in professional and consulting fees, and (b) a one-time payment for market research of $300,000 during the year ended March 31, 2008. These increases were partly offset by a decrease in salaries, compensation and recruiting fees of $531,000 for the year ended March 31, 2008 compared to the year ended December 31, 2006.

We anticipate that our general and administrative expenses will decrease in future periods given our reduction in workforce and facilities as a result of our restructuring efforts.

Restructuring and Impairments

During the year ended March 31, 2008, we recorded restructuring expenses of $2,356,000 resulting from the restructuring plan implemented in the three months ended March 31, 2008. This charge is being utilized to cover additional severance payments and other employee-related costs of approximately $2,102,000 associated with the involuntary termination of approximately 100 employees and impairment of long-lived assets and other expenses of approximately $254,000.

Financial Income (Financial Expenses), Net

Financial Income (Financial Expenses), net includes interest income from investment and foreign currency remeasurement gains and losses. Net interest expense in the years ended March 31, 2008 and December 31, 2006 was $2,029,000 and $1,691,000, respectively. Net interest expense increased due to increased interest on the 2005 Syntek Note and the 2007 Goldman Note compared to interest on the notes delivered in the 2006 Financing. These increases were partially offset by interest income derived mainly from our cash and short-term investment balances.

During the years ended March 31, 2008 and December 31, 2006, we recognized an other-than-temporary impairment in our available-for-sale securities of $0 and $42,000, respectively, and realized losses of $0 and $42,000, respectively. Our recognition of the other-than-temporary investment impairment is due to the effect of rising interest rates on our fixed-interest debt investments that we potentially may not hold until maturity. Our interest income is derived from our cash and short-term investment balances.

We will incur increased interest expenses due to the 2008 Notes issued in the 2008 Financing in which the 2008 Notes bear an annual interest rate of 20% and the amortization of deferred expenses incurred as part of the 2008 Financing. The 2007 Goldman Note carried a 5% annual interest rate. We recorded expenses of $1,099,000 during the year ended March 31, 2008 related to the 2005 Syntek Note.

Income Taxes

Our tax rate reflects a mix of the federal and state taxes on our United States income and Israeli tax on non-exempt income. As of March 31, 2008, we had United States federal net operating loss carryforwards of approximately $94,148,000, which will expire between 2011 through 2028 and state net operating loss carryforwards of approximately $75,046,000 which will expire between 2008 through 2018. The utilization of net operating loss carryforwards may be subject to substantial annual limitations if there has been a significant "change in ownership," as defined in Section 382 of the Internal Revenue Code of 1986. Any "change in ownership" may substantially limit our utilization of the net operating losses.

As of March 31, 2008, our Israeli subsidiaries, had net operating loss carryforwards of approximately $110,000,000. These loss carryforwards have no expiration date.

Our Israeli subsidiaries have been granted "approved enterprise" status for several investment programs. The "approved enterprise" status entitles these subsidiaries to receive tax exemption periods, ranging from two to six years, on undistributed earnings commencing in the year in which the subsidiaries attain taxable income. In addition, this "approved enterprise" status provides a reduced corporate tax rate of between 10% to 25% (as opposed to the usual Israeli corporate tax rate of 27% for 2008) for the remaining term of the program based on the program's proportionate share of income.

Since our Israeli subsidiaries do not have taxable income, the tax benefits periods have not yet commenced. The subsidiaries' losses are expected to offset certain future earnings of the subsidiaries during the tax-exempt period; therefore, the utilization of the net operating losses will generate no tax

benefits. Accordingly, deferred tax assets from such losses have not been included in our fiscal 2008 annual Consolidated Financial Statements. We are entitled to the above benefits if the subsidiaries fulfill conditions stipulated by the law, regulations published thereunder and instruments of approval for the specific investments in approved enterprises.

One of our subsidiaries is taxed at the regular Israeli corporate tax rate. Following a series of changes in Israeli tax rates, the corporate tax rates are as follows: 2006: 31%, 2007: 29%, 2008: 27%, 2009: 26% and for 2010 and thereafter: 25%.

On January 1, 2003, the Israeli Law for Amendment of the Income Tax Ordinance (Amendment No. 132), 5762-2002, as amended, known as the "Tax Reform," came into effect. The Tax Reform is aimed at broadening the categories of taxable income and reducing the tax rates imposed on employment income. Pursuant to these reforms, we have chosen to grant options without a trustee intermediary under our 2000 Plan to employees (excluding controlling stockholders) of our subsidiaries who are Israeli tax residents. This permits employees to exercise stock options and sell shares of common stock without the holding period requirements and other restrictions imposed upon options granted through a trustee intermediary. In the absence of a trustee intermediary, the Tax Reform generally permits such employees to recognize ordinary income at the time the employee sells the shares, rather than on the date of grant or exercise, but precludes us from deducting the resulting expense for tax purposes at any time.

We have provided a full valuation allowance against our United States federal and state deferred tax assets because the future realization of the tax benefit is not sufficiently assured.

Charges for Stock-Based Compensation

Charges for stock-based compensation for the years ended March 31, 2008 and December 31, 2006 were $5,103,000 and $5,402,000, respectively. The stock-based compensation charges resulted from stock option grants to service providers, members of our board of directors members and employees accounted for on the fair value based method.

The charges for stock-based compensation relating to the continuing operations were as follows:

	Year Ended
	March 31, 2008		December 31, 2006
	(in thousands of U.S. $)
Cost of products sold	$	32	$	83

Research and development	$	440	$	820

Sales and marketing	$	1,768	$	1,543

General and administrative	$	2,863	$	2,956

Three-Month Transition Period Ended March 31, 2007 Compared to Three Months Ended March 31, 2006

Revenues

Revenues decreased to $623,000 in the three-month transition period ended March 31, 2007 from $2,369,000 in the three months ended March 31, 2006. This decrease was primarily due to a decrease in revenues of $161,000 compared to $1,800,000 from our wireless solutions sold to ANI in the three-month transition period ended March 31, 2007 and three months ended March 31, 2006, respectively. ANI is a related party as discussed in note 4. Sales of our cable solutions were $462,000 and $463,000 in the three-month transition period ended March 31, 2007 and the three months ended March 31, 2006, respectively.

Our revenue was concentrated among relatively few customers, as set forth in the following table.

		Three-Month Transition Period Ended March 31, 2007		Three Months Ended March 31, 2006
Customer A		72	%	18	%
Customer B (related party)		26	%	76	%

Customer A is an MSO. Sales to customer B were of our wireless solutions.

Cost of Revenues

Cost of revenues consists of component and material costs, direct labor costs, warranty costs and overhead related to manufacturing our solutions.

Cost of revenues decreased to $698,000 during the three-month transition period ended March 31, 2007 from $1,810,000 during the three months ended March 31, 2006. This decrease in cost of revenues was primarily attributable to decreases in shipments of our wireless solutions. Our gross margins during the three-month transition period ended March 31, 2007 decreased primarily due to the decrease in shipment of our solutions together with flat fixed costs.

Research and Development

Our research and development expenses were $2,868,000 and $2,461,000 during the three-month transition period ended March 31, 2007 and the three months ended March 31, 2006, respectively. Approximately $2,206,000 and $1,135,000 of these expenses were from our cable solutions and approximately $662,000 and $1,326,000 were from our wireless solutions for the three-month transition period ended March 31, 2007 and the three months ended March 31, 2006, respectively. These expenses consisted primarily of personnel, facilities, equipment and supplies and are charged to operations as incurred. All of our internal research and development activities were conducted in our facility in Israel.

Sales and Marketing

Sales and marketing expenses decreased to $1,881,000 during the three-month transition period ended March 31, 2007 compared to $2,643,000 during the three months ended March 31, 2006. Sales and marketing expenses consisted of salaries and related costs for sales and marketing employees, consulting fees and expenses for travel, trade shows, market research, branding and promotional activities.

General and Administrative

General and administrative expenses were $2,047,000 compared to $3,009,000 during the three-month transition period ended March 31, 2007 and the three months ended March 31, 2006, respectively. General and administrative expenses consisted primarily of personnel and related costs for general corporate functions, including finance, accounting, implementation of the Sarbanes-Oxley Act of 2002, strategic and business development and legal.

The decrease in general and administrative expenses during the three-month transition period ended March 31, 2007 compared to the three months ended March 31, 2006 was primarily due to (a) decreased charges for stock-based compensation from $1,281,000 to $447,000 and (b) decreased professional fees from $332,000 to $209,000.

Financial Income (Financial Expenses), Net

"Financial Income (expense), net" includes interest and investment income, foreign currency remeasurement gains and losses. Net interest expense was $3,918,000 for the three-month transition period ended March 31, 2007 compared to $269,000 for the three months ended March 31, 2006. As a result of the extinguishment of the $10,000,000 2006 Note and the $7,500,000 2006 Note, we recorded $3,263,000 in the three-month transition period ended March 31, 2007 as financial expenses consisting of $2,231,000 of unamortized accretion and $1,032,000 of unamortized issuance expenses. In addition, we had increased interest expenses due to the 2005 Syntek Note, the $10,000,000 2006 Note and the $7,500,000 2006 Note. These increases were partially offset by interest income derived mainly from our cash and short-term investment balances, and recognition of an other-than-temporary impairment in our available-for-sale securities of $0 and ($42,000) and realized losses of $0 and $31,000 for the three-month transition period ended March 31, 2007 and the three months ended March 31, 2006, respectively.

We recorded accretion of $323,000 during the three-month transition period ended March 31, 2007 on the 2005 Syntek Note.

Income Taxes

As of March 31, 2008, our Israeli subsidiaries had net operating loss carryforwards of approximately $110,000,000. These carryforwards have no expiration date.

Our Israeli subsidiaries have been granted "Approved Enterprise" status for several investment programs. The Approved Enterprise status entitles these subsidiaries to receive tax exemption periods, ranging from two to six years, on undistributed earnings commencing in the year in which the subsidiaries attain taxable income. In addition, this Approved Enterprise status provides a reduced corporate tax rate of between 10% to 25% (as opposed to the usual Israeli corporate tax rate of 27% for 2008) for the remaining term of the program on the plan's proportionate share of income.

Since our Israeli subsidiaries have not achieved taxable income, the tax benefits periods have not yet commenced. The subsidiaries' losses are expected to offset certain future earnings of the subsidiaries during the tax-exempt period; therefore, the utilization of the net operating losses will generate no tax benefits. Accordingly, deferred tax assets from such losses were not included in our fiscal 2008 annual Consolidated Financial Statements. The entitlement to the above benefits is conditioned upon the subsidiaries fulfilling the conditions stipulated by the law, regulations published thereunder and the instruments of approval for the specific investments in approved enterprises.

Liquidity, Capital Resources and Going Concern Considerations

Since inception, we have financed our operations principally through bank borrowings and other loans and equity sales of our common stock for approximately $198,650,000.

As of March 31, 2008, our principal source of liquidity was $6,021,000 of cash, cash equivalents and short-term investments. On June 13, 2008, we received $4,500,000 of new funding after closing a financing of $41,000,000, which included $38,000,000 from Goldman and $3,000,000 from Syntek (the "2008 Financing"). In the 2008 Financing, we delivered the 2008 Goldman Note, $35,000,000 of which we used to payoff the outstanding 2007 Goldman Note issued in the 2007 Financing. We also delivered the 2008 Syntek Note, $1,500,000 of which we used to payoff the outstanding 2005 Syntek Note (which had $1,500,0000 of principal outstanding). The 2008 Notes are payable on December 13, 2008. Concurrent with the 2008 Financing, we paid approximately $400,000 to Goldman and Syntek for accrued interest on the 2007 Goldman Note and the 2005 Syntek Note which resulted in approximately $4,000,000 of cash available for general corporate purposes (after debt issuance costs). Our obligations under the 2008 Notes are guarantied by certain of our subsidiaries and secured by a security interest in

substantially all of our assets and those of our subsidiaries. See "—Subsequent Events" and note 17 of our fiscal 2008 annual Consolidated Financial Statements.

On March 28, 2007, we received $35,000,000 from Goldman under the 2007 Goldman Note, which included $17,500,000 of new funding and $17,500,000 of which we used to pay off the $10,000,000 2006 Note and the $7,500,000 2006 Note. The 2007 Goldman Note was redeemed with the 2008 Financing.

Our financial statements are presented on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. We have experienced significant losses and negative cash flows from operations since incorporation. For the year ended March 31, 2008, we incurred a net loss of $29,939,000 and had an accumulated deficit of $305,554,000. This raises substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern will depend upon our ability to raise additional capital during the next three months. We are pursuing raising additional capital to fund our operations although there is no assurance that such capital will be available to us. We also are seeking to expand our revenue base by adding new customers.

We expect that the proceeds from the 2008 Financing will allow us to operate until September 2008. Failure to secure additional capital in the very short term or to expand our revenue base in the longer term will result in depleting our available funds and not being able to pay our obligations when they become due. The accompanying fiscal 2008 annual Consolidated Financial Statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from our possible inability to continue as a going concern.

Net Cash Used in Operating Activities

Net cash used in operating activities was $26,080,000 and $16,722,000 for the years ended March 31, 2008 and December 31, 2006, respectively. During the year ended March 31, 2008, we used cash primarily to (a) fund our net loss which included non-cash charges related to (i) depreciation and amortization of $1,039,000, (ii) write-downs of inventory of $1,250,000, (iii) financing expenses of $1,129,000 resulting from accretion of the 2005 Syntek Note and the 2007 Goldman Note, and (iv) stock-based compensation expenses of $5,103,000; (b) increase inventory by $931,000, (c) increase other current assets by $285,000; (d) increase trade payables and accrued liabilities by $4,400,000; (e) increase accrued restructuring charges by $1,282,000; (f) increase account receivables by $85,000; (g) decrease deferred revenues from a related party by $333,000 and (h) increase our liability for employee rights upon retirement by $112,000.

During the year ended December 31, 2006, we used cash primarily to (a) fund our net loss which included non-cash charges related to (i) depreciation and amortization of $850,000, (ii) write-downs of inventory and non-cancelable purchase commitments of $514,000, (iii) financing expenses of $1,470,000 resulting from accretion of the 2005 Syntek Note, the $10,000,000 2006 Note and the $7,500,000 2006 Note, and (iv) stock-based compensation expenses of $5,402,000; (b) increase inventory by $385,000, (c) increase other current assets by $61,000; (d) decrease trade payables and accrued liabilities by $814,000; (e) increase related parties' accounts receivable by $991,000; (f) decrease account receivables by $674,000; (g) increase deferred revenues from a related party by $3,795,000 and (h) increase our liability for employee rights upon retirement by $651,000.

During the three-month transition period ended March 31, 2007, net cash used in operations was $5,302,000, comprised mainly of our loss of $11,039,000, partially offset by (a) non-cash charges related to depreciation and amortization of $218,000, (b) stock-based compensation of $886,000, (c) financing expenses of $3,715,000 resulting from accretion of the 2005 Syntek Note, the $10,000,000 2006 Note and the $7,500,000 2006 Note delivered in the 2006 Financing and the 2007 Goldman Note delivered in

the 2007 Financing, (d) an increase of liability for employee rights upon retirement of $234,000, and (e) changes in other working capital accounts of $688,000.

During the three months ended March 31, 2006, net cash used in operations was $4,087,000, comprised mainly of our loss of $7,980,000, partially offset by (a) non-cash charges related to depreciation and amortization of $229,000, (b) financing expenses of $365,000 resulting from accretion of the 2005 Syntek Note, the $10,000,000 2006 Note and the $7,500,000 2006 Note, (c) stock-based compensation of $1,981,000, (d) an increase of liability for employee rights upon retirement of $301,000, and (e) changes in other working capital accounts of $1,017,000.

Net Cash Provided by (Used in) Investing Activities

Net cash provided by (used in) investing activities was $5,746,000 and ($4,428,000) for the years ended March 31, 2008 and December 31, 2006, respectively.

During the year ended March 31, 2008, cash provided from sales and maturities of our short-term investments net of purchases of short-term investments was $6,303,000. Net purchases of property and equipment were $440,000, primarily related to investment in equipment for research and development and manufacturing.

During the year ended December 31, 2006, cash used for the purchase of short-term investments was $3,872,000. Net purchases of property and equipment were $382,000, primarily related to investment in equipment for research and development and manufacturing.

During the three-month transition period ended March 31, 2007 and the three months ended March 31, 2006, cash provided from investing activities was $3,772,000 and $3,674,000, respectively.

During the three-month transition period ended March 31, 2007, cash provided from sales and maturities of short-term investments net of purchases of short-term investments was $4,254,000. This amount was partially offset by purchases of property and equipment of $435,000. During the three months ended March 31, 2006, net cash provided by investing activities was $3,674,000 comprised of $3,739,000, net of sales and purchases of short-term investments which were partially offset by purchases of property and equipment of $34,000.

Net Cash Provided by Financing Activities

Net cash provided by financing activities was $1,503,000 and $26,018,000 for the years ended March 31, 2008 and December 31, 2006, respectively. During the year ended March 31, 2008, we received $1,653,000 from exercises of stock options.

During the year ended December 31, 2006, we received net proceeds from the 2006 Financing of approximately $23,400,000, as described in note 10 of our fiscal 2008 annual Consolidated Financial Statements and $2,615,000 from exercises of stock options.

Financing activities in the three-month transition period ended March 31, 2007 were approximately $18,248,000 related to the 2007 Financing which included the 2007 Goldman Note and proceeds we received upon the exercise of stock options. Financing activities in the three months ended March 31, 2006 were approximately $24,874,000 and related to (a) the 2006 Financing, which included the issuance of our common stock, the $10,000,000 2006 Note, the $7,500,000 2006 Note and warrants to purchase our common stock, net of issuance cost and (b) proceeds we received upon the exercise of stock options.

Selected Quarterly Data

The following table presents unaudited quarterly financial information for each quarter in the year ended March 31, 2008, the three month transition period ended March 31, 2007 and the year ended December 31, 2006. You should read this information in conjunction with our fiscal 2008 annual Consolidated Financial Statements and the accompanying notes.

		Quarter Ended
		March 31, 2008			December 31, 2007			September 30, 2007			June 30, 2007			March 31, 2007
		(in thousands of U.S. $, except per share data)
Statements of Operations data:
Revenues
	Revenues	$	927		$	799		$	1,026		$	354		$	462
	Revenues from related party		162			1,526			1,560			1,313			161

Total revenues		$	1,089		$	2,325		$	2,586		$	1,667		$	623

Cost of revenues
	Cost of products sold		1,101			670			1,066			393			618
	Cost of products sold, related party		—			1,321			1,492			1,040			80
	Write-down of inventory and purchase commitments		1,067			—			47			136			—
	Insurance reimbursement for damaged inventory		—			—			—			(101	)		—

Total cost of revenues			2,168			1,991			2,605			1,468			698

Gross profit (loss)			(1,079	)		334			(19	)		199			(75	)

Operating loss			(7,596	)		(7,781	)		(8,024	)		(7,543	)		(6,871	)

Loss		$	(8,060	)	$	(8,479	)	$	(8,714	)	$	(4,686	)	$	(11,039	)

Loss per share (basic and diluted)		$	(0.43	)	$	(0.46	)	$	(0.47	)	$	(0.25	)	$	(0.61	)

Weighted average number of shares of common stock outstanding
	Basic and diluted		18,613			18,554			18,479			18,417			18,095

		Quarter Ended
		December 31, 2006			September 30, 2006			June 30, 2006			March 31, 2006
		(in thousands of U.S. $, except per share data)
Statements of Operations data:
Revenues
	Revenues	$	413		$	161		$	136		$	569
	Revenues from related party		1,343			953			2,625			1,800

Total revenues		$	1,756		$	1,114		$	2,761		$	2,369

Cost of revenues
	Cost of products sold		354			133			52			318
	Cost of products sold, related party		1,085			795			1,881			1,492
	Write-down of inventory and purchase commitments		255			169			—			—
	Insurance reimbursement for damaged inventory		(710	)		—			—			—

Total cost of revenues			984			1,097			1,933			1,810

Gross profit			772			17			828			559

Operating loss			(5,857	)		(6,958	)		(6,642	)		(7,554	)

Loss from continuing operations			(6,533	)		(7,718	)		(7,273	)		(7,980	)
Discontinued operations			—			48			30			—

Loss		$	(6,533	)	$	(7,670	)	$	(7,243	)	$	(7,980	)

Loss per share (basic and diluted)		$	(0.36	)	$	(0.43	)	$	(0.41	)	$	(0.50	)

Weighted average number of shares of common stock outstanding
	Basic and diluted		18,035			17,956			17,611			15,859

Off-Balance Sheet Arrangements

We did not undertake any off-balance sheet arrangements during the year ended March 31, 2008.

Subsequent Events

2005 Syntek Note

We previously delivered a $5,000,000 letter of credit in connection with the 2005 Syntek Note which was reflected as "Restricted cash" on our Balance Sheets. In accordance with the terms of the 2005 Syntek Note, on April 14, 2008, Syntek drew upon the letter of credit for payment of the $5,000,000. See note 5 and note 7 of our fiscal 2008 annual Consolidated Financial Statements for a description of the restricted cash and the 2005 Syntek Note.

2008 Financing

On June 13, 2008, we received $4,500,000 of new funding after closing a financing of $41,000,000, which included $38,000,000 from Goldman and $3,000,000 from Syntek (the "2008 Financing"). In the 2008 Financing, we delivered to Goldman a $38,000,000 20% Senior Secured Convertible Note, payable on December 13, 2008 (the "2008 Goldman Note"), $35,000,000 of which we used to payoff the outstanding 2007 Goldman Note. We also delivered to Syntek a $3,000,000 20% Senior Secured Convertible Note, payable on December 13, 2008 (the "2008 Syntek Note"), $1,500,000 of which we used to payoff the 2005 Syntek Note. Following these redemptions, our net proceeds form the 2008 Financing were approximately $4,400,000. Concurrent with the 2008 Financing, we paid approximately $400,000 to Goldman and Syntek for accrued interest on the 2007 Goldman Note and the 2005 Syntek

Note which resulted in approximately $4,000,000 of cash available for general corporate purposes (after debt issuance costs). Our obligations under the 2008 Notes are guarantied by certain of our subsidiaries and secured by a security interest in substantially all of our assets and those of our subsidiaries. See note 17 of our fiscal 2008 annual Consolidated Financial Statements.

The 2008 Notes are convertible into shares of our common stock as follows: (a) at the holder's option, if there occurs a Qualified Equity Investment (as defined in the 2008 Notes), at a price per share equal to the price per share paid for Equity Securities (as defined in the 2008 Notes) in such Qualified Equity Investment by investors unaffiliated with us; (b) at the holder's option, if there occurs a Non-Qualified Equity Investment (as defined in the 2008 Notes), at a price per share equal to 90% of the price per share paid for Equity Securities (as defined in the 2008 Notes) in such Non-Qualified Equity Investment by investors unaffiliated with us; and (c) at the holder's option at any time at an initial conversion price of $5 per share. In addition, a pro rata portion of the 2008 Syntek Note in the ratio of 35:1.5 will be automatically converted into shares of our common stock upon the conversion of all or any portion of the 2008 Goldman Note pursuant to the Qualified Equity Investment option or the Non-Qualified Equity Investment option.

In the event of a Fundamental Transaction (as defined in the 2008 Notes to include sales of our assets and certain business combinations), the holder may, at its option, require us to redeem all or any portion of the 2008 Notes at a price equal to 101% of the principal amount, plus all accrued and unpaid interest, if any, and subject to specified conditions, may be entitled to a cash "make-whole" premium, calculated in accordance with the terms of the 2008 Notes. In addition, a pro rata portion of the 2008 Syntek Note in the ratio of ¹/2:1 will be automatically redeemed upon the redemption of all or any portion of the 2008 Goldman Note pursuant to the Fundamental Transaction option.

Under the Amended and Restated Registration Rights Agreement executed in connection with the 2008 Notes, at any time after June 1, 2010, we must register and offer publicly all or any part of our securities owned by Goldman or Syntek if Goldman or Syntek demands such a registration and offer, subject to certain conditions. In addition, Goldman and Syntek have "piggyback" registration rights to include any of our securities owned by them in a registered offering of our securities, subject to certain conditions.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

Item 8. Financial Statements and Supplementary Data

See our fiscal 2008 annual Consolidated Financial Statements and accompanying notes appearing in this Annual Report on Form 10-K.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A(T). Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that

management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Based on our evaluation, our chief executive officer and chief financial officer concluded that, as of March 31, 2008, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

(b) Management's Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of our internal control over financial reporting as of March 31, 2008. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on management's assessment and those criteria, management believes that we maintained effective internal control over financial reporting as of March 31, 2008.

(c) Changes in Internal Control Over Financial Reporting.

We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes.

There were no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2008 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Current Directors

Listed below are our current directors:

Margaret A. Bellville (age 54) has been a member of our board of directors since November 2006. Since 2004, Ms. Bellville has been a partner at CarterBaldwin, a national executive search services firm based in Roswell, Georgia. From 2002 to 2004, Ms. Bellville served as chief operating officer and executive vice president of Charter Communications, a broadband communications company (NASDAQ: CHTR). From 2001 to 2002, Ms. Bellville was president and chief executive officer of Incanta, Inc., a technology-based streaming content business based in Atlanta, Georgia. Ms. Bellville also served in various capacities at Cox Communications from 1995 to 2001, last serving as executive vice president of operations from 1999 to 2001.

Ronn Benatoff (age 58) has been a member of our board of directors since July 2004. Mr. Benatoff is a long-time entrepreneur in international trade and from 2000 until August 2007 served as the Managing Director—Israel for Syntek Capital A.G., an investment holding company based in Germany ("Syntek"). Mr. Benatoff has served as chairman of Italinvest Ltd. since 1999 and as a director of Xcitel Ltd. from 2003 until 2007. Mr. Benatoff has been associated with Fideco SpA since 1990, and at various times served as its chairman of the board of directors and/or an executive of the company. From 2002 until 2004, Mr. Benatoff was a director with Adyoron Intelligent Systems Ltd., acting as chairman of the board from 2002 until mid-2003. Mr. Benatoff also was previously chief executive officer of Cifideco Ltd., a Hong Kong-based company with subsidiaries in Spain and Argentina. Mr. Benatoff was a member of the board of directors of Xtend Networks Ltd. from 2001 until 2004, when we acquired that company. Mr. Benatoff is fluent in English, French, Hebrew, Italian and Spanish. In our acquisition of Xtend Networks Ltd., Syntek, a former shareholder of Xtend, was given the right to nominate one representative to our board of directors. Mr. Benatoff was nominated pursuant to this right. In April 2008, irrevocably waived its right to nominate a representative to our board of directors.

Lewis S. Broad (age 50) has been a member of our board of directors since 1999. From May 2000 until December 2002, Mr. Broad served as chief executive officer of Portfab LLC, a manufacturer of heating enclosures. Prior to November 1999, and since December 2002, Mr. Broad has been self-employed as a private investor. From 1996 until July 2004, Mr. Broad was a member of the board of directors of Vesta Corp., a company specializing in payment processing and fraud prevention for telephone and Internet transactions. From 1994 until 1999, Mr. Broad also served as a director of DSP Communications, Inc.

Neill H. Brownstein (age 64) has been a member of our board of directors since 1999. Since July 2005, Mr. Brownstein has served as a founder of Footprint Ventures, a Cayman Island-based venture capital firm with operations in India, Israel and the United States. Mr. Brownstein is president of Neill H. Brownstein Corporation, a strategic investment management consulting firm that he founded in 1976. From 1970 to 1995, Mr. Brownstein was associated with Bessemer Securities Corporation and Bessemer Venture Partners, and during that period he served as a founding general partner of three affiliated venture capital funds. Mr. Brownstein also served on the board of directors of Giga Information Group from December 1995 until March 2003, when Giga Information Group was acquired by Forrester Research. From 1994 until 1999, Mr. Brownstein also served as a director of DSP Communications, Inc. Mr. Brownstein resigned from our board of directors effective June 26, 2008.

James A. (Jim) Chiddix (age 62) has served as vice chairman of our board of directors since March 2007. From 2004 until March 2007, Mr. Chiddix served as chairman and chief executive officer of OpenTV Corp. (Nasdaq: OPTV), a provider of software solutions for the delivery of digital and interactive television. Mr. Chiddix continues to serve as a director and vice chairman of OpenTV. From

2001 to 2004, Mr. Chiddix was president of Mystro TV, a business and technology development division of Time Warner Inc. Mr. Chiddix served as chief technical officer at Time Warner Cable from 1998 to 2001 and senior vice president, engineering and technology from 1986 to 1998. Before joining Time Warner's corporate office, Mr. Chiddix held a variety of engineering and operating positions with two Hawaiian cable companies which were acquired by Time Warner's predecessor, American Television & Communications Corporation. Mr. Chiddix was inducted into the Cable Pioneers in 1991. In 1994, Mr. Chiddix and his Time Warner Cable engineering team won an Emmy Award for their work on hybrid fiber/coax architecture. Mr. Chiddix's other cable industry awards include being named 1989 "Man of the Year" by CED Magazine, and the National Cable Television Association's (NCTA) 1983 Vanguard Award for work on the introduction of addressable converters and NCTA's 1991 "President's Award" for his fiber work. Mr. Chiddix has served with numerous cable industry associations and governmental boards, including the Computer Science and Telecommunications Board (an arm of the National Research Council), The Cable Center and Museum in Denver and The Society of Cable Television Engineers. In addition to OpenTV, Mr. Chiddix currently serves on the board of directors of Symmetricom, Inc. (Nasdaq: SYMM) and Dycom Inc. (NYSE: DY). In 2007, the Cable Center inducted Jim into the Cable Hall of Fame.

Avraham Fischer (age 52) has been a member of our board of directors since 1996. Mr. Fischer is co-managing partner of Fischer Behar Chen Well Orion & Co., a law firm located in Tel Aviv, Israel, where he has served since 1982. Mr. Fischer is deputy chairman of IDB Holding Corporation Ltd., Israel's largest holding company, and co-chief executive officer of Clal Industries and Investments Ltd., one of IDB's two principal subsidiaries focused on the hi-tech, bio-tech, real estate and trade sectors. Mr. Fischer is also the co-founder and vice-chairman of Ganden Holdings Ltd., a holding company that has a controlling interest in IDB Holdings, and a co-founder and co-chairman of Ganden Tourism and Aviation Ltd., Israel's second largest tourism and aviation group. Mr. Fischer is a member of the board of directors of IDB Holding Corporation Ltd. (TASE: IDBH); Discount Investment Corporation Ltd. (TASE: DISI); Makhteshim-Agan Industries Ltd. (TASE: MAIN); Koor Industries Ltd. (NASDAQ and TASE: KOR); Clal Industries and Investments Ltd. (TASE: CII) and other privately-held corporations. Mr. Fischer is a founder and board member of Matan, a non-profit organization dedicated to supporting programs that improve the conditions and prospects of people in need. Mr. Fischer earned his degree in law from the Tel Aviv University and is a Lieutenant Colonel (Res.) in the Israel Defense Forces.

Davidi Gilo (age 51) has served as chairman of our board of directors since 1996. Mr. Gilo served as our chief executive officer from October 2001 until March 2007 and from April 1999 until October 2000. Mr. Gilo also served as our Interim chief financial officer from October 2001 until August 2002. From October 1998 until November 1999, Mr. Gilo served as chairman of the board of directors of DSP Communications, Inc., a developer of chip sets for wireless personal communication applications, and from June 1999 until November 1999, he served as DSP Communications' chief executive officer. Mr. Gilo also served as the chairman of the board of directors of DSP Communications from its founding in 1987 through 1999. Mr. Gilo served as chairman of the board of directors of Zen Research N.V., a developer of technology and intellectual property for use in CD and DVD optical storage devices, between 1995 and 1999, and served as Zen Research plc's chairman from April 2000 to October 2003. Between 1987 and 1993, Mr. Gilo was president and chief executive officer of DSP Group, Inc., and he served as chairman of the board of directors of DSP Group from 1987 until 1995. Mr. Gilo is a director of Arcadian Networks, Inc. and OrNim Inc., both privately-held companies.

Samuel L. Kaplan (age 72) has been a member of our board of directors since 1999. Mr. Kaplan has been a partner in the law firm of Kaplan, Strangis and Kaplan, P.A. of Minneapolis, Minnesota since 1978. Mr. Kaplan is a director of Piper Jaffray Companies (NYSE: PJC) and Cambria Enterprises. Mr. Kaplan served as president of Banking Corporation of Florida from 2002 through 2006. From 1999 to 2004, Mr. Kaplan was a director of Associated Bank-Corp of Minnesota. From 1991 until June 1999, Mr. Kaplan also served as a director of DSP Group, Inc.

Benita Fitzgerald Mosley (age 46) has been a member of our Board of Directors since September 2007. Ms. Fitzgerald Mosley has served as President and CEO of Women in Cable Telecommunications ("WICT") since 2001, and is a current trustee and past president of the Board of Trustees of the Women's Sports Foundation and a member of the advisory board of iVillage and We: Women's Entertainment. Prior to joining WICT, Ms. Fitzgerald Mosley served in a variety of roles with the United States Olympic Committee beginning in 1995, including, Director of Olympic Training Centers from 1997 to 2000. She also served as the Director of the Olympic Training Center in San Diego from 1995 to 1997, and Director of all public relations programs from 2000 to 2001. Ms. Fitzgerald Mosley was a member of the 1980 and 1984 U.S. Olympic Teams and won a gold medal in the 100-meter hurdles in the 1984 Olympic Games in Los Angeles.

Alan L. Zimmerman (age 65) has been a member of our board of directors since 1999. Since 1994, Mr. Zimmerman has served as co-chief executive officer and director of Law Finance Group, Inc., a provider of financing to law firms, parties engaged in legal proceedings and probate executors, heirs and trustees. Mr. Zimmerman also serves as a manager and/or director of several companies affiliated with Law Finance Group, Inc., including Law Finance Group Holdings, LLC; Law Investment Company, LLC; BZM, LLC; Estate Finance Group, LLC; A.L. Zimmerman Capital, LLC; Law Finance Limited; and LFG National Capital, LLC. Mr. Zimmerman is a partner of Litigation Resource Counsel, LLP, a law firm located in San Francisco, California.

Current Executive Officers

Listed below are our current executive officers:

Wayne H. Davis (age 54) was named our chief executive officer in March 2007. Prior to joining us, Mr. Davis joined Charter Communications Inc. (NASDAQ: CHTR) in 2001 and most recently served as its executive vice president, engineering and chief technology officer. Prior to that time, Mr. Davis served in various capacities at Charter Communications, including vice president engineering, western division. From 1999 to January 2000, Mr. Davis was vice president of engineering at Comcast Corporation (Nasdaq: CMCSA), serving as Comcast's engineering lead in managing the integration and upgrade of plant acquired from Jones Intercable Inc., into the Comcast network. Mr. Davis joined Jones Intercable, Inc. in 1984 and served until its acquisition by Comcast. While at Jones Intercable, Mr. Davis rose from fund engineering director for that company's Midwest systems to vice president, technical operations and group vice president, engineering.

David Feldman (age 52) was named our chief technology officer in July 2007. Prior to joining us, Mr. Feldman served from August 2006 to July 2007 as Principal Member Technical Staff at Advanced Micro Devices (Nasdaq: AMD), where he was responsible for PC-based digital cable television receiver solutions. From 2003 to 2006, Mr. Feldman served as Vice President, Technology with Charter Communications (Nasdaq: CMCSA). Prior to 2003, Mr. Feldman was with Jones Intercable, Inc. for six years. Prior to Charter and Jones Intercable, Mr. Feldman served as Vice President, Engineering for Nova-Net Communications for seven years, and was a staff engineer at Phasecom. Mr. Feldman also served as a consultant for, or on staff of, a variety of other companies such as American Television & Communications; MediaOne; Sprint Nextel Corporation; U.S. West Wireless; and Convacent Corporation.

Robert K. Mills (age 44) was named our chief financial officer in August 2007. Prior to joining us, Mr. Mills was chief financial officer of Tri-S Security Corporation (NASDAQ: TRIS). From 1999 to 2005, Mr. Mills was chief financial officer of Knology, Inc. (Nasdaq: KNOL), a broadband communications provider, where he was a key participant in growing the subscriber base, negotiating contracts, business planning and mergers and acquisitions. From 1994 to 1999, Mr. Mills was Vice President, Treasurer and Strategic Planning for Powertel, Inc., a wireless telephone service provider. Mr. Mills is a certified public accountant and served as an auditor with an international accounting firm for seven years.

Tashia L. Rivard (age 39) has served as our general counsel and corporate secretary since June 2006, and as our deputy general counsel from July 2005 until her appointment as general counsel. Prior to joining us, Ms. Rivard was an attorney at Adaptec, Inc. (Nasdaq: ADPT), a provider of storage solutions for data, practicing securities and general corporate law from January 2005 to July 2005. Prior to that time, Ms. Rivard practiced securities, mergers and acquisitions and general corporate law at Montgomery & Hansen LLP (formerly Montgomery Law Group, LLP) from November 2003 to December 2004; Brobeck, Phleger & Harrison, LLP in Palo Alto, California from May 2000 to December 2001; Warner Norcross & Judd LLP in Grand Rapids, Michigan from 1995 to April 2000 and from April 2002 to November 2003. Ms. Rivard is licensed to practice law in California, Georgia and Michigan.

Walter Ungerer (age 39) has served as our executive vice president, corporate strategy and investor relations since September 2007, and prior to that time, as vice president, corporate communications from November 2004 to September 2007. Mr. Ungerer has over 10 years of experience managing finance, investor relations and communications within organizations that have earned recognition from Reuters, Frost and Sullivan and an Emmy Award from the National Academy of Television Arts and Sciences. Prior to joining us, Mr. Ungerer was director of investor relations at Concurrent Computer Corporation (Nasdaq: CCUR) from 2001 until October 2004. Previously, Mr. Ungerer held various positions with Scientific-Atlanta, a Cisco company (Nasdaq: CSCO), which he joined in 1996 as assistant manager of structured trade finance, and he was promoted to manager of corporate treasury services and manager of investor relations before leaving the company in 2001. Previously, Mr. Ungerer spent four years in various finance related positions at Fortune 100 companies Eaton Corporation (NYSE: ETN) and Cooper Industries (NYSE: CBE).

Former Executive Officers

The following individuals served as executive officers during the fiscal year ended March 31, 2008:

Avner Kol (age 55) served as our chief operating officer from November 2005 until January 2008. From February 2005 until November 2005, Mr. Kol served as site manager of our Norcross, Georgia operations and manager of our T1 business unit. From January 2000 until January 2005, Mr. Kol was general manager of Vyyo Ltd., our wholly-owned subsidiary based in Israel. From 1977 to 1999, Mr. Kol was vice president of operations for DSP Communications, Inc., which was acquired by Intel Corporation in 1999.

Arik Levi (age 38) served as our chief financial officer from February 2003 until August 2007, and previously served as our corporate secretary from February 2006 until June 2006. Mr. Levi previously served as our interim chief financial officer from November 2002 until his appointment in February 2003 to chief financial officer. Mr. Levi first served as our Israeli controller from March 2000 until November 2001 and as our vice president, finance from November 2001 until November 2002. Prior to joining us, Mr. Levi was as an auditor at Kesselman & Kesselman CPAs (Isr.), a member of PricewaterhouseCoopers International Limited, and its predecessor accounting firm, from 1994 through 2000.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires our directors and officers, and persons who own more than 10% of a registered class of our equity securities, to file initial reports of ownership and reports of changes in ownership with the Securities and Exchange Commission. The SEC regulations also require these persons to furnish us with a copy of all Section 16(a) reports that they file. Based solely on our review of the copies of the forms furnished to us and written representations from our executive officers and directors, we believe that all Section 16(a) filing requirements were met during the fiscal year ended March 31, 2008.

Code of Ethics

We have adopted a code of conduct and ethics for all of our employees and directors, including our chief executive officer, chief financial officer, other executive officers and senior financial personnel. A copy of our code of conduct and ethics is posted on our website at www.vyyo.com. Our code of business conduct and ethics may be found on our website as follows:

•: from our main Web page, first click on "Investors" and then click on "Corporate Governance."
•: Next, click on the document entitled "Code of Conduct and Ethics."

We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of this code of conduct and ethics by posting the required information on our website, at the address and location specified above.

Corporate Governance and Independence Issues

We have not made any material changes to the procedures by which security holders may recommend nominees to our board of directors since the proxy statement that we filed for our 2007 annual meeting of stockholders.

Pursuant to our governance principles, our board of directors annually considers whether a director or nominee has any relationship which, in the opinion of the board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Our board of directors has determined that each of our directors other than Ms. Bellville and Messrs. Chiddix, Fischer and Gilo, qualify as independent directors as defined by the Sarbanes-Oxley Act of 2002 and the National Association of Securities Dealers listing standards, including such definitions applicable to each committee of the board of directors upon which he or she serves or served.

Our board of directors has three standing committees: Audit Committee, Compensation Committee and Nominating Committee. All committees operate under written charters approved by our board of directors, which are available at our website at www.vyyo.com/Investors/Corporate Governance. We also will provide a copy of these charters to any stockholder upon request.

The Audit Committee of the board of directors is a separately-designated standing audit committee established in accordance with section 3(a)(58)(A) of the Exchange Act and the rules thereunder. The Audit Committee operates under a written charter approved by our board of directors, which is available at our website at www.vyyo.com/Investors/Corporate Governance. We also will provide a copy of this charter upon request to Investor Relations, Vyyo Inc, 6625 The Corners Parkway, Suite 100, Norcross, Georgia 30092. The current members of our Audit Committee are Neill H. Brownstein (chairman), Lewis S. Broad and Samuel L. Kaplan. The board of directors has determined that the members of the Audit Committee are independent under the Nasdaq listing requirements and the Exchange Act and the rules thereunder, and that Mr. Brownstein is an "audit committee financial expert" in accordance with the rules established by the SEC. Mr. Brownstein resigned from our board of directors effective June 26, 2008. Our board has not yet determined whether another member of our Audit Committee qualifies as an "audit committee financial expert."

Our Compensation Committee is comprised of Broad (chairman), Kaplan and Zimmerman, and our Nominating Committee is comprised of Messrs. Zimmerman (chairman), Broad and Kaplan, all of whom are independent directors as defined by NASD listing standards.

As previously described in this Annual Report on Form 10-K, our common stock was de-listed from The Nasdaq Global Market effective April 21, 2008. Accordingly, the Nasdaq listing requirements no longer apply to us.

Item 11. Executive Compensation

Summary Compensation Table

This table summarizes the compensation paid to or earned by our named executive officers. The "named executive officers" are our principal executive officer, our two most highly compensated executive officers other than the principal executive officer who were serving as executive officers as of March 31, 2008 and Messrs. Kol and Levi, each of whom would have been one of our two most highly compensated officers had they been serving as an executive officer as of March 31, 2008.

Name and Principal Position	Year (1)	Salary ($)(2)		Bonus ($)	Option Awards ($)(3)			All Other Compensation			Total ($)
Wayne H. Davis(4) Chief Executive Officer	Stub 2007 2006	$	75,000 234,375 —	— — —	$	296,042 624,590 —		$	5,685 17,054 —	(5) (6)	$	376,727 876,019 —
Tashia L. Rivard General Counsel and Corporate Secretary	Stub 2007 2006		55,000 206,667 185,417	— 35,000 36,877		51,530 131,155 148,705			1,798 7,190 6,190	(7) (8)		108,328 380,012 377,189
Walter J. Ungerer Executive Vice President, Corporate Strategy and Investor Relations	Stub 2007 2006		52,500 169,167 140,000	— — —		50,464 98,062 114,725			4,191 55,765 52,415	(9) (10)		107,155 322,994 307,140
Avner Kol Former Chief Operating Officer	Stub 2007 2006		20,833 250,000 250,000	— 60,000 —		— 256,833 359,187	(11)		12,297 43,533 12,502	(12) (13)		33,130 610,366 621,689
Arik Levi(14) Former Chief Financial Officer	Stub 2007 2006		32,944 202,838 175,464	— — 50,000		20,909 136,991 246,420			39,116 52,132 64,041	(15) (16)		92,969 391,961 535,925

(1): On November 15, 2007, our board of directors changed our fiscal year end from December 31 to March 31. The period designated as "Stub" represents the period from January 1, 2008 to March 31, 2008. "2007" refers to the period beginning January 1, 2007 and ending December 31, 2007, and "2006" refers to the period beginning January 1, 2006 and ending December 31, 2006.
(2): For named executive officers in the United States, includes salary deferred under the Vyyo Inc. 401(k) Savings Plan, and for named executive officers in Israel, includes employee insurance coverage mandated by Israeli law (which may be used, in the discretion of the employee, for life insurance, savings or a mix of both).
(3): Amounts shown in this column do not reflect the compensation actually received by the named executive officer. Instead, these amounts represent the compensation expense we recognized during the reported periods for financial accounting purposes. The amounts shown exclude the effects of estimated forfeitures related to service-based vesting conditions. The fair values of these awards and the amounts expensed during the reported periods were determined in accordance with SFAS 123(R). For additional valuation assumptions, see note 1 "Significant Accounting Policies—Employee Stock-Based Compensation" to our fiscal 2008 annual Consolidated Financial Statements. The awards for which expense is shown in this table include options granted in the last fiscal year as well as options granted in prior fiscal years, all as described in the "Outstanding Equity Awards at Fiscal Year-End" table appearing below for which we continued to recognize expense during the reported periods. There can be no assurance that options will be exercised (in

which case no value will be realized by the individual) or that the value on exercise will approximate the compensation expense that we recognize.

(4): Mr. Davis joined us in March 2007.
(5): Includes $5,490 for group health insurance and $195 for life insurance premiums paid by us.
(6): Includes $16,469 for group health insurance and $585 for life insurance premiums paid by us.
(7): Includes $1,681 for group health insurance and $117 for life insurance premiums paid by us.
(8): Includes $6,722 for group health insurance and $468 for life insurance premiums paid by us.
(9): Includes $4,082 for group health insurance and $109 for life insurance premiums paid by us.
(10): Includes $16,328 for group health insurance and $437 for life insurance premiums paid by us, and $39,000 in compensation expense related to Mr. Ungerer's exercise of a stock option granted at a discount from the market price of our common stock on the date of grant.
(11): Mr. Kol's employment terminated as of January 30, 2008. In connection with his termination, certain unvested options previously granted to Mr. Kol were cancelled. Given this cancellation, we did not recognize compensation expense during this period for Mr. Kol. Under Mr. Kol's separation agreement, he continues to receive severance payments as previously disclosed by us on our Current Report on Form 8-K filed with the SEC on March 18, 2008.
(12): Includes $1,828 for group health insurance; $52 for life insurance premiums; and $10,417 related to Mr. Kol's termination of employment paid by us.
(13): Includes $21,940 for group health insurance; $624 for life insurance premiums; and $20,969 related to educational benefits paid by us.
(14): Compensation paid to Mr. Levi was in New Israeli Shekels (NIS). For purposes of reporting the compensation in United States dollars in this table, we converted the monthly compensation earned in NIS into United States dollars using the prevailing exchange rate as of the last day of each month during the reported periods, since we pay salaries to our Israeli employees once a month at the end of each month.
(15): Mr. Levi's employment terminated effective March 1, 2008. Although under Israeli law his effective date of termination is considered November 30, 2008 (the date through which severance is paid), he is no longer performing services for us. Under Mr. Levi's separation agreement, he continues to receive severance payments as previously disclosed by us on our Current Report on Form 8-K filed with the SEC on April 14, 2008. The amount reported includes $4,534 for group health insurance; $646 of deposits made by us as required by Israeli law for amounts payable to Israeli employees upon termination of employment; $4,083 of deposits made by us for educational funds; $5,488 for an automobile lease paid by us; and $24,365 related to Mr. Levi's termination of employment.
(16): Includes $2,283 for group health insurance; $16,025 of deposits made by us as required by Israeli law for amounts payable to Israeli employees upon termination of employment; $14,428 of deposits made by us for educational funds; and $19,396 for an automobile lease paid by us.

Employment Agreements, Termination of Employment and Change-in-Control Arrangements

Wayne H. Davis. On March 21, 2007, we entered into an employment agreement with Mr. Davis, our chief executive officer (the "Davis Agreement"). The Davis Agreement is for a three-year term, with automatic one-year renewals, subject to termination upon prior notice by either party. Mr. Davis will receive an annual base salary of $300,000, which will be reviewed on or before December 31, 2007 and thereafter based on Mr. Davis' services and our financial results. Mr. Davis may become eligible to receive an annual cash bonus up to $300,000 based on performance objectives to be agreed to by Mr. Davis and our board of directors. We also granted Mr. Davis a stock option to purchase 600,000 shares of our common stock subject to standard vesting for new employees: 25% vest at the one year anniversary of the grant with the remaining vesting in equal monthly installments for the next 36 months. The original exercise price of the stock options was $6.31, the closing price of our common stock on the grant date. In connection with the repricing program described below in footnote 1 to the "Outstanding Equity Awards at Fiscal-Year End" table, the exercise price was reduced to $1.40, the closing price of our common stock on the date of the repricing. Mr. Davis accrues 30 days of paid vacation for each calendar year during the term of his agreement.

If we terminate his employment without "Cause" (as defined in the Davis Agreement), (a) before the first anniversary of his employment, we must pay Mr. Davis severance equal to six months of his annual salary (without bonus), (b) after the first anniversary of his employment but on or before the second anniversary of his employment, we must pay Mr. Davis severance equal to nine months of his annual salary (without bonus), and (c) after the second anniversary of his employment, we must pay Mr. Davis severance equal to 12 months of his annual salary (without bonus).

If Mr. Davis' employment is terminated upon a "Change of Control" (as defined in the Davis Agreement), Mr. Davis will be entitled to (a) in lieu of the severance described in the foregoing paragraph, severance equal to his annual salary plus 100% of his annual target bonus in effect during the year in which a Change of Control occurs; (b) immediate vesting of all unvested stock options; and (c) continuation of life, health, disability, vision, hospitalization, dental and other insurance coverage for one year for Mr. Davis and his spouse and dependent children. If upon a Change of Control Mr. Davis is offered employment by our successor with responsibilities substantially similar to those in the Davis Agreement and Mr. Davis does not accept the offer, 33.3% of Mr. Davis' stock options will immediately vest. If upon a Change of Control Mr. Davis accepts employment by our successor with responsibilities substantially similar to those in the Davis Agreement, 33.3% of Mr. Davis' stock options will immediately vest. If Mr. Davis terminates his employment for Good Reason (as defined in the Davis Agreement) with our successor on or after the six-month anniversary of his employment, all remaining stock options held by Mr. Davis will immediately vest.

Tashia L. Rivard. On November 8, 2007, we entered into an employment agreement with Ms. Rivard, our general counsel and corporate secretary (the "Rivard Agreement"), effective as of September 1, 2007.

The Rivard Agreement is for a two-year term, with automatic one-year renewals, subject to termination upon prior notice by either party. Ms. Rivard will receive an annual base salary of $220,000, which will be reviewed on or before December 31, 2008 and thereafter based on Ms. Rivard's services and our financial results. Ms. Rivard is eligible to receive employee benefits available to all employees and may become eligible to receive an annual cash bonus based on performance objectives to be agreed to by Ms. Rivard and our chief executive officer.

If the Rivard Agreement is terminated without "Cause" (as defined therein) before the initial two-year term, we must pay Ms. Rivard severance equal to six months of her annual salary (without bonus), payable over such period in accordance with our usual payroll practices.

If Ms. Rivard's employment is terminated upon a "Change of Control" (as defined in the Rivard Agreement), Ms. Rivard shall be entitled to (a) in lieu of the severance described in the foregoing paragraph, severance equal to her annual salary in effect during the year in which a Change of Control occurs; (b) immediate vesting of all unvested stock options; and (c) continuation of life, health, disability, vision, hospitalization, dental and other insurance coverage for one year. If upon a Change of Control, Ms. Rivard is offered employment by our successor with responsibilities substantially similar to those in the Rivard Agreement and she does not accept the offer, 33.3% of her stock options will immediately vest. If upon a Change of Control, Ms. Rivard accepts employment by our successor with responsibilities substantially similar to those in the Rivard Agreement, 33.3% of her stock options will immediately vest. If Ms. Rivard terminates her employment for Good Reason (as defined in the Rivard Agreement) with our successor on or after the six-month anniversary of the effective date of the Rivard Agreement, all remaining stock options held by Ms. Rivard will immediately vest.

Walter J. Ungerer. On November 8, 2007, Mr. Ungerer, our former vice president of corporate communications and investor relations, was promoted to executive vice president, corporate strategy and investor relations pursuant to the terms of an employment agreement (the "Ungerer Agreement"), effective as of September 1, 2007.

The Ungerer Agreement is for a two-year term, with automatic one-year renewals, subject to termination upon prior notice by either party. Mr. Ungerer will receive an annual base salary of $210,000, which will be reviewed on or before December 31, 2008 and thereafter based on Mr. Ungerer's services and our financial results. Mr. Ungerer is eligible to receive employee benefits available to all employees and may become eligible to receive an annual cash bonus based on performance objectives to be agreed to by Mr. Ungerer and our chief executive officer. Mr. Ungerer also was granted a stock option to purchase 30,000 shares of our common stock which will vest in equal monthly installments for the next 48 months. The original exercise price of the stock options was $5.99, the closing price of our common stock on the grant date. In connection with the repricing program described below in footnote 1 to the "Outstanding Equity Awards at Fiscal-Year End" table, the exercise price was reduced to $1.40, the closing price of our common stock on the date of the repricing.

If the Ungerer Agreement is terminated without "Cause" (as defined therein) before the initial two-year term, we must pay Mr. Ungerer severance equal to six months of his annual salary (without bonus), payable over such period in accordance with our usual payroll practices.

If Mr. Ungerer's employment is terminated upon a "Change of Control" (as defined in the Ungerer Agreement), Mr. Ungerer shall be entitled to (a) in lieu of the severance described in the foregoing paragraph, severance equal to his annual salary in effect during the year in which a Change of Control occurs; (b) immediate vesting of all unvested stock options; and (c) continuation of life, health, disability, vision, hospitalization, dental and other insurance coverage for one year. If upon a Change of Control, Mr. Ungerer is offered employment by our successor with responsibilities substantially similar to those in the Ungerer Agreement and he does not accept the offer, 33.3% of his stock options will immediately vest. If upon a Change of Control, Mr. Ungerer accepts employment by our successor with responsibilities substantially similar to those in the Ungerer Agreement, 33.3% of his stock options will immediately vest. If Mr. Ungerer terminates his employment for Good Reason (as defined in the Ungerer Agreement) with our successor on or after the six-month anniversary of the effective date of the Ungerer Agreement, all remaining stock options held by Mr. Ungerer will immediately vest.

Separation Agreement and Consulting Agreement of Avner Kol. We entered into a separation agreement and release and a consulting agreement with Mr. Kol, our former chief operating officer, both effective as of March 14, 2008. The separation agreement and release provides that Mr. Kol will receive $104,167 (which amount includes accrued vacation pay) to be paid over normal pay periods for five months, subject to Mr. Kol's continued satisfaction of various covenants set forth in the agreement.

Mr. Kol's outstanding stock options will continue to vest through December 31, 2008, at which time he will hold 237,334 vested options, at exercise prices ranging from $3.35 to $6.92. Mr. Kol will be allowed to exercise his options that have vested on or before December 31, 2008 no later than March 31, 2009.

The consulting agreement provides that in exchange for certain services that may be performed by Mr. Kol to Vyyo Ltd, our wholly-owned Israeli subsidiary, Vyyo Ltd. will pay Mr. Kol $20,833 per month for six months, subject to Mr. Kol's continued satisfaction of various covenants set forth in the consulting agreement. These payments will commence after the payments have been made to Mr. Kol under the separation agreement and release described above. The monthly payments are inclusive of any and all other amounts for social or other benefits, including, but not limited to, contributions or deductions with respect to National Insurance or social security, health tax or unemployment insurance.

Separation Agreement of Arik Levi. Vyyo Ltd., our wholly-owned subsidiary, entered into a separation agreement and release with Mr. Levi, effective as of April 8, 2008. The separation agreement provides that Mr. Levi will receive approximately 833,000 NIS (New Israeli Shekels), or approximately $229,000 in United States dollars, payable in monthly increments through November 30, 2008. The total amount payable to Mr. Levi is inclusive of all amounts otherwise payable to Mr. Levi in connection with the termination of his employment, including severance payments required under contract and Israeli law, Employee Recreation Pay required by Israeli law and accrued vacation days. In addition, Vyyo Ltd. will transfer to Mr. Levi the ownership of his Manager Insurance policies and Continuous Education Funds in accordance with Israeli law. Mr. Levi's outstanding stock options will continue to vest through November 30, 2008, at which time he will hold 177,750 vested options, at exercise prices ranging from $2.27 to $5.22. Mr. Levi will be allowed to exercise his options that have vested on or before November 30, 2008 no later than March 31, 2009.

Outstanding Equity Awards at Fiscal Year-End

The table below sets forth details concerning outstanding option awards as of March 31, 2008 made in the current and prior fiscal years to the named executive officers. All of the following options have five-year terms.

Option Awards

				Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)
	Number of Securities Underlying Unexercised Options (#)	Number of Securities Underlying Unexercised Options (#)
						Option Exercise Price ($)(1)
Name								Option Expiration Date
Name	Exercisable	Unexercisable						Option Expiration Date
Wayne H. Davis	150,000 —	450,000 —	(2)	— 336,000	(3)	$	1.40 1.37	3/20/2012 3/4/2013
Robert K. Mills	— —	150,000 —	(4)	— 140,000	(3)		1.40 1.37	8/8/2012 3/4/2013
Tashia L. Rivard	26,666 34,999 6,250 —	13,334 45,001 23,750 —	(5) (6) (7)	— — — 140,000	(3)		1.40 1.40 1.40 1.37	8/10/2010 6/28/2011 5/9/2012 3/4/2013
Walter J. Ungerer	33,333 7,500 10,416 2,500 —	6,667 2,500 39,584 27,500 —	(8) (9) (10) (11)	— — — — 140,000	(3)		1.40 1.40 1.40 1.40 1.37	11/16/2009 3/21/2010 5/9/2012 11/7/2012 3/4/2013
Avner Kol(12)	40,000 46,500 80,000 21,250	— 46,500 — 108,750	(14)	— — — —			3.40 5.22 3.35 6.92	3/31/2009 3/31/2009 3/31/2009 3/31/2009	(13) (15) (16) (17)
Arik Levi(18)	10,000 30,000 50,000 — — — 45,000 24,000	— — — — — — 45,000 —	(26)	— — — 20,000 20,000 20,000 — —	(22) (23) (24)		2.27 2.90 3.92 7.50 9.00 10.50 5.22 3.35	3/31/2009 3/31/2009 3/31/2009 3/31/2009 3/31/2009 3/31/2009 3/31/2009 3/31/2009	(19) (20) (21) (25) (25) (25) (27) (28)

(1): On March 4, 2008, our board of directors approved a repricing program for all outstanding options previously granted to current employees, including executive officers, and our chairman and vice chairman of the board of directors. The options were repriced to $1.40 per share, the closing price of our common stock on The Nasdaq Global Market on March 4, 2008. The other terms of the options, including vesting schedules and term, remain unchanged as a result of the repricing.

(2): This option originally granted on March 21, 2007 vests as follows: 25% of the option is vested beginning one year after date of grant with the remaining vesting in equal monthly installments over the next 36 months.
(3): These options granted on March 5, 2008 vest in equal increments of 25% upon the achievement of certain business objectives.
(4): This option originally granted on August 9, 2007 vests as follows: 25% of the option is vested beginning one year after date of grant with the remaining vesting in equal monthly installments over the next 36 months.
(5): This option originally granted on August 10, 2005 vests as follows: 25% of the option is vested beginning on year after date of grant with the remaining vesting in equal monthly installments over the next 36 months.
(6): This option originally granted on June 29, 2006 vests in equal monthly installments over 48 months.
(7): This option originally granted on May 10, 2007 vests in equal monthly installments over 48 months.
(8): This option originally granted on November 16, 2004 vests as follows: 25% of the option is vested beginning on year after date of grant with the remaining vesting in equal monthly installments over the next 36 months.
(9): This option originally granted on March 21, 2005 vests in equal monthly installments over 48 months.
(10): This option originally granted May 10, 2007 vests in equal monthly installments over 48 months.
(11): This option originally granted November 8, 2007 vests in equal monthly installments over 48 months.
(12): Mr. Kol's employment terminated as of January 30, 2008. Pursuant to his separation agreement, Mr. Kol's outstanding options continue to vest in accordance with their terms through December 31, 2008; any unvested options as of that date will be forfeited. Mr. Kol will be allowed to exercise his options that have vested on or before December 31, 2008 no later than March 31, 2009. Mr. Kol's outstanding options were not included in the repricing program described in footnote 1 above. Under Mr. Kol's separation agreement, he continues to receive severance payments as previously disclosed by us on our Current Report on Form 8-K filed with the SEC on March 18, 2008.
(13): This option's original expiration date was July 29, 2008. Under the terms of Mr. Kol's separation agreement, the expiration date was extended to March 31, 2009.
(14): This option granted on February 10, 2006 vests in equal monthly installments over 48 months.
(15): This option's original expiration date was February 9, 2011.
(16): This option's original expiration date was November 9, 2011.
(17): This option's original expiration date was May 9, 2012.
(18): Mr. Levi's employment terminated effective March 1, 2008. Although under Israeli law his effective date of termination is considered November 30, 2008 (the date through which severance is paid), he is no longer performing services for us. Pursuant to his separation agreement, Mr. Levi's outstanding options continue to vest in accordance with their terms through November 30, 2008; any unvested options as of that date will be forfeited. Mr. Levi will be allowed to exercise his options that have vested on or before November 30, 2008 no later than March 31, 2009. Mr. Levi's outstanding options were not included in the repricing program described in

footnote 1 above. Under Mr. Levi's separation agreement, he continues to receive severance payments as previously disclosed by us on our Current Report on Form 8-K filed with the SEC on April 14, 2008.

(19): This option's original expiration date was March 25, 2008. Under the terms of Mr. Levi's separation agreement, the expiration date was extended to March 31, 2009.
(20): This option's original expiration date was May 13, 2008. Under the terms of Mr. Levi's separation agreement, the expiration date was extended to March 31, 2009.
(21): This option's original expiration date was August 12, 2008. Under the terms of Mr. Levi's separation agreement, the expiration date was extended to March 31, 2009.
(22): This option granted on March 21, 2005 vests if the per share price of our common stock closes at or above $15.00, for a period of 10 (consecutive or non-consecutive) trading days out of any 30 consecutive trading days.
(23): This option granted on March 21, 2005 vests if the per share price of our common stock closes at or above $17.50, for a period of 10 (consecutive or non-consecutive) trading days out of any 30 consecutive days.
(24): This option granted on March 21, 2005 vests if the per share price of our common stock closes at or above $20.00, for a period of 10 (consecutive or non-consecutive) trading days out of any 30 consecutive trading days.
(25): This option's original expiration date was March 21, 2010.
(26): This option originally granted on February 10, 2006 vests in equal monthly installments over 48 months.
(27): This option's original expiration date was February 9, 2011.
(28): This option's original expiration date was November 9, 2011.

Compensation of Directors

Non-employee directors serving on our board of directors do not receive any cash compensation for their service. See the discussion below entitled "—Amended and Restated Employment Agreement of Mr. Gilo" and "—Amended and Restated Consulting Agreement of Mr. Chiddix" for compensation arrangements with our chairman and vice chairman of the board of directors which are related to service other than as a director. All directors are reimbursed for their out-of-pocket expenses incurred in attending meetings of our board of directors and committees on which they may serve.

Under our 2000 Plan, each non-employee director receives an initial option to purchase 25,000 shares of our common stock on the date on which he or she becomes a director, at the closing price of our common stock on the date of grant. These options have a 10-year term and vest in four equal annual installments on each of the first four anniversaries of the date of grant. Thereafter, on the date of each of our annual meetings of stockholders, each of our non-employee directors receives an annual stock option grant to purchase 7,500 shares of our common stock, provided such director has served on our board of directors for at least six months on such date. These options have a 10-year term and vest immediately upon the date of grant.

In addition, under the 2000 Plan in the fiscal year ended March 31, 2008, each non-employee director received a quarterly option grant to purchase 3,125 shares of our common stock, other than the chairman of our Audit Committee, who, given his additional responsibilities, received a quarterly option grant to purchase 4,375 shares of our common stock. On February 25, 2008, our board of directors approved an increase in the number of options granted to non-employee directors as

follows: (a) each non-employee director who does not serve on a committee receives a quarterly grant of non-qualified stock options to purchase 5,000 shares of our common stock; (b) each non-employee director who serves on a committee but does not chair the Compensation Committee or the Audit Committee receives a quarterly grant of non-qualified stock options to purchase 7,500 shares of the our common stock; and (c) the chairman of the Compensation Committee and the chairman of the Audit Committee receive a quarterly grant of non-qualified stock options to purchase 10,000 shares of our common stock.

The following table sets forth information about the cash and stock-based compensation earned by our directors during the fiscal year ended March 31, 2008:

Name	Option Awards ($)(1)			All Other Compensation ($)			Total ($)
Margaret A. Bellville	$	58,662		$	428,077	(2)	$	486,739
Ronn Benatoff		58,662			—			58,662
Lewis S. Broad		58,662			—			58,662
Neill H. Brownstein		71,562			—			71,562
James A. Chiddix		575,027	(3)		165,000	(4)		740,027
Avraham Fischer		58,662			—			58,662
Davidi Gilo		114,655	(5)		344,507	(6)		459,162
Samuel L. Kaplan		58,662			—			58,662
Benita Fitzgerald Mosley		32,247			—			32,247
Alan L. Zimmerman		58,662			—			58,662

(1): Amounts shown in this column do not reflect the compensation actually received by the director. Instead, these amounts represent the compensation expense we recognized in the fiscal year ended March 31, 2008 for financial accounting purposes. The amounts shown exclude the effects of estimated forfeitures related to service-based vesting conditions. The fair values of these awards and the amounts expensed in the fiscal year ended March 31, 2008 were determined in accordance with SFAS 123(R). For additional valuation assumptions, see note 1 "Significant Accounting Policies—Employee Stock-Based Compensation" to our fiscal 2008 annual Consolidated Financial Statements. There can be no assurance that options will be exercised (in which case no value will be realized by the individual) or that the value on exercise will approximate the compensation expense that we recognize.

On March 4, 2008, our board of directors approved a repricing program for the outstanding options that it had previously granted to employees, including executive officers, and our chairman and vice chairman of the board of directors. The remaining directors did not have their outstanding options repriced. The options were repriced to $1.40 per share, the closing price of our common stock on The Nasdaq Global Market on March 4, 2008. The other terms of the options, including vesting schedules and term, remain unchanged as a result of the repricing.

The following table shows the aggregate number of options held by each non-employee director as of March 31, 2008, all of which are vested except as described below.

Name		Options Outstanding
Margaret A. Bellville(a)		48,125
Ronn Benatoff(b)		91,250
Lewis S. Broad		108,544
Neill H. Brownstein		125,625
James A. Chiddix(c)		287,500
Avraham Fischer		111,875
Davidi Gilo(d)		2,075,000
Samuel L. Kaplan		111,875
Benita Fitzgerald Mosley(e)		31,250
Alan L. Zimmerman		111,875

(a): Of the total options granted to Ms. Bellville, 18,750 of the options granted in connection with her initial appointment to our board of directors remain unvested. These options will vest in increments of 6,250 on each of November 8, 2008, 2009 and 2010.
(b): Of the total options granted to Mr. Benatoff, 6,250 of the options granted in connection with his initial appointment to our board of directors remain unvested. All of these options will vest on July 21, 2008.
(c): Of the total options granted to Mr. Chiddix, 206,250 remain unvested. Of the total unvested options, 18,750 options were granted in connection with his initial appointment to our board of directors. These options will vest in increments of 6,250 on each of March 20, 2009, 2010 and 2011. The remaining 187,500 unvested options were granted to Mr. Chiddix pursuant to a consulting agreement executed in March 2007 and vest monthly through March 20, 2011. For a discussion of the vesting of these options, see the discussion below at "—Consulting Agreement of Mr. Chiddix."
(d): All options granted to Mr. Gilo were in connection with his prior service as our chief executive officer. Of the total options granted to Mr. Gilo, 975,000 remain unvested as follows: (i) 125,000 will vest if our stock price reaches $20.00 for 10 (consecutive or non-consecutive) days in any 30 consecutive trading days; (ii) 125,000 will vest if our stock price reaches $17.50 for 10 (consecutive or non-consecutive) days in any 30 consecutive trading days; (iii) 125,000 will vest if our stock price reaches $15.00 for 10 (consecutive or non-consecutive) days in any 30 consecutive trading days; (iv) 300,000 will vest if our stock price closes at or above $15.66 for a period of any 22 (consecutive or non-consecutive) trading days; and (v) 300,000 will vest if our stock price closes at or above $10.44 for a period of any 22 (consecutive or non-consecutive) trading days.
(e): Of the total options granted to Ms. Fitzgerald Mosley, 25,000 of the options granted in connection with her initial appointment to our board of directors remain unvested. These options will vest in increments of 6,250 on each of September 23, 2008, 2009, 2010 and 2011.

(2): We entered into a consulting agreement in 2006 with Ms. Bellville in her individual capacity. During the fiscal year ended March 31, 2008, we paid Ms. Bellville $14,000 in accordance with this agreement, which expired by its terms in October 2007. In addition, Ms. Bellville is a partner in CarterBaldwin, an executive search firm that has assisted us in the search for and placement of executives and members of our board of directors. During the fiscal year ended March 31, 2008, we paid $414,077 to CarterBaldwin, of which $371,741 related to services performed in the fiscal

year ended March 31, 2008. Our relationship with CarterBaldwin began early in 2006, prior to Ms. Bellville joining our board of directors.

(3): The aggregate compensation expenses consist of $78,788 related to options granted to Mr. Chiddix for his service as a director and $496,239 related to options granted to Mr. Chiddix in his capacity as a consultant.
(4): Amounts were paid pursuant to our consulting agreement with Mr. Chiddix executed in March 2007 as described below in "—Amended and Restated Consulting Arrangement of Mr. Chiddix."
(5): This amount relates to compensation expense we recognized during this period for option grants made to Mr. Gilo in prior fiscal years.
(6): These amounts were paid to Mr. Gilo under his amended and restated employment agreement as described below at "—Amended and Restated Employment Agreement of Mr. Gilo." These amounts include: $171,999 for salary; $150,000 for bonus; $21,934 for group health insurance and $574 for life insurance premiums paid by us.

Amended and Restated Employment Agreement of Mr. Gilo. In February 2006, we entered into a new employment agreement with Mr. Gilo, our chairman of the board of directors and former chief executive officer, which replaced and superseded his prior employment agreement. On March 21, 2007, Mr. Davis became our new chief executive officer. As a result of this change in management, on April 5, 2007, we entered into an Amended and Restated Employment Agreement with Mr. Gilo (the "2007 Gilo Agreement"). The term of the 2007 Gilo Agreement is three years from the effective date of the 2006 Gilo Agreement, with automatic renewals thereafter for one-year terms, subject to termination upon prior notice by either party. In exchange for 20 hours of services per week, Mr. Gilo received an annual base salary of $200,000. Mr. Gilo is eligible to participate in bonus plans that may be adopted by our board of directors and is entitled to receive an additional bonus based on his performance and our performance each year as determined by our board of directors or our Compensation Committee. In addition, Mr. Gilo may become entitled to additional stock options that the Compensation Committee deems appropriate, and he accrues 30 days of paid vacation for each 12 months of employment, up to a maximum of 60 days.

If we terminate the 2007 Gilo Agreement without "Cause" (as defined in his employment agreement), all of Mr. Gilo's unvested options would vest immediately and he would receive a severance payment equal to the greater of (a) the full amount of the compensation that he could have expected under the 2007 Gilo Agreement (based on his total compensation (salary and bonus) earned in 2007), through the end of the term; or (b) the full amount of the compensation that he could have expected under the 2007 Gilo Agreement for 18 months (based on his total compensation (salary and bonus) earned in 2007). If we terminate the 2007 Gilo Agreement without Cause after the initial three-year term, all of Mr. Gilo's unvested options would vest immediately and he would receive a severance payment equal to the full amount of the compensation that he could have expected under the 2007 Gilo Agreement for 18 months (based on his total compensation (salary and bonus) earned in 2007). If we terminate the 2007 Gilo Agreement for Cause, we must pay Mr. Gilo a severance payment equal to the full amount of the compensation that he could have expected under the 2007 Gilo Agreement for three months (based on his total compensation (salary and bonus) earned in 2007). If Mr. Gilo voluntarily terminates the 2007 Gilo Agreement, we must pay Mr. Gilo a severance fee equal to the amount of the compensation that he could have expected under the 2007 Gilo Agreement for nine months (based on his total compensation (salary and bonus) earned in 2007).

Effective as of February 1, 2008, the Company entered into a new amended and restated employment agreement with Mr. Gilo pursuant to which his annual salary was reduced from $200,000 to $12,000. The 2008 amended and restated employment agreement also contains amendments for the purpose of complying with Section 409A of the Internal Revenue Code of 1986. Among these changes,

the amendments require the payment of amounts subject to Section 409A to be delayed in certain circumstances for six months following termination of Mr. Gilo's employment. If Mr. Gilo becomes entitled to severance pay on or after January 1, 2009, and within one year following a "Change in Control" (as defined in his employment agreement), then his severance pay shall be paid in a lump sum within five business days of the Change in Control. If Mr. Gilo becomes entitled to severance pay during 2008 following a Change in Control that occurs during 2008, then his severance pay shall be paid in accordance with normal payroll periods until January 1, 2009, at which time the remaining unpaid severance pay shall be paid in a lump sum. In all other respects, the material terms of the 2007 Gilo Agreement remain in effect.

Amended and Restated Consulting Agreement of Mr. Chiddix. On March 21, 2007, we entered into a consulting agreement with Mr. Chiddix pursuant to which he received $15,000 per month in exchange for providing certain services to us for on average 40 hours per month. On February 1, 2008, we amended this agreement to reduce the monthly fees to $7,500 per month.

Mr. Chiddix also was granted a stock option to purchase 250,000 shares of our common stock which vests in equal monthly installments over 48 months. The exercise price of the stock options was $6.31, the closing price of our common stock on March 21, 2007. In connection with the stock option repricing program described above, the exercise price of these options was repriced to $1.40 per share on March 4, 2008. The stock options granted to Mr. Chiddix may be accelerated upon the occurrence of specified events (as defined in his consulting agreement), as follows:

Financing Event. If we were a party to a Financing Event (as defined in the consulting agreement, which did not include the financing completed on March 28, 2007) on or before December 31, 2007, and it was determined that Mr. Chiddix contributed in a material way (as defined in the consulting agreement) to the Financing Event, then 30,000 of Mr. Chiddix's outstanding and unvested stock options would have vested immediately. This vesting event did not occur on or before December 31, 2007, and has expired by its terms.

Spectrum Overlay. If our Spectrum Overlay solution is approved by one of two identified cable companies which generates a required level of revenue and if Mr. Chiddix contributed in a material way to the completion of such orders, then (a) 30,000 of Mr. Chiddix's stock options will immediately vest, and (b) the remaining number of outstanding and unvested stock options held by Mr. Chiddix (other than the number of stock options that may vest monthly through December 31, 2008) would be eligible to immediately vest if we subsequently receive the required approval and revenue from the second identified cable company.

Change of Control. If we enter into a definitive agreement on or before December 31, 2008 which would result in a Change of Control (as defined in his consulting agreement), then the remaining number of outstanding and unvested stock options held by Mr. Chiddix will immediately vest as of the closing of the Change of Control.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Securities Authorized for Issuance Under Equity Compensation Plans

This information is included in Part II, Item 5 of this Annual Report.

Security Ownership of Certain Beneficial Owners and Management

The following table presents certain information regarding the beneficial ownership of our common stock as of March 31, 2008 by: (a) each beneficial owner of 5% or more of our outstanding common stock; (b) each of our current directors; (c) each of our named executive officers (as defined above in Item 11 "Summary Compensation Table;" and (d) all of our current directors and executive officers as a group.

The percentage of beneficial ownership in the table is based on approximately 18,700,012 shares of our common stock outstanding as of March 31, 2008. To our knowledge, except under community property laws or as otherwise noted, the persons and entities named in the table have sole voting and sole investment power over their shares of our common stock. Unless otherwise indicated, each beneficial owner listed below maintains a mailing address of c/o Vyyo Inc., 6625 The Corners Parkway, Suite 100, Norcross, Georgia 30092.

The number of shares beneficially owned by each stockholder is determined under the rules of the SEC and is not necessarily indicative of beneficial ownership for any other purpose. Under these rules, beneficial ownership includes those shares of our common stock over which the stockholder has sole or shared voting or investment power and those shares of our common stock that the stockholder has the right to acquire within 60 days after March 31, 2008 through the exercise of any stock option or otherwise. The "Percentage Owned" column treats as outstanding all shares underlying such options held by the stockholder, but not shares underlying options held by other stockholders.

Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership(1)	Percentage Owned
GS Investment Strategies, LLC(2) Goldman, Sachs & Co. 85 Broad Street New York, New York 10004	5,186,982	23.36	%(3)
Gilder, Gagnon, Howe & Co. LLC(4) 1775 Broadway, 26^th Floor New York, New York 10019	2,141,821	11.45	%
Syntek Capital A.G.(5) Zugspitzstrasse 15 Pullach, Germany 82049	972,675	5.20	%
Davidi Gilo(6)	4,969,439	25.10	%
Margaret A. Bellville	29,375	*
Ronn Benatoff(7)	85,000	*
Lewis S. Broad(8)	145,973	*
Neill H. Brownstein(9)	197,186	1.05	%
James A. Chiddix	91,666	*
Avraham Fischer	121,877	*
Samuel L. Kaplan	187,838	1.00	%
Benita Fitzgerald Mosley	6,250	*
Alan L. Zimmerman	185,353	*
Wayne H. Davis	174,999	*
Tashia L. Rivard	74,166	*
Walter Ungerer	79,165	*
Arik Levi(10)	164,625	*
Avner Kol(11)	197,813	1.05	%
All current directors and executive officers as a group (15 persons)(12)	6,348,287	30.39	%

*: Less than 1%.

(1): Includes shares that may be acquired by the exercise of stock options granted under our stock option plans within 60 days after March 31, 2008. The number of shares subject to stock options exercisable within 60 days after March 31, 2008 for each of the directors and named executive officers is shown below:

Davidi Gilo		1,100,000
Margaret A. Bellville		29,375
Ronn Benatoff		85,000
Lewis Broad		108,544
Neill H. Brownstein		125,625
James A. Chiddix		91,666
Avraham Fischer		111,875
Samuel L. Kaplan		111,875
Benita Fitzgerald Mosley		6,250
Alan L. Zimmerman		111,875
Wayne H. Davis		174,999
Tashia L. Rivard		74,166
Walter Ungerer		59,165
Arik Levi		164,625
Avner Kol		197,813
Directors and executive officers as a group		2,552,853

(2): GS Investment Strategies, LLC (an entity affiliated with Goldman) reported that it has shared voting and dispositive power over all of its shares of our common stock. All information regarding Goldman Investment Strategies, LLC is based solely on the Schedule 13G filed by it with the SEC on February 13, 2008, and other information of which we are aware following the closing of the 2007 Financing. The number of shares reported includes 3,500,000 shares that, as of March 31, 2008, could have been acquired upon conversion of our then outstanding 2007 Goldman Note. On June 13, 2008, we closed the 2008 Financing with Goldman in which the 2007 Goldman Note was redeemed in exchange for the 2008 Goldman Note. Under the terms of the 2008 Goldman Note, Goldman is entitled to convert all principal and accrued interest and receive in exchange 8,180,687 shares of our common stock. See note 17 of our fiscal 2008 annual Consolidated Financial Statements for a description of the 2008 Financing.
(3): Under the terms of the 5% Convertible Note delivered to Goldman on March 28, 2007, Goldman did not have the right to convert any portion of the Convertible Note into shares of our common stock to the extent that after giving effect to such conversion and taking into account all other shares of our common sock beneficially owned by Goldman, Goldman would beneficially own more than 14.8% of our outstanding common stock. The 2008 Goldman Note contains an identical provision.
(4): Gilder, Gagnon, Howe & Co. LLC ("Gilder") reported that it has shared dispositive power over all of its shares of our common stock. All information regarding Gilder is based solely on the Schedule 13G (Amendment No. 4) filed by Gilder with the SEC on February 6, 2008.
(5): Syntek reported that it has sole dispositive power over all of its shares of our common stock. All information regarding Syntek is based solely on the Schedule 13D filed by Syntek with the Securities and Exchange Commission on July 21, 2004. On June 13, 2008, we closed the 2008 Financing with Syntek. Under the terms of the 2008 Syntek Note delivered to Syntek in connection with the 2008 Financing, Syntek is entitled to convert all principal and accrued interest and receive in exchange 645,844 shares of our common stock. See note 17 of our fiscal 2008 annual Consolidation Financial Statements for a description of the 2008 Financing.

(6): Includes (a) 3,187,480 shares held by the Gilo Family Trust U/A/D 1/18/91, of which Davidi Gilo is the sole trustee; (b) 563,333 shares held by Mr. Gilo individually; (c) 5,420 shares held by Harmony Management, Inc., of which Mr. Gilo and a trust for his benefit are the sole shareholders; (d) 18,206 shares held by the Gilo Family Partnership, L.P., a limited partnership of which Harmony Management, Inc. is the general partner and Mr. Gilo, his former spouse Gilo and three trusts for the benefit of Mr. Gilo's children are the limited partners; and (e) 95,000 shares held by the Gilo Family Foundation, a not-for-profit corporation of which Mr. Gilo is the trustee. Mr. Gilo has sole voting and dispositive power with respect to all of the shares held by the Gilo Family Trust U/A/D 1/18/91, by Mr. Gilo individually, by Harmony Management, Inc., by the Gilo Family Partnership, L.P., and the Gilo Family Foundation. Mr. Gilo has sole dispositive power with respect to all of the shares held by the Gilo Family Trust U/A/D 1/18/91, by Mr. Gilo individually, by Harmony Management, Inc., by the Gilo Family Partnership, L.P. and the Gilo Family Foundation. Excludes 81,649 shares held in three trusts for the benefit of Mr. Gilo's children, as to which Mr. Gilo has no voting or investment power. Mr. Gilo disclaims beneficial ownership of such shares.
(7): Mr. Benatoff disclaims beneficial ownership of the shares held by Syntek.
(8): Includes 37,429 shares held by Blue Heron I, LLC, of which Mr. Broad has sole investment and voting power.
(9): Includes 8,335 shares held directly by Mr. Brownstein and 63,226 shares held by the Neill and Linda Brownstein Living Trust ATA 12/18/02, of which Mr. Brownstein and his spouse are the trustees and beneficiaries.
(10): Mr. Levi's employment terminated effective March 1, 2008. The number of shares reported as beneficially owned by Mr. Levi is derived from Mr. Levi's separation agreement. Mr. Levi may exercise the reported options through March 31, 2009.
(11): Mr. Kol's employment terminated effective January 30, 2008. The number of shares reported as beneficially owned by Mr. Kol is derived from Mr. Kol's separation agreement. Mr. Kol may exercise the reported options through March 31, 2009.
(12): Mr. Brownstein resigned from our board of directors effective June 26, 2008.

Item 13. Certain Relationships and Related Transactions and Director Independence

Transactions with Entities Related to Davidi Gilo, our Chairman of the Board of Directors

Harmony Management

Aircraft. Our board of directors previously authorized the use of charter aircraft for certain business travel subject to certain procedures. In the year ended December 31, 2006, we were billed $26,686 by an unaffiliated third party management company in connection with several charters of aircraft for business travel purposes. We were not billed in the three-month transition period ended March 31, 2007 or the year ended March 31, 2008 for any such charters. While we chartered the aircraft directly from the management company, the chartered aircraft is leased by Harmony Management, Inc., of which Mr. Gilo and a trust for his benefit are the sole shareholders. Payments made by us to the management company for the aircraft charters were ultimately paid to Harmony Management, after deductions for certain operating costs and charter management fees. At the instruction of Harmony Management, the hourly rate charged by the management company for these charters was substantially less than the standard rate charged by the management company for similar charters to other unaffiliated parties.

Strategic Investment and Miscellaneous Office Services. During the year ended December 31, 2006, we reimbursed Harmony Management $10,135 for strategic investment and miscellaneous office

services. We did not reimburse Harmony Management for services in the three-month transition period ended March 31, 2007 or the year ended March 31, 2008.

Gilo Family Partnership. In the year ended December 31, 2006, we paid rent and administrative support of $12,000 and field labor support services of $36,279 to Harmony Management and an unaffiliated third party, respectively. We made no such payments in the three-month transition period ended March 31, 2007 or the year ended March 31, 2008. Harmony Management is the general partner of the Gilo Family Partnership and Mr. Gilo, his former spouse and three trusts for the benefit of Mr. Gilo's children are the limited partners of the Gilo Family Partnership.

Silicon Design Systems. In the year ended December 31, 2006 we reimbursed Silicon Design Systems for $43,365 related to management information services provided by an employee of Silicon Design Systems in connection with our maintenance and operation of computer systems. We did not reimburse Silicon Design Systems for services in the three-month transition period ended March 31, 2007 or the year ended December 31, 2008.

Transaction with Avraham Fischer. Avraham Fischer, a director of our company, is co-managing partner of the law firm of Fischer Behar Chen Well Orion & Co., which represents us on matters relating to Israeli law. Fischer Behar Chen Well Orion & Co. billed us $133,000 in the year ended December 31, 2006, $60,750 in the three-month transition period ended March 31, 2007 and $107,510 in the year ended March 31, 2008 for legal services.

Arcadian Networks, Inc. On March 31, 2006, we entered into an equipment purchase agreement with ANI. Under this agreement, we sold certain of our wireless solutions to ANI over a 10-year term. During the year ended December 31, 2006, the three-month transition period ended March 31, 2007 and the year ended March 31, 2008, we recognized revenue of approximately $6,721,000; $161,000 and 4,561,000 from the sale of our solutions. to ANI. During the year ended December 31, 2006, we also received the first exclusivity payment of $4,000,000 contemplated by the agreement.

On March 19, 2008, we entered into a lease for rental of test equipment with ANI following ANI's establishing a business presence in Airport City, Israel. The lease term is 180 days at $8,000 per month. During the year ended March 31, 2008, we were reimbursed by a subsidiary of ANI for general and administrative and research and development expenses of $52,000.

Mr. Gilo, our chairman of the board of directors, is also the former chairman of the board of directors of ANI and the sole member of the limited liability company that is the general partner of a major stockholder of ANI.

In August 2006, Clal Industries and Investments, Ltd. ("Clal") invested $20,000,000 in ANI. Avraham Fischer, a director of our company, is co-chief executive officer and a director of Clal. Mr. Fischer does not have a direct equity interest in Clal, however, he is an officer, director and a shareholder of Ganden Holdings Ltd., which is part of the controlling group of IDB Holdings Ltd. Mr. Fischer is deputy chairman of IDB Holdings which holds a majority ownership interest in Clal.

Goldman Sachs Investment Partners Master Fund, LP ("Goldman"). Goldman owns more than 10% of our outstanding common stock. In the year ended March 31, 2006 and three-month transition period ended March 31, 2007, we paid to an entity affiliated with Goldman $1,037,000 and $709,000, respectively, of interest for outstanding debt under the $10,000,000 2006 Note and the $7,500,000 2006 Note issued in the 2006 Financing. In the year ended March 31, 2008, we paid Goldman $1,472,000 of interest for outstanding debt under the 2007 Goldman Note issued in the 2007 Financing. An entity affiliated with Goldman is also a significant stockholder of ANI.

Margaret A. Bellville. Ms. Bellville, a director of our company, provided consulting services to us in her individual capacity. In the year ended March 31, 2008 and the three-month transition period ended

March 31, 2007, Ms. Bellville received $14,000 and $6,000, respectively. In addition, Ms. Bellville is a partner in CarterBaldwin, an executive search firm that has assisted us in the search for and placement of executives and members of our board of directors. In the year ended December 31, 2006, the three-month transition period ended March 31, 2007 and the year ended March 31, 2008, we were billed $149,000; $84,000 and $372,000, respectively, for these executive searches and placements. Our relationship with CarterBaldwin began early in 2006, prior to Ms. Bellville joining our board of directors.

James A. Chiddix. We entered into a consulting agreement with James A. Chiddix, vice chairman of our board of directors, in 2007, which we amended in February 2008. The amendment reduces the fees payable to Mr. Chiddix from $15,000 to $7,500 per month. In the three-month transition period ended March 31, 2007 and the year ended March 31, 2008, we paid $5,000 and $165,000, respectively, to Mr. Chiddix for consulting services.

Indemnification Arrangements. We have entered into indemnification agreements with our directors and executive officers containing provisions that may require us, among other things, to indemnify our directors and executive officers against various liabilities that may arise by virtue of their status or service as directors and executive officers, and to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified.

Item 14. Principal Accountant Fees and Services

The following table presents information regarding the fees billed by PricewaterhouseCoopers International Limited and affiliated entities ("PWC") to us for the years ended December 31, 2006 and March 31, 2008.

Type of Fees	Fiscal Year Ended December 31, 2006		Fiscal Year Ended March 31, 2008
Audit Fees	$	195,000	$	335,000
Tax Fees	$	76,529	$	149,000
All Other Fees	$	—	$	113,000

Total	$	271,529	$	597,000

Audit Fees. This category includes services provided in connection with the audit of our consolidated financial statements, the review of our quarterly consolidated financial statements and other services that are normally provided in connection with our statutory and regulatory filings.

Tax Fees. This category includes professional services rendered by PWC for tax compliance, tax advice and tax planning, including the preparation and review of tax returns and the provision of incidental tax advice.

All Other Fees. This category includes products and services, other than those reported under the above items, including products and services related to compliance with the Sarbanes-Oxley Act of 2002.

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a): Documents filed as a part of this report
1.: Financial Statements

The financial statements filed as a part of this report are identified in the Index to our fiscal 2008 annual Consolidated Financial Statements.

2.: Financial Statement Schedules

No financial statement schedules are required to be filed.

3.: Exhibits

The information required by this item is set forth on the exhibit index which follows the signature page of this Annual Report on Form 10-K.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		VYYO INC.
		By:	/s/ WAYNE H. DAVIS Wayne H. Davis, Chief Executive Officer

Date: June 30, 2008

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date

/s/ WAYNE H. DAVIS Wayne H. Davis	Chief Executive Officer (Principal Executive Officer)	June 30, 2008
/s/ ROBERT K. MILLS Robert K. Mills	Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)	June 30, 2008
/s/ MARGARET A. BELLVILLE Margaret A. Bellville	Director	June 30, 2008
/s/ RONN BENATOFF Ronn Benatoff	Director	June 30, 2008
/s/ LEWIS S. BROAD Lewis S. Broad	Director	June 30, 2008
/s/ JAMES A. CHIDDIX James A. Chiddix	Director	June 30, 2008
/s/ AVRAHAM FISCHER Avraham Fischer	Director	June 30, 2008
/s/ DAVIDI GILO Davidi Gilo	Director	June 30, 2008
/s/ SAMUEL L. KAPLAN Samuel L. Kaplan	Director	June 30, 2008
/s/ BENITA FITZGERALD MOSLEY Benita Fitzgerald Mosley	Director	June 30, 2008
/s/ ALAN L. ZIMMERMAN Alan L. Zimmerman	Director	June 30, 2008

Vyyo Inc.
2008 ANNUAL REPORT

CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS

		Page
Report of Independent Registered Public Accounting Firm		F-2
Consolidated Balance Sheets as of March 31, 2008, March 31, 2007 and December 31, 2006		F-3
Consolidated Statements of Operations for the years ended March 31, 2008 and December 31, 2006 and the three-month transition period ended March 31, 2007		F-4
Consolidated Statements of Changes in Capital Deficiency for the years ended March 31, 2008 and December 31, 2006 and the three-month transition period ended March 31, 2007		F-5
Consolidated Statements of Cash Flows for the year ended March 31, 2008, December 31, 2006, and the three-month transition period ended March 31, 2007		F-6
Notes to Consolidated Financial Statements		F-7

F-1

Kesselman & Kesselman
Certified Public Accountants (Isr.)
Trade Tower, 25 Hamered Street
Tel Aviv 68125 Israel
P.O. Box 452 Tel Aviv 61003 Israel
Telephone +972-3-7954555
Facsimile +972-3-7954556

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Vyyo Inc.

We have audited the consolidated balance sheets of Vyyo Inc. (the "Company") and its subsidiaries as of March 31, 2008, March 31, 2007 and December 31, 2006 and the related consolidated statements of operations, capital deficiency and cash flows for the years ended March 31, 2008 and December 31, 2006 and the three-month transition period ended March 31, 2007. These financial statements are the responsibility of the Company's Board of Directors and management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Company's Board of Directors and management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of March 31, 2008, March 31, 2007 and December 31, 2006 and the results of its operations, changes in capital deficiency and its cash flows for the years ended March 31, 2008 and December 31, 2006 and the three-month transition period ended March 31, 2007, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1a to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1a. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Tel-Aviv, Israel
June 30, 2008

/s/ Kesselman & Kesselman CPAs (Isr.)
A member of PricewaterhouseCoopers International Limited

F-2

Vyyo Inc.

Consolidated Balance Sheets

(In thousands of U.S. $, except share data)

			March 31, 2008			March 31, 2007			December 31, 2006
ASSETS
Current Assets
	Cash and cash equivalents		$	5,303		$	24,134		$	7,416
	Short-term investments			718			7,020			11,272
	Restricted cash			5,000			—			—
	Accounts receivable trade, net:
		Related party		—			—			991
		Other		553			468			194
	Inventory, net			2,001			2,320			2,362
	Other			1,208			923			996

		Total Current Assets		14,783			34,865			23,231
Long-Term Assets
	Restricted cash			—			5,000			5,000
	Property and equipment, net			913			1,662			1,676
	Employee rights upon retirement funded			—			1,221			1,168
	Debt issuance costs, net			120			150			1,074

		TOTAL ASSETS	$	15,816		$	42,898		$	32,149

LIABILITIES NET OF CAPITAL DEFICIENCY
Current Liabilities
	Accounts payable		$	632		$	1,349		$	1,719
	Accrued restructuring charges			1,282			—			—
	Accrued liabilities			4,954			8,140			7,877
	Deferred revenues, related party			400			400			400
	Promissory note			6,500			5,401			—

		Total Current Liabilities		13,768			15,290			9,996

Long-Term Liabilities
	Promissory note			—			—			5,078
	$7,500,000 2006 Note			—			—			5,085
	$10,000,000 2006 Note			35,000			35,000			10,097
	Deferred revenues, related party			2,946			3,279			3,395
	Liability for employee rights upon retirement			300			2,345			2,111

Commitments and Contingent Liabilities
		Total Liabilities		52,014			55,914			35,762

Capital Deficiency
	Preferred stock, $0.001 par value; 5,000,000 shares authorized, none issued			—			—			—
	Common stock, $0.0001 par value and paid in capital; 50,000,000 shares authorized, 18,700,012; 18,316,231 and 18,114,031 shares issued and outstanding at March 31, 2008; March 31, 2007 and December 31, 2006, respectively			269,356			262,600			260,966
	Accumulated other comprehensive loss			—			(1	)		(3	)
	Accumulated deficit			(305,554	)		(275,615	)		(264,576	)

		Total Capital Deficiency		(36,198	)		(13,016	)		(3,613	)

TOTAL LIABILITIES NET OF CAPITAL DEFICIENCY			$	15,816		$	42,898		$	32,149

The accompanying notes are an integral part of these consolidated financial statements.

F-3

Vyyo Inc.

Consolidated Statements of Operations

(In thousands of U.S. $, except per share data)

			Year Ended						Three-Month Transition Period Ended March 31, 2007
			March 31, 2008			December 31, 2006			Three-Month Transition Period Ended March 31, 2007
REVENUES
	Revenues		$	3,106		$	1,279		$	462
	Revenues, related party			4,561			6,721			161

		Total Revenues		7,667			8,000			623

COST OF REVENUES
	Cost of products sold			3,230			857			618
	Cost of products sold, related party			3,853			5,253			80
	Write-down of inventory			1,250			424			—
	Insurance reimbursement for damaged inventory			(101	)		(710	)		—

		Total Cost of Revenues		8,232			5,824			698

GROSS PROFIT(LOSS)				(565	)		2,176			(75	)

OPERATING EXPENSES (INCOME)
	Research and development			10,776			11,216			2,868
	Sales and marketing			7,941			9,261			1,881
	General and administrative, net			9,306			8,710			2,047
	Restructuring and impairments			2,356			—			—

		Total Operating Expenses		30,379			29,187			6,796

OPERATING LOSS				(30,944	)		(27,011	)		(6,871	)
FINANCIAL INCOME				971			1,214			244
FINANCIAL EXPENSES				(3,000	)		(2,905	)		(4,162	)

LOSS BEFORE INCOME TAXES				(32,973	)		(28,702	)		(10,789	)
INCOME TAXES				3,034			(802	)		(250	)

LOSS FROM CONTINUING OPERATIONS				(29,939	)		(29,504	)		(11,039	)
DISCONTINUED OPERATIONS				—			78			—

LOSS FOR THE PERIOD			$	(29,939	)	$	(29,426	)	$	(11,039	)

LOSS PER SHARE
Basic and diluted:
	Continuing operations		$	(1.62	)	$	(1.69	)	$	(0.61	)

			$	(1.62	)	$	(1.69	)	$	(0.61	)

WEIGHTED AVERAGE NUMBER OF SHARES
	Basic and diluted			18,516			17,368			18,095

The accompanying notes are an integral part of these consolidated financial statements.

F-4

Vyyo Inc.

Consolidated Statements of Changes in Stockholders' Equity (Capital Deficiency)

(In thousands of U.S. $, except share data)

		Number of shares		Amount and additional paid in capital			Notes receivable from stockholders			Accumulated other comprehensive income (loss)			Accumulated deficit			Total stockholders' equity (capital deficiency)
BALANCE AT JANUARY 1, 2006		15,721,334		$	243,314		$	(19	)		—		$	(235,150	)	$	8,145
Loss														(29,426	)		(29,426	)
Other comprehensive loss:
	Unrealized loss on investments net										(3	)					(3	)
	Reclassification of realized gain included in net loss										(42	)					(42	)
	Other-than-temporary impairment in available-for-sale securities										42						42

Comprehensive loss																	(29,429	)

Issuance of common stock upon exercise of options		743,530			2,615												2,615
Issuance of common stock to Goldman, Sachs & Co.		1,353,365			*7,601												7,601
Issuance of warrants to Goldman, Sachs & Co.					**1,656												1,656
Issuance of common stock upon exercise of warrants by Goldman, Sachs & Co.		298,617			*30												30
Issuance of warrants to financial advisor					*367												367
Issuance of common stock upon exercise of warrants by financial advisor		2,185			(—	)											(—	)
Stock-based compensation expense					5,402												5,402
Cancellation of shares		(5,000	)		(19	)		19									—

BALANCE AT DECEMBER 31, 2006		18,114,031		$	260,966			—		$	(3	)	$	(264,576	)	$	(3,613	)
Loss														(11,039	)		(11,039	)
Other comprehensive loss:
Unrealized gain on investments net											2						2

Comprehensive loss																	(11,037	)

Issuance of common stock upon exercise of options		202,200			748												748
Stock-based compensation expense					886												886

BALANCE AT MARCH 31, 2007 (Transition Period)		18,316,231		$	262,600			—		$	(1	)	$	(275,615	)	$	(13,016	)
Loss														(29,939	)		(29,939	)
Other comprehensive loss:
Unrealized gain on investments net											1						1

Comprehensive loss																	(29,938	)

Issuance of common stock upon exercise of options		383,781			1,653												1,653
Stock-based compensation expense					5,103												5,103

BALANCE AT MARCH 31, 2008		18,700,012		$	269,356			—			—		$	(305,554	)	$	(36,198	)

*: Net issuance expenses of $659,000
**: Net issuance expenses of $143,000
The accompanying notes are an integral part of these consolidated financial statements.

F-5

Vyyo Inc.

Consolidated Statements of Cash Flows

(In thousands of U.S. $)

		Year Ended						Three-Month Transition Period Ended March 31, 2007
		March 31, 2008			December 31, 2006			Three-Month Transition Period Ended March 31, 2007
CASH FLOWS FROM OPERATING ACTIVITIES
Loss		$	(29,939	)	$	(29,426	)	$	(11,039	)
Adjustments to reconcile loss to net cash used in operating activities
	Income and expenses not involving cash flows
	Depreciation		817			850			218
	Amortization		222			—			—
	Accretion and amortization of financing instruments, net		1,129			1,470			3,715
	Write-down of inventories and non-cancelable purchase commitments		1,250			514			—
	Stock-based compensation, net		5,103			5,402			886
	Capital gain on sale of property and equipment		(22	)		(29	)		(4	)
Decrease (increase) in assets and liabilities
	Accounts receivable, related party		—			(991	)		991
	Accounts receivable, other		(85	)		674			(274	)
	Other current assets		(285	)		(61	)		73
	Inventory		(931	)		(385	)		42
	Accounts payable		(717	)		(269	)		(370	)
	Accrued liabilities		(3,683	)		1,083			342
	Accrued restructuring charges		1,282			—			—
	Deferred revenues, related party		(333	)		3,795			(116	)
	Liability for employee rights upon retirement		112			651			234

Net cash used in operating activities			(26,080	)		(16,722	)		(5,302	)

CASH FLOWS FROM INVESTING ACTIVITIES
	Purchase of property and equipment		(440	)		(382	)		(435	)
	Proceeds from sale of property and equipment		89			29			6
	Purchase of short-term investments		(21,581	)		(29,048	)		(3,400	)
	Proceeds from sales and maturities of short-term investments		27,884			25,176			7,654
	Contributions to severance pay funds		(206	)		(203	)		(53	)

Net cash provided by (used in) investing activities			5,746			(4,428	)		3,772

CASH FLOWS FROM FINANCING ACTIVITIES
	Proceeds from exercise of stock options		1,653			2,615			748
	Proceeds from issuance of common stock, $7,500,000 2006 Note, $10,000,000 2006 Note and warrants, net of issuance cost		—			23,403			—
	Proceeds from issuance of 2007 Goldman Note		(150	)		—			35,000
	Payments of $7,500,000 2006 Note and $10,000,000 2006 Note		—			—			(17,500	)

Net cash provided by financing activities			1,503			26,018			18,248

Increase (decrease) in cash and cash equivalents			(18,831	)		4,868			16,718
Cash and cash equivalents at beginning of period			24,134			2,548			7,416

Cash and cash equivalents at end of period		$	5,303		$	7,416		$	24,134

Non-Cash Investing and Financing Activities
Purchase of property and equipment			—		$	559			—

Cancellation of shares			—		$	19			—

Supplemental Disclosure of Cash Flow Information
Cash paid for taxes		$	23		$	7		$	8

Cash paid for interest		$	1,473		$	1,038		$	709

The accompanying notes are an integral part of these consolidated financial statements.

F-6

Vyyo Inc.

Notes to Consolidated Financial Statements

1. General; Significant Accounting Policies

1a. General

Organization

Vyyo Inc. and its wholly-owned subsidiaries (the "Company") provide extended bandwidth solutions for cable system operators. The Company's UltraBand® spectrum overlay technology expands cable operators' typical hybrid-fiber coax ("HFC") network capacity in the "last mile" by up to two times in the downstream and up to four times in the upstream. The Company's results also include operations of Xtend Networks Ltd., an Israeli company, and its wholly-owned, United States-based subsidiary, Xtend Networks Inc. (collectively, "Xtend"). Vyyo Inc. was incorporated in Delaware in 1996.

Since the acquisition of Xtend in 2004, the Company had operated in two segments: the cable solutions segment and the wireless solutions segment. Beginning in 2007, the Company announced that its primary focus and dedication of resources was in its cable solutions segment. In July 2007, the Company implemented a cost reduction program that reduced its workforce, including workforce in its wireless solutions segment. In the three months ended March 31, 2008, the Company simplified its structure by further streamlining its corporate organization and reducing operating costs to better address market needs and revenue opportunities in the cable market. As part of this restructure plan, the Company ceased the marketing and support efforts for its wireless solutions segment in March 2008, and it has no current wireless operations. However, the Company still has limited involvement with this business as discussed in note 4.

Change in Fiscal Year End

Effective December 3, 2007, the Company changed its fiscal year end from December 31 to March 31. Reference to a particular fiscal year means the period beginning April 1 and ending March 31 of the stated year.

Liquidity and Capital Resources

The Company's consolidated financial statements are presented on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has experienced a significant loss from operations since its incorporation. For the year ended March 31, 2008, the Company incurred a net loss of $29,939,000 and had an accumulated deficit of $305,554,000. Additionally, the Company has current liabilities of approximately $13,800,000 and current assets of approximately $14,800,000. The Company also has substantial long-term liabilities of $38,300,000. These matters raise substantial doubt about the ability of the Company to continue as a going concern. The Company's ability to continue as a going concern will depend upon its ability to raise additional capital or attain profitable operations. In addition, the Company continues to seek to expand its revenue base by adding new customers. Failure to secure additional capital or to expand its revenue base to achieve profitability, would likely result in the Company depleting its available funds and not being able to pay its obligations when they become due. The accompanying 2008 fiscal annual Consolidated Financial Statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result if the Company is unable to continue as a going concern.

F-7

Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

1. General; Significant Accounting Policies (Continued)

The Company received $4,500,000 of additional cash on June 13, 2008 from a financing of $41,000,000, which included $38,000,000 from Goldman and $3,000,000 from Syntek. The remaining $36,500,000 were used to payoff existing debt and interest. The cash available for general corporate purposes from the financing was approximately $4,000,000 after interest payments and debt issuance costs. Management currently expects this cash to fund the Company through September 2008. The Company intends to seek additional debt or equity financing. There is no assurance that the Company will be able to secure additional funding. If the Company is unable to secure additional funding, the Company will not be able to continue as a going concern.

2008 Restructuring Plan

In January 2008, the Company began to implement a significant restructuring plan intended to enhance its competitive position and lower its overall cost structure. Key initiatives of the restructure plan included termination of approximately 100 employees, (out of 122 employees), including research and development, sales and administrative employees, the closing and consolidation of facilities and the write-down of certain assets.

The Company completed its restructuring plan in June 2008. The charges associated with the restructuring plan include $222,000 of asset impairments and $2,102,000 related to workforce reduction. These charges were recorded as restructuring charges among operating expenses. The following table summarizes the status of the restructuring provision:

		Accrual balance at March 31, 2007	Restructuring expenses		Write Off			Payment			Accrual balance at March 31, 2008
		(in thousands of U.S. $)
Cost relating to:
Workforce reduction		—	$	2,102		—		$	(852	)	$	1,250
Fixed asset write-off		—		222	$	(222	)		—			—
Other expenses		—		32		—			—			32

	Total	—	$	2,356	$	(222	)	$	(852	)	$	1,282

As of March 31, 2008, approximately 70 employees had left the Company under the restructuring plan. The remaining provision will be primarily utilized during fiscal 2008, as severance payments, some of which are paid on a monthly basis, are completed.

2007 Cost Reduction Program

On July 23, 2007, the Company implemented a cost reduction program that reduced its workforce by approximately 16% (when compared to the workforce levels as of June 30, 2007). The Company recorded approximately $400,000 in a one-time cash severance payment and related expenses. This cost reduction did not require the termination of any contractual obligations or require the Company to incur other material associated costs.

Notice of De-listing

The Company's shares of common stock were de-listed from The Nasdaq Global Market effective April 21, 2008 due to our failure to maintain minimum capitalization requirements in accordance with

F-8

Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

1. General; Significant Accounting Policies (Continued)

Nasdaq Marketplace Rules. Since that time, the Company's common stock has been quoted on the OTC Bulletin Board and, currently, the Pink Sheets. Securities traded in over-the-counter markets are, for the most part, thinly traded and generally are not subject to the level of regulation imposed on securities listed or traded on Nasdaq or other national securities exchanges. As a result, an investor may find it difficult to dispose of the Company's common stock or to obtain accurate quotations as to its price.

Periodic Reporting

On April 24, 2008, the Company filed Form 15 certifying that its common stock was held by 300 or fewer record holders as of the beginning of the fiscal year. This action suspended the Company's reporting obligations under the Securities Exchange Act of 1934. The Company does not intend to continue to file periodic reports on Forms 8-K, 10-Q and 10-K.

Financings

On June 13, 2008, the Company closed a financing of $38,000,000 from Goldman and a financing of $3,000,000 from Syntek. See note 17.

On March 28, 2007, the Company closed the private placement (the "2007 Financing") of a convertible note with Goldman, Sachs & Co. (an affiliate of Goldman) in exchange for $35,000,000 (the "2007 Goldman Note"), which included $17,500,000 of new funding and $17,500,000 of which the Company used to pay off the $10,000,000 10% Convertible Note (the "$10,000,000 2006 Note") and $7,500,000 9.5% Senior Secured Note (the "$7,500,000 2006 Note") issued to Goldman, Sachs & Co. in March 2006 as described below. The 2007 Financing resulted in net proceeds to the Company of approximately $17,350,000. See note 10.

Risk Factors and Concentrations

The Company is subject to various risks in the cable market, including dependence on key customers and key individuals, competition from substitute products and larger companies and the continued development and marketing of its solutions.

Financial instruments that subject the Company to credit risk consist primarily of cash, cash equivalents, restricted cash, short-term investments and accounts receivable. The Company invests cash equivalents and short-term investments through high-quality financial institutions. The Company's sales are concentrated among a small numbers of customers. The Company performs ongoing credit evaluations of its customers and provides reserves for estimated credit losses based on the

F-9

Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

1. General; Significant Accounting Policies (Continued)

circumstances of a specific debt for which collection may be doubtful. The allowance for doubtful accounts as of March 31, 2008, March 31, 2007 and December 31, 2006 is as follows:

	Year Ended March 31, 2008			Three-Month Transition Period Ended March 31, 2007		Year Ended December 31, 2006
	(In thousands of U.S. $)
Balance at beginning of the period	$	200,000		$	200,000	$	200,000
Deductions from reserves		(200,000	)		—		—

Balance at end of the period		—		$	200,000	$	200,000

A relatively small number of customers account for a large percentage of the Company's revenues. The Company expects that it will continue to depend on a limited number of customers for a substantial portion of its revenues in future periods. The loss of a major customer could seriously harm the Company's ability to sustain revenue levels, which would seriously harm operating results.

The Company currently has relationships with a limited number of manufacturing suppliers. These relationships may be terminated by either party with little or no notice. If the manufacturers are unable or unwilling to continue manufacturing the Company's solutions in required volumes, the Company would have to identify qualified alternative suppliers, which would result in delays causing results of operations to suffer. The Company's limited experience with these manufacturers and lack of visibility as to the manufacturing capabilities of these manufacturers if the Company's volume requirements significantly increase, does not provide it with a reliable basis on which to project its ability to meet delivery schedules, yield targets or costs. If the Company is required to find alternative manufacturing sources, it may not be able to satisfy its production requirements at acceptable prices and on a timely basis, if at all. Any significant interruption in supply would affect the allocation of systems to customers, which in turn could seriously harm the Company's business.

1b. Significant Accounting Policies

Accounting Principles

The Company has prepared the consolidated financial statements in accordance with generally accepted accounting principles in the United States ("US GAAP").

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with US GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and related disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting years. Actual results could differ from those estimates.

On an on-going basis, management evaluates its estimates, judgments and assumptions. Management bases its estimates, judgments and assumptions on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily

F-10

Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

1. General; Significant Accounting Policies (Continued)

apparent from other sources. Actual results could differ from these estimates, judgments and assumptions.

Foreign Currency Transactions

The United States dollar is the functional currency for the Company and all of its subsidiaries and all of its sales are made in United States dollars. In addition, a substantial portion of the costs of the Company's foreign subsidiaries are incurred in United States dollars. Since the United States dollar is the primary currency in the economic environment in which the Company and its foreign subsidiaries operate, monetary accounts maintained in currencies other than the United States dollar (principally cash and liabilities) are remeasured into United States dollars using the representative foreign exchange rate at the balance sheet date. Operational accounts and nonmonetary balance sheet accounts are measured and recorded at the rate in effect at the date of the transaction. The effects of foreign currency remeasurement are reported in current operations in the Statements of Operations as part of "Financial Income" and "Financial Expense."

Principles of Consolidation

The Company's fiscal 2008 annual Consolidated Financial Statements include the accounts of Vyyo Inc. and its wholly-owned subsidiaries. All material inter-company balances and transactions have been eliminated in consolidation.

Investments in Marketable Securities

The Company has designated its investments in debt securities as available-for-sale pursuant to Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities." Available-for-sale securities are carried at fair value, which is determined based upon the quoted market prices of the securities, with unrealized gains and losses reported in "Accumulated other comprehensive loss," in the Balance Sheets, a component of stockholders' equity (capital deficiency), until realized. Realized gains and losses and declines in value judged to be other-than-temporary on available-for-sale securities are included in the Statements of Operations as part of "Financial Expenses." The Company views its available-for-sale portfolio as available for use in its current operations. Accordingly, the Company has classified all investments as short-term in the Balance Sheets under "Short-term investments," even though the stated maturity date may be one year or more from the current balance sheet date.

The Company recognizes an impairment charge when the decline in the fair values of these investments below their cost basis is deemed to be other-than-temporary. The Company considers various factors in determining whether to recognize an impairment charge, including the length of time and the extent to which the fair value has been below the cost basis, the current financial condition of the investee and the Company's intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value. The Company recognized an other-than-temporary impairment in its available-for-sale securities of $0, $0 and $42,0000 for the year ended March 31, 2008, the three-month transition period ended March 31, 2007 and the year ended December 31, 2006, respectively. The Company recognized realized gains of $0, $0, and $42,000 for the year ended March 31, 2008, the three-month transition period ended March 31, 2007 and the year ended December 31, 2006, respectively

F-11

Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

1. General; Significant Accounting Policies (Continued)

Cash Equivalents

Cash equivalents are short-term, highly-liquid investments and deposits that have original maturities of three months or less at time of investment and that are readily convertible to cash.

Inventory

Inventories are stated at the lower of cost or market, computed using the moving average basis and include material and labor. The Company regularly monitors inventory quantities on hand and records a provision for excess and obsolete inventories based primarily on its forecast of future product demand and production requirements. Although the Company makes every effort to ensure the accuracy of its forecasts of future product demand, any significant unanticipated changes in demand or technological developments would significantly impact the value of the inventory and the reported operating results. If actual market conditions are less favorable than the Company's assumptions, additional provisions may be required. The Company's estimates of future product demand may prove to be inaccurate, in which case the Company may have understated or overstated the provision required for excess and obsolete inventory. In the future, if the inventory is determined to be overvalued, the Company would be required to recognize such costs in its cost of sales at the time of such determination. If the Company's inventory is determined to be undervalued, the Company may have overstated its cost of sales in previous periods and would be required to recognize additional operating income only when the undervalued inventory was sold.

The Company adopted the provisions of FASB Statement No. 151, "Inventory Costs," as of January 1, 2006, which did not have a material effect on its financial statements. This statement requires that abnormal idle facility expenses be recognized as current-period charges, and that allocation of fixed production overhead costs to inventory be based on normal capacity of the production facility.

Fair Value of Financial Instruments

The fair value of the financial instruments included in the Company's working capital approximates carrying value.

Debt Issuance Costs

Costs incurred in the issuance of the 2007 Goldman Note in the 2007 Financing consisted of payments to legal advisors in the year ended December 31, 2007. Costs incurred in the issuance of the $10,000,000 2006 Note and $7,500,000 2006 Note included warrants to purchase shares of the Company's common stock issued to the Company's financial advisor and cash payments made to legal and financial advisors in the year ended December 31, 2006. In the year ended December 31, 2006, the Company determined the fair value of the warrants based on the Black-Scholes option-pricing model. Issuance costs are deferred and amortized as a component of interest expense over the period from issuance through the first redemption date.

Extinguishment of Debt

In the 2007 Financing, the Company repaid the $10,000,000 2006 Note and the $7,500,000 2006 Note. The Company accounted for this repayment as "extinguishment of debt" under Emerging Issues

F-12

Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

1. General; Significant Accounting Policies (Continued)

Task Force ("EITF") 96-19, "Debtor's Accounting for a Modification or Exchange of Debt Instruments" ("EITF 96-19"). The Company initially recorded the 2007 Goldman Note at its estimated fair value, and used that amount to determine the debt extinguishment loss of $3,263,000 resulting from recognition of $2,231,000 in unamortized accretion and $1,032,000 in unamortized issuance expenses related to the $10,000,000 2006 Note and the $7,500,000 Note.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of the assets.

Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the related asset.

Impairment of Long-Lived Assets and Intangible Assets

SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"), requires that long-lived assets, including finite intangible assets to be held and used or disposed of by an entity, be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Under SFAS 144, if the sum of the expected future cash flows (undiscounted and without interest charges) of the long-lived assets is less than the carrying amount, the Company would recognize an impairment loss and would write down the assets to their estimated fair values. See "—2008 Restructuring Plan" in note 1a.

Revenue Recognition

Substantially all of our revenues are from sales of the Company's solutions. As of March 31, 2008, the Company's revenues from services were not significant. The Company's solutions are off-the-shelf products, sold "as is," without further adjustment or installation. When establishing a relationship with a new customer, the Company also may sell these solutions together as a package, in which case the Company typically ships solutions at the same time to the customer.

The Company records revenues from sales of products when (a) persuasive evidence of an arrangement exists; (b) delivery has occurred and customer acceptance requirements have been met, if any, and the Company has no additional obligations; (c) the price is fixed or determinable; and (d) collection of payment is reasonably assured. The Company's standard sales terms generally do not include customer acceptance provisions. However, if there is a right of return, customer acceptance provision or there is uncertainty about customer acceptance, the Company defers the associated revenue until it has evidence of customer acceptance.

EITF No. 00-21, "Revenue Arrangements with Multiple Deliverables" ("EITF 00-21"), addresses when and how an arrangement involving multiple deliverables should be divided into separate units of accounting. The Company's multiple deliverables arrangements are those arrangements with new customers in which the Company sells its products together as a package. Because the Company delivers these off-the-shelf products at the same time, the four revenue recognition criteria discussed above are met.

F-13

Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

1. General; Significant Accounting Policies (Continued)

The Company recognizes revenues related to the exclusivity provisions contained in the equipment purchase agreement with Arcadian Networks, Inc. described in note 4 on a straight line basis, over the 10-year term of that agreement.

Product Warranty

The Company provides for product warranty costs when it recognizes revenue from sales of its products. The provision is calculated as a percentage of sales based on historical experience.

Research and Development Costs

Research and development costs are expensed as incurred and consist primarily of personnel, facilities, equipment and supplies for research and development activities. Grants received from the Office of the Chief Scientist at the Ministry of Industry and Trade in Israel and other research foundations are deducted from research and development expenses as the related costs are incurred or as the related milestone is met.

Loss Per Share of Common Stock

Basic and diluted loss per share are calculated and presented in accordance with SFAS No. 128 "Earnings Per Share" ("SFAS 128") for all years presented. All outstanding stock options and shares of restricted stock have been excluded from the calculation of diluted loss per share because all such securities are not dilutive for the presented years. The total number of shares of common stock related to outstanding options, the $10,000,000 2006 Note, warrants issued in connection with the 2006 Financing and restricted stock excluded from the calculations of diluted loss per share were 11,101,084, 10,118,466 and 7,065,009 for the year ended March 31, 2008, the three-month transition period ended March 31, 2007 and the year ended December 31, 2006, respectively.

Comprehensive Income (Loss)

SFAS No. 130, "Reporting Comprehensive Income" ("SFAS 130"), establishes standards for the reporting and presentation of comprehensive income, its components and accumulated balances in a full set of general purpose financial statements. The Company's components of comprehensive income (loss), in addition to the loss for the year, include net unrealized gains or losses on investments classified as available for sale.

Employee Stock-Based Compensation

Effective January 1, 2006, the Company adopted SFAS No. 123 (revised 2004), "Share-based Payment" ("SFAS 123(R)"). SFAS 123(R) requires that awards classified as equity awards be accounted for using the grant-date fair value method. The fair value of stock options is determined based on the number of shares granted and the price of the Company's common stock, and determined based on the Black-Scholes, Monte Carlo and the binomial option-pricing models, net of estimated forfeitures. The Company estimates forfeitures based on historical experience and anticipated future conditions. The Company uses the Monte Carlo valuation model only for stock options granted to executives in 2005, 2006 and repriced in 2008 where vesting is subject to specific stock price performance.

F-14

Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

1. General; Significant Accounting Policies (Continued)

The Company recognizes compensation cost for options granted with service conditions that have graded vesting schedules using the graded vesting attribution method.

The Company adopted the modified prospective transition method permitted by SFAS 123(R). Under this transition method, the Company implemented SFAS 123(R) as of the first quarter of 2006 with no restatement of prior periods. The valuation provisions of SFAS 123(R) apply to new awards and to awards modified, repurchased or cancelled after January 1, 2006. Additionally, the Company recognizes compensation cost over the remaining service period for the portion of awards for which the requisite service has not been rendered using the grant-date fair value of those awards as calculated for pro forma disclosure purposes under SFAS 123 "Accounting for Stock-Based Compensation."

The Company accounts for equity instruments issued to third party service providers (non-employees) in accordance with the fair value of the instruments based on an option-pricing model, pursuant to the guidance in EITF 96-18 "Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling Goods or Services." The Company revalues the fair value of the options granted over the related service periods and recognizes the value over the vesting period using the Black-Scholes model.

The fair value of each stock option granted during the year ended March 31, 2008, the three-month transition period ended March 31, 2007 and the year ended December 31, 2006 respectively, was estimated at the grant date using different valuation models such as Black-Scholes, Monte Carlo (for stock options whose vesting is based on market conditions, granted in 2005, 2006 and repriced in 2008) and the binomial option-pricing models, using the following assumptions:

		Year Ended		Three-Month Transition Period Ended March 31, 2007
		March 31, 2008	December 31, 2006	Three-Month Transition Period Ended March 31, 2007
Black-Scholes model assumptions:
	Risk-free interest rates ranges	2.46%-5.03%	4.66%-5.25%	4.68%
	Weighted-average expected life	4.11-9.89	2.50-5.00	10
	Volatility ranges	0.62-0.86	0.56-0.76	0.61
	Dividend yields	—	—	—
Monte Carlo valuation model assumptions:
	Risk-free interest rates ranges	1.65%-3.22%	4.6%	—
	Weighted-average expected life range	2.04-7.94	5.22	—
	Volatility ranges	64.77-81.41	0.61	—
	Dividend yields	—	—	—
Binomial valuation model assumptions:
	Risk-free interest rates ranges	1.66%-5.10%	4.60%-5.33%	4.46%-5.16%
	Weighted-average expected life range	0.59-8.64	0.25-6.30	2.79-6.54
	Volatility ranges	0.26-0.99	0.61-0.62	0.33-0.85
	Dividend yields	—	—	—

The expected volatility is based on the historical volatility of the Company's stock. The risk-free interest rate assumption is based on observed interest rates appropriate for the expected term of the respective stock option grant. The expected term is based on the Company's history of stock option

F-15

Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

1. General; Significant Accounting Policies (Continued)

exercises. The dividend yield assumption reflects the expected dividend. Pre-vesting forfeiture rates were estimated based on pre-vesting forfeiture experience.

The Company accounts for equity instruments issued to third party service providers (non-employees) in accordance with the fair value based on an option-pricing model, pursuant to the guidance in EITF 96-18 "Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling Goods or Services." The fair value of the options granted is revalued over the related service periods and recognized over the vesting period.

Taxes on Income

Deferred income taxes are determined utilizing the asset and liability method, based on the estimated future differences between the financial accounting and tax basis of assets and liabilities under the applicable tax laws. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely than not that some or all of the assets will not be realized. See also note 13.

Taxes that would apply in the event of disposal of investment in a subsidiary have not been taken into account when computing deferred taxes, as if the Company intended to hold this investment and has not realized it.

As of January 1, 2007, the Company adopted FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes—an Interpretation of FASB Statement No. 109" ("FIN 48") which clarifies the accounting for uncertainty in income taxes recognized in the Company's consolidated financial statements. FIN 48 requires that a position taken or expected to be taken in a tax return be recognized in the financial statements when it is more likely than not (i.e., a likelihood of more than 50%) that the position would be sustained upon examination by tax authorities. A recognized tax position is then measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. Upon adoption, the Company did not have any material unrecognized tax benefits. As of March 31, 2008, the Company does not have any material unrecognized tax benefits.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits as components of interest expense and other expense, respectively, in arriving at pretax income. The Company did not have any interest and penalties accrued upon the adoption of FIN 48, and, as of March 31, 2008, the Company does not have any interest and penalties accrued related to unrecognized tax benefits.

A summary of open tax years by major jurisdiction is presented below:

Jurisdiction:		Years:
Israel		2004-2007
United States		2005-2007

According to federal statute, the Company's United States tax returns for the years ended December 31, 2005, 2006 and 2007 remain open to examination by the Internal Revenue Service. Most state taxing authorities follow the federal statute of three years.

F-16

Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

1. General; Significant Accounting Policies (Continued)

Reclassifications

Certain comparative figures have been reclassified to conform to the current year presentation.

Recent Accounting Pronouncements

In March 2008, FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133" ("SFAS 161"). SFAS 161 requires enhanced disclosures regarding derivatives and hedging activities, including: (a) the manner in which a company uses derivative instruments; (b) the manner in which derivative instruments and related hedged items are accounted for under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities;" and (c) the effect of derivative instruments and related hedged items on a company's financial position, financial performance and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company is evaluating the impact, if any, that adoption of SFAS 161 will have on its financial statements.

In December 2007, the SEC issued Staff Accounting Bulletin No. 110 ("SAB 110"), relating to the use of a "simplified" method in developing an estimate of the expected term of "plain vanilla" share options. SAB 107 previously allowed the use of the simplified method until December 31, 2007. SAB 110 permits the extension, under certain circumstances, of the use of the simplified method beyond December 31, 2007. The Company believes that the adoption of SAB 110 will not have a material impact on its consolidated financial statements.

In December 2007, FASB issued SFAS No. 160, "Non-controlling Interests in Consolidated Financial Statements—an amendment of Accounting Research Bulletin No. 51" ("SFAS 160"). SFAS 160 establishes new accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 is effective for fiscal years beginning on or after December 15, 2008. The Company does not believe that SFAS 160 will have a material impact on its consolidated financial statements.

In February 2007, FASB issued SFAS 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS 159"). SFAS 159 permits companies to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS 159 will be effective for the Company during the fiscal year ending March 31, 2009. The Company is currently evaluating the impact that adoption of SFAS 159 would have on its consolidated financial statements.

In September 2006, FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS 157"). SFAS 157 defines fair value, establishes a framework and gives guidance regarding the methods used

F-17

Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

1. General; Significant Accounting Policies (Continued)

for measuring fair value, and expands disclosures about fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Subsequent to the issuance of SFAS 157, FASB issued FASB Staff Positions 157-1, "Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13" ("FSP 157-1") and FSP 157-2 "Effective Date of FASB Statement No. 157" ("FSP 157-2"). FSP 157-1 excludes, in certain circumstances, SFAS 13 and other accounting pronouncements that address fair value measurements for purposes of lease classification or measurement under Statement 13 from the provision of SFAS 157. FSP 157-2 delays the effective date of SFAS 157 for nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually),to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. The Company is currently assessing the impact that SFAS 157 will have on its consolidated financial statements.

2. Short-Term Investments

The fair value of available-for-sale securities are as follows:

	March 31, 2008		March 31, 2007		December 31, 2006
	Due in one year or less including money market
	(In thousands of U.S. $)
Corporate debts securities and municipal securities		—	$	6,677	$	10,930
Bank deposits	$	718		343		342

	$	718	$	7,020	$	11,272

F-18

Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

2. Short-Term Investments (Continued)

for the year ended March 31, 2008, the three-month transition period ended March 31, 2007 and the year ended December 31, 2006, respectively.

	March 31, 2008						March 31, 2007							December 31, 2006
	Amortized cost		Unrealized holding losses		Estimated fair value market		Amortized cost		Unrealized holding losses			Estimated fair value market		Amortized cost		Unrealized holding losses			Estimated fair value market
	(In thousands of U.S. $)
Corporate debt securities and municipal securities		—		—		—	$	6,678	$	(1	)	$	6,677	$	10,933	$	(3	)	$	10,930
Bank deposits	$	718	$	—	$	718		343		—			343		342		—			342

	$	718	$	—	$	718	$	7,021	$	(1	)	$	7,020	$	11,275	$	(3	)	$	11,272

3. Inventory

In accordance with its inventory evaluation policy and procedures, the Company recognized inventory and purchase commitment write-downs of $1,250,000, $0 and $514,000 for the year ended March 31, 2008, the three-month transition period ended March 31, 2007 and the year ended December 31, 2006, respectively. The Company took these write-downs to account of excess inventory resulting from a slower than expected sales cycle and the Company's increased focus on providing solutions to cable customers while ceasing sales efforts to wireless customers. The purchase commitment provision results from the Company's contractual obligation to order or build inventory in advance of anticipated sales.

The Company charged the write-down to cost of revenues. Revenues in the year ended March 31, 2008, the three-month transition period ended March 31, 2007 and the year ended December 31, 2006 did not include any inventory previously written-down to $0. During the year ended December 31, 2006, the Company received reimbursement of $901,000 from its insurance company for inventory damaged in a flood in its Israeli facilities. For the year ended December 31, 2006, $710,000 of this reimbursement was recorded against "Cost of Revenues" and $191,000 as part of "General and administrative, net."

Inventory was comprised of the following:

	March 31, 2008		March 31, 2007		December 31, 2006
	(In thousands of U.S. $)
Raw materials		—	$	421	$	395
Work in process		—		455		445
Finished goods	$	2,001		1,444		1,522

	$	2,001	$	2,320	$	2,362

For information on the Company's policy regarding the write-down of inventory, see note 1.

4. Agreement with Arcadian Networks, Inc.—Related Party

On March 31, 2006, the Company entered into an Equipment Purchase Agreement (the "ANI Agreement") with Arcadian Networks, Inc. ("ANI"). Davidi Gilo, the Company's chairman of the board

F-19

Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

4. Agreement with Arcadian Networks, Inc.—Related Party (Continued)

of directors and former chief executive officer, is also the chairman of the board of directors of ANI and the sole member of the limited liability company that is the general partner of a major stockholder of ANI. Avraham Fischer, a director of the Company, is co-chief executive officer and a director of Clal Industries and Investments, Ltd., which invested $20,000,000 in ANI in August 2006. Goldman, Sachs & Co., an affiliate of a major stockholder in the Company and holder of the 2008 Goldman Note, is a stockholder of ANI.

Pursuant to the ANI Agreement, the Company sold certain of its wireless solutions and services to ANI over a 10-year term. The ANI Agreement fixes the product prices for the first two years, after which time prices are subject to adjustment according to the amount of product purchased by ANI compared to specified forecasted purchase amounts.

The ANI Agreement provided that the Company would distribute its products to ANI on an exclusive basis in the United States, Canada and the Gulf of Mexico to identified markets if: (a) ANI made two non-refundable payments of $4,000,000 during each of the first two years of the ANI Agreement; (b) ANI met specified annual minimum product purchase amounts; and (c) ANI's outstanding balances were below specified amounts. The Company received an initial purchase order for $10,000,000 on March 31, 2006 (related to products to be purchased in the first year of the ANI Agreement) and the first exclusivity payment of $4,000,000 on April 3, 2006, which satisfied ANI's requirements for exclusivity in the first year of the ANI Agreement. As of March 31, 2008, the Company does not expect to receive the second $4,000,000 exclusivity payment. In March 2008, the Company ceased operations related to its wireless business, including the termination of all employees dedicated to that business. The Company has entered into a leasing agreement with ANI for the rental of test equipment related to wireless solutions. Notwithstanding this leasing agreement, the Company continues to own all of our intellectual property, including patents and patent applications, related to its wireless solutions. The ANI Agreement was not terminated; therefore the Company continues to have limited involvement in the wireless business.

The Company recognized revenue of $4,561,000, $161,000 and $6,721,000 for the year ended March 31, 2008, the three-month transition period ended March 31, 2007 and the year ended December 31, 2006, respectively, under the ANI Agreement. The revenue included income related to the exclusivity payment of $400,000, $100,000 and $300,000 respectively, and product maintenance of $306,000, $61,000 and $103,000 for the year ended March 31, 2008, the three-month transition period ended March 31, 2007 and the year ended December 31, 2006, respectively. The Company will recognize the exclusivity payments from ANI over the 10-year term of the ANI Agreement.

As of March 31, 2008, ANI did not have an outstanding accounts receivable balance. The Company had deferred revenues from sales to ANI of $3,346,000 of which $400,000 is classified as "Current Liabilities" and $2,946,000 is classified as "Long-Term Liabilities" on the Balance Sheets. During the year ended March 31, 2008, a subsidiary of ANI reimbursed the Company $52,000 for general and administrative and research and development expenses.

5. Restricted Cash

As security for the 2005 Syntek Note, the Company delivered a $5,000,000 irrevocable letter of credit. In connection with this letter of credit, the Company deposited $5,000,000 with the Israeli Bank and agreed to restrictions on withdrawal of this amount until the letter of credit is cancelled. See note 7. On April 14, 2008, Syntek drew upon the letter of credit for payment of the $5,000,000.

F-20

Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

6. Property and Equipment, net

Property and equipment consist of the following:

	Estimated useful life	March 31, 2008			March 31, 2007			December 31, 2006
		(In thousands of U.S. $)
Cost:
Machinery and equipment	2-5 years	$	2,090		$	4,005		$	3,989
Computers	2-3 years		1,255			2,987			2,805
Furniture, fixtures and leasehold improvements	2-6 years		801			1,225			1,217
Vehicles	7 years		—			30			56

			4,146			8,247			8,067
Accumulated depreciation and amortization			(3,233	)		(6,585	)		(6,391	)

Property and equipment, net		$	913		$	1,662		$	1,676

Depreciation and amortization expenses were $1,039,000 ($222,000 of which related to amortization in connection with the 2008 restructuring plan), $218,000, and $850,000 for the year ended March 31, 2008, the three-month transition period ended March 31, 2007 and the year ended December 31, 2006, respectively.

7. 2005 Syntek Note

On June 30, 2004, the Company acquired all of the outstanding shares of Xtend, an Israeli privately-held company that was a development stage company at the time. As part of the purchase, the Company delivered a promissory note in the principal amount of $6,500,000 originally payable on March 31, 2007. The Company accounted for the original promissory note as contingent consideration since it was payable only if the Company was unable to meet certain key provisions. These key provisions were amended on December 16, 2005 as follows (the "2005 Syntek Note"):

•

the maturity date was extended by one year from March 31, 2007 to March 31, 2008;

•

the provision that would have allowed acceleration of the original promissory note if the sum of the Company's cash, cash equivalents, short-term investments and accounts receivables, net of short- and long-term debt, was less than $20,000,000 on December 31, 2005 or June 30, 2006 was waived; and

•

the 2005 Syntek Note would be cancelled if:

(a): the Company's revenue (including that of all subsidiaries, except for newly-acquired businesses) equaled or exceeded $60,000,000 and gross margin equaled or exceeded 35%, for the year ended December 31, 2007; or
(b): beginning on the first day that the Company's common stock closes at or above $18.00 per share and at any time thereafter, a sale by the holder of all of its Remaining Shares at an average sales price at or above $18.00 per share. "Remaining Shares" means those shares of the Company's common stock received by the holder in connection with the Xtend acquisition; or

F-21

Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

7. 2005 Syntek Note (Continued)

(c): all of the Remaining Shares are included in a successfully concluded secondary offering (on Form S-3 or otherwise) at an offering price at or above $18.00 per share in which the holder either (i) sells all of the Remaining Shares or (ii) is provided an opportunity to sell all of such shares into such secondary offering and elects not to sell, provided that the successfully concluded offering included no fewer than the number of Remaining Shares; or
(d): the receipt by the holder of a bona fide offer for the purchase of all of the Remaining Shares at an average sales price at or above $18.00 per share. A "bona fide" offer means a fully-funded and unconditional offer for purchase by a buyer who has provable and sufficient financial resources to purchase all of the Remaining Shares for cash within a commercially reasonable period of time from the date of offer, not to exceed 30 days.

As security for the 2005 Syntek Note, the Company delivered a $5,000,000 irrevocable letter of credit, and deposited $5,000,000 with a bank and agreed to restrictions on withdrawal until the letter of credit is cancelled. The letter of credit would have been cancelled if, for 45 consecutive trading days, all of the following conditions exist: (a) the weighted average trading price of the Company's common stock was equal to or higher than $18.00 per share; (b) the average daily trading volume of the Company's common stock was higher than 150,000 shares per day; and (c) the holder was lawfully able to sell publicly in one transaction or in a series of transactions, during such 45 consecutive trading days, all of its shares of the Company's common stock without registration under the Securities Act of 1933, as amended.

The Company determined that, as of the time of the amendment of the 2005 Syntek Note in December 2005 and immediately prior to its amendment, the contingency had been resolved and therefore the Company recorded $6,500,000 as additional consideration paid in the Xtend acquisition. This resulted in an increase to the intangible assets acquired. Following an impairment test performed on the intangible assets, the assets were immediately impaired. In addition, the Company estimated the fair value of the amended 2005 Syntek Note at $3,967,000 and recorded this amount in the Balance Sheets as a long-term liability under "Promissory note."

The Company recorded $2,533,000, the difference between the value of the amended 2005 Syntek Note and the original promissory note, as "Gain Resulting from Amendment to Promissory Note" in the Consolidated Statements of Operations for the year ended December 31, 2005. In addition, the Company concluded that the contingent non-payment/cancellation feature that exists in the 2005 Syntek Note met the criteria in paragraph 12 of SFAS 133 and was considered an embedded derivative instrument. Accordingly, the contingent non-payment feature is subject to the accounting requirements of SFAS 133 whereby the contingent non-payment feature will be recorded at fair value at each reporting period with the adjustment to its fair value recorded in the Statements of Operations as "Financial Expenses." The Company has elected to present the embedded derivative on a combined basis with the 2005 Syntek Note due to the legal right of offset between the two features of the note. The Company recorded expenses of approximately $1,099,000, $323,000 and $1,111,000 for the year ended March 31, 2008, the three-month transition period ended March 31, 2007 and the year ended December 31, 2006, respectively, resulting from the adjustment of the embedded derivative to its fair value.

F-22

Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

7. 2005 Syntek Note (Continued)

As of March 31, 2008, the Company did not satisfy any cancellation feature described and the amended 2005 Syntek Note of $6,500,000 was recorded in the Balance Sheets as "Current Liabilities" and became due and payable on such date.

Subsequent to the year ending March 31, 2008, Syntek drew upon the letter of credit for $5,000,000 which decreased the outstanding principal on the 2005 Syntek Note to $1,500,000. The Company, by not redeeming the note on March 31, 2008, was in default and began accruing interest on the note. On June 13, 2008, the Company refinanced the remaining balance of the 2005 Syntek Note and paid the accrued interest. See note 17 for a description of the 2008 Financing.

8. Accrued Liabilities

Accrued liabilities consist of the following:

	March 31, 2008		March 31, 2007		December 31, 2006
	(In thousands of U.S. $)
Withholding tax*	$	535	$	3,577	$	3,321
Compensation and benefits		1,700		2,185		1,995
Royalties		963		950		940
Professional fees		390		322		361
Deferred rent		311		361		354
Interest payable to Goldman, Sachs & Co.		292		14		285
Warranty**		166		57		66
Deferred revenues		49		70		66
Other		548		604		489

	$	4,954	$	8,140	$	7,877

*: In June 2007, the Company signed an agreement with its Israeli wholly-owned subsidiary to restructure its intercompany debt, whereby $77,139,000 previously classified as an intercompany loan was replaced and converted into a convertible capital note. The convertible capital note is convertible into ordinary shares of the wholly-owned subsidiary. Additionally, $17,062,000 of accrued interest on the loan was forgiven. Following the restructuring of debt and based on a ruling received from the Israeli tax authorities, management concluded that the likelihood of an exposure to withholding tax on the interest forgiven is now remote. As a result, the Company reversed its provision for withholding tax on the debt interest of $3,226,000 (at March 31, 2007), which had been provided for as a liability in the Company's financial statements. The reversal of the provision was recorded as income under "Income Taxes" in the Statements of Operations for the year ended March 31, 2008.

F-23

Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

8. Accrued Liabilities (Continued)

**: The changes in the warranty provisions are as follows:

	March 31, 2008			March 31, 2007			December 31, 2006
	(In thousands of U.S. $)
Balance at beginning of period	$	57		$	66		$	104
Usage of warranty		(19	)		—			(59	)
Product warranty issued for new sales		229			23			177
Changes in accrual in respect of warranty periods ending		(101	)		(32	)		(156	)

Balance at end the of period	$	166		$	57		$	66

9. Liability for Employee Rights upon Retirement

Israel. Israeli labor laws and agreements require severance payments upon dismissal of an employee or upon termination of employment in other circumstances. The severance pay liability of the Company's Israeli subsidiaries, which reflects the undiscounted amount of the liability as if it were payable at each balance sheet date, is calculated based upon length of service and the latest monthly salary (one month's salary for each year worked). The Company's liability for severance pay required by Israeli law is covered by deposits with financial institutions and by accrual. The accrued severance pay liability is presented as a long-term liability and a short-term liability within "Accrued liabilities." The amounts funded are presented separately as "Employee rights upon retirement funded." For certain Israeli employees, the Company's liability is covered mainly by regular contributions to defined contribution plans which are not reflected in the balance sheets, since they are not under the Company's control and management.

United States. The Company's liability for severance pay includes severance for certain United States employees of $583,000, $666,000 and $516,000 as of March 31, 2008, March 31, 2007 and December 31, 2006, respectively. As of March 31, 2008, severance pay liability included $300,000 for Mr. Gilo, the Company's chairman of the board of directors and former chief executive officer.

The amounts paid related to severance and severance expenses were:

	Year Month Ended				Three-Month Transition Period Ended March 31, 2007
	March 31, 2008		December 31, 2006		Three-Month Transition Period Ended March 31, 2007
	(In thousands of U.S. $)
Amounts paid and contributed related to severance	$	1,016	$	1,037	$	129

Severance expenses	$	846	$	1,451	$	310

The Company expects that payments relating to future benefits payable to employees upon retirement at normal retirement age in the next 10 years will not be material to the Company's business or results of operation. These payments are determined based on recent salary rates and do not include amounts that might be paid to employees who retire before their normal retirement age or

F-24

Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

9. Liability for Employee Rights upon Retirement (Continued)

who retire after 2018. For information regarding severance expenses for the 2008 restructuring plan, see note 1a.

10. Financing

2008 Financing

For a description of the financing completed on June 13, 2008 resulting in new funding to the Company of $4,500,000, see note 17.

2007 Financing

On March 28, 2007, the Company issued the 2007 Goldman Note ($35,000,000 principal; 5% annual interest), initially convertible into 3,500,000 shares of the Company's common stock to Goldman, Sachs & Co., of which $17,500,000 was used to pay off in full the Company's outstanding $10,000,000 2006 Note and $7,500,000 2006 Note delivered in the 2006 Financing.

The 2007 Goldman Note is convertible at the holder's option into shares of the Company's common stock at a conversion price of $10.00 per share, provided, that in no event may the holder own of record more than 14.8% of the outstanding shares of the Company's common stock. In the event of a Fundamental Transaction (as defined in the 2007 Goldman Note to include sales of the Company's assets and certain business combination transactions) the holder may, at its option, require the Company to redeem all or any portion of the 2007 Goldman Note at a price equal to 101% of the principal amount, plus all accrued and unpaid interest, if any, and, subject to specified conditions, may be entitled to a cash "make-whole" premium, calculated in accordance with the terms of the 2007 Goldman Note.

Under the Amended and Restated Registration Rights Agreement executed in connection with the 2007 Goldman Note, the Company is required to file a registration statement on Form S-3 registering the resale of the shares issuable upon conversion of the 2007 Goldman Note for an initial two-year period, subject to extension under specified circumstances.

The Company accounted for the issuance of the 2007 Goldman Note (and the resulting repayment of the $10,000,000 2006 Note and the $7,500,000 2006 Note) as extinguishment of debt under EITF 96-19. As a result of the extinguishment of these notes, the Company recorded $3,263,000 in the Statements of Operations as "Financial Expenses" consisting of $2,231,000 of unamortized accretion and $1,032,000 of unamortized issuance expenses.

In accordance with the provisions of EITF 96-19, the Company recorded the 2007 Goldman Note at its fair value, which is estimated at $35,000,000. The 2007 Financing resulted in estimated net proceeds to the Company of approximately $17,350,000, following payoff in full of the $10,000,000 2006 Note and the $7,500,000 2006 Note and payment of issuance expenses of approximately $150,000.

2006 Financing

In March 2006, the Company closed the private placement of $25,000,000 of common stock, the $10,000,000 2006 Note, the $7,500,000 2006 Note and warrants to purchase common stock to Goldman, Sachs & Co. In the 2006 Financing, the Company issued (a) 1,353,365 shares of common stock, (b) the $10,000,000 2006 Note ($10,000,000; 10% annual interest), (c) the $7,500,000 2006 Note ($7,500,000

F-25

Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

10. Financing (Continued)

principal; 9.5% annual interest), and (d) warrants to purchase 298,617 shares of common stock. The transaction resulted in estimated net proceeds to the Company of approximately $23,400,000.

The Company allocated the proceeds received in the 2006 Financing to the different instruments based on the relative fair value of each instrument as follows:

	Face value		Relative fair value
1,353,365 shares of common stock	$	7,500,000	$	8,260,000
$10,000,000 2006 Note		10,000,000		10,111,000
$7,500,000 2006 Note		7,500,000		4,830,000
Warrants to purchase 298,617 shares of common stock for $0.10 per share		—		1,799,000

Total gross proceeds received in 2006 Financing	$	25,000,000	$	25,000,000

The estimated issuance costs of the 2006 Financing were approximately $1,993,000 including (a) a $1,210,000 payment and issuance of warrants to purchase 79,559 shares of the Company's common stock, at exercise prices ranging from $0.10 to $10.00 (at an estimated fair value of $366,000), to the Company's financial advisor and (b) approximately $417,000 for legal and other professional fees and costs. Of these estimated issuance costs, $806,000 and $385,000 were allocated to the $10,000,000 2006 Note and the $7,500,000 2006 Note, respectively. These costs were amortized based on the effective interest amortization method through the five-year term until maturity of the notes and recorded as interest expense, based on the effective interest method of amortization. The issuance costs described above were allocated to the different instruments based on their relative fair values.

As noted above, the Company repaid in full the $10,000,000 2006 Note and the $7,500,000 2006 Note with proceeds from the 2007 Financing, and the unamortized accretion and unamortized issuance expenses were extinguished at that time.

Following the 2006 Financing, Goldman, Sachs & Co. became a related party. See note 15.

11. Commitments and Contingent Liabilities

Operating Leases

The Company leases its facilities and automobiles under cancelable and non-cancelable operating lease agreements. The Company leases its United States facilities in Georgia and Colorado and its Israeli facilities in Airport City near Tel Aviv. During March 2008, the Company was released from a lease obligation of approximately 25,500 square foot of its Israeli facilities, which originally ran until April 2011.

F-26

Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

11. Commitments and Contingent Liabilities (Continued)

The future minimum rental payments on a fiscal year basis under the operating leases are as follows:

	March 31, 2008
	(In thousands of U.S. $)
2009	$	718
2010		690
2011		648
2012		256

	$	2,312	*

*: Includes $68,000 related to automobile leases.

Rental expenses under all operating leases were $2,403,000, $495,000 and $2,087,000 for the year ended March 31, 2008, the three-month transition period ended March 31, 2007 and the year ended December 31, 2006, respectively.

Purchase Obligations

As of March 31, 2008, the Company had purchase obligations of $2,425,000 which may become payable to the Company's suppliers at various times in the year ended March 31, 2009 and beyond.

Research Grants

The Office of the Chief Scientist in the Israeli Ministry of Industry and Trade (the "Chief Scientist"). The Company's Israeli subsidiaries have obtained grants from the Chief Scientist of $2,800,000. The technology developed under these grants may not be transferred to any person without the consent of the Chief Scientist. The grants are repayable to the Chief Scientist generally at the rate of 3% to 5% of the sales of the products developed, up to 100% of the grant received.

Binational Industrial Research and Development Foundation (the "BIRD Foundation"). The Company has participated in programs sponsored by the BIRD Foundation, which funds joint US-Israeli teams in the development of technology products. The Company has received BIRD Foundation grants of $1,700,000 for various projects. Grants received from the BIRD Foundation must be paid back at the rate of 2.5% to 5% of revenues from the projects funded, up to a maximum amount equal to 150% of the grants received.

As of March 31, 2008, the Company repaid or accrued $1,400,000 of these grants. The maximum amount of contingent liability in respect of future royalties is $4,000,000 as of March 31, 2008. The royalty expenses for the year ended March 31, 2008, the three-month transition period ended March 31, 2007 and the year ended December 31, 2006, were $100,000, $8,000 and $10,000, respectively.

2005 Syntek Note

As part of the Xtend acquisition, the Company issued the 2005 Syntek Note in the principal amount of $6,500,000, which was secured by the $5,000,000 letter of credit. Subsequent to the year

F-27

Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

11. Commitments and Contingent Liabilities (Continued)

ended March 31, 2008, Syntek drew upon the letter of credit for $5,000,000 which resulted in an outstanding balance of $1,500,000. See note 7 and note 17.

Guarantees

As of March 31, 2008, the Company issued guarantees of $410,000 which have been pledged by investments in banks and related to lease agreements.

12. Stockholders' Equity

Common Stock Reserved for Issuance

As of March 31, 2008, the Company reserved 349,874 shares of common stock for issuance upon exercise of options and issuance of shares of restricted stock reserved under the Company's stock-based compensation plans.

Issuance of Common Stock under the Financing Agreement

On March 23, 2006, in connection with the 2006 Financing, the Company issued 1,353,365 shares of common stock. See also note 10.

Warrants

On March 23, 2006 in connection with the 2006 Financing, the Company issued warrants to purchase 298,617 shares of common stock at an exercise price of $0.10 per share. Goldman, Sachs & Co. exercised these warrants on March 24, 2006. In addition, the Company issued to its financial advisors warrants to purchase 79,559 shares of the Company's common stock, at exercise prices ranging from $0.10 to $10.00 (at an estimated fair value of $367,000). In December 2006, 2,240 of these warrants were exercised in a cashless exercise in which the Company issued 2,185 shares of common stock and returned 55 shares of common stock (which initially had been reserved for issuance) to its reserve of common stock authorized for issuance. A summary of warrants for the year ended March 31, 2008 (in thousands of United States dollars, except per share data):

A summary of warrants for the year ended March 31, 2008:

	Number outstanding (in thousands)		Weighted average exercise price in dollars		Weighted average fair value in dollars
Warrants:
Granted	378		$	1.47	$	5.35
Exercised during 2006	(301	)	$	0.10

Balance at March 31, 2008	77		$	6.83

Stock Option Plans

The Company has the following stock option plans: the 1999 Employee and Consultant Equity Incentive Plan and the Fourth Amended and Restated 2000 Employee and Consultant Equity Incentive Plan (the "2000 Plan"). The Company's 1996 Equity Incentive Plan expired by its terms as of

F-28

Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

12. Stockholders' Equity (Continued)

February 3, 2006. The Company currently makes grants only from the 2000 Plan, which permits the grant of incentive stock options ("ISOs") to employees, nonstatutory stock options to employees, directors and consultants and stock options which comply with Israeli law if granted to persons who are subject to Israel income tax. The 2000 Plan also provides for the awards of restricted stock and stock bonuses.

In 2004, the Company's Board of Directors approved an amendment to the terms of the 2000 Plan to comply with Israeli tax legislation that became effective in January 2003.

ISOs must have an exercise price equal to the fair value of the common stock on the grant date as determined by the Board of Directors. The period within which the option may be exercised is determined at the time of grant, but may not be longer than 10 years. The number of shares reserved under the 2000 Plan is subject to automatic annual increases on the first day of each fiscal year, equal to the lesser of 1,500,000 shares or 10% of the number of outstanding shares on the last day of the immediately preceding year.

In March 2005, the Company granted its chairman of the board of directors and former chief executive officer and certain other employees 630,000 options to purchase shares of its common stock for $7.50 to $10.50 per share. The options vest and become exercisable if the closing price of the Company's common stock is at or above specified prices for 10 trading days out of any 30 consecutive trading days, so long as the optionee remains an employee of or consultant to the Company on the 10th day of the period. The options expire five years after the grant date, or, if earlier, 90 days after the optionee is no longer an employee of or consultant to the Company. In the year ended March 31, 2008, the three-month transition period ended March 31, 2007 and the year ended December 31, 2006 the Company recorded expenses of $422,000, $117,000 and $475,000, respectively, related to these stock options, including the expenses related to the repricing program as describe below.

On March 21, 2007, the Company granted its new chief executive officer a stock option to purchase 600,000 shares of the Company's common stock subject to standard vesting for new employees: 25% vest at the one year anniversary of the grant with the remaining vesting in equal monthly installments for the next 36 months. The exercise price of the stock options is $6.31, the closing price of the Company's common stock on March 21, 2007. All of these options were included under the Company's repricing program as described below.

On March 4, 2008, the Company approved a repricing program for the outstanding options that it had previously granted to all of its current employees, including executive officers and its chairman and vice chairman of the board of directors. The exercise price of options, all of which had been previously granted pursuant to the Company's Fourth Amended and Restated 2000 Employee and Consultant Equity Incentive Plan were repriced to $1.40 per share. All other terms of the options, including vesting schedules, term and expiration dates, remain unchanged as a result of the repricing.

The repriced options had originally been issued with $3.35 to $8.43 per share option exercise prices, which prices reflected the then current market prices of the Company's common stock on the dates of the original grants. As a result of the repricing, the Company recorded $600,000 as stock-based compensation expenses.

On March 5, 2008, the Company granted its chief executive officer 336,000 and other executive officers 560,000 options to purchase shares of its common stock for $1.37 per share. The options shall vest and become exercisable upon achievement of certain business milestones.

F-29

Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

12. Stockholders' Equity (Continued)

Grant of Stock Options to Davidi Gilo

On February 10, 2006, the Company's Compensation Committee granted Mr. Gilo options to purchase 900,000 shares of the Company's common stock. These options vest as follows:

(a): 300,000 shares vested upon the closing of the 2006 Financing.
(b): 300,000 shares vest at such time as the per share price of the Company's common stock closes at or above $10.44 for a period of any 22 (consecutive or non-consecutive) trading days, so long as Mr. Gilo remains an employee of or consultant to the Company on the 22nd day of such period.
(c): 300,000 shares vest at such time as the per share price of the Company's common stock closes at or above $15.66 for a period of any 22 (consecutive or non-consecutive) trading days, so long as Mr. Gilo remains an employee of or consultant to the Company on the 22nd day of such period.

These options, which all outstanding, were included under the Company's repricing program as described above. The price targets of these options however were not reset to a lower stock price.

Including the expenses related to the repricing program, the Company recorded stock-based compensation expenses of $57,000, $0 and $750,000 for the year ended March 31, 2008, the three-month transition period ended March 31, 2007 and the year ended December 31, 2006, respectively, related to the 300,000 options granted to Mr. Gilo that vested upon the closing of the 2006 Financing. The Company also recorded stock-based compensation expenses of $234,000, $62,000 and $199,000 for the year ended March 31, 2008, the three-month transition period ended March 31, 2007 and the year ended December 31, 2006, in connection with the 600,000 stock options granted to Mr. Gilo which vest based on the closing price of the Company's common stock. These stock-based compensation expenses were determined based on the Monte Carlo valuation method. Of the aggregate 2,075,000 repriced options of Mr. Gilo, 1,000,000 options have vested.

Restricted Stock

Recipients of shares of restricted stock are entitled to cash dividends, to the extent paid, and to vote their shares throughout the period of restriction. The value of the shares is the market price on the date of grant. Compensation was amortized ratably over the vesting period. Compensation expenses must be recognized for shares of restricted stock subject to designated performance criteria if the performance criteria are being attained or it is probable that they will be attained.

In July 2004, the Company granted a former Xtend employee 146,000 shares of restricted stock, of which 71,000 shares have vested. The remaining 75,000 shares were subject to vesting based on designated performance criteria which were not obtained. In the year ended March 31, 2008, the three-month transition period ended March 31, 2007 and the year December 31, 2006, the Company did not record compensation expenses since it did not achieve the performance conditions related to the remaining restricted stock.

A summary of stock option plans, shares of restricted stock and related information, under all of the Company's equity incentive plans for the years ended March 31, 2008 and December 31, 2006 and

F-30

Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

12. Stockholders' Equity (Continued)

the three-month transition period ended March 31, 2007 are as follows (in thousands of U.S. $, except per share data):

	Options/Shares available for Grants		Number outstanding		Weighted average exercise price		Weighted average fair value
Balance at December 31, 2005	830		5,585		$	5.35
Authorized	1,000		—			—
Grant*	(2,075	)	2,075			5.26	$	2.71
Exercised	—		(753	)		3.47
Cancelled	844		(844	)		6.37
Expired plan	(40	)	—			—

Balance at December 31, 2006	559		6,063		$	5.41
Authorized	1,000		—			—
Grant*	(1,130	)	1,130			5.86	$	2.65
Exercised	—		(278	)		4.82
Cancelled	299		(299	)		6.53

Balance at March 31, 2007	728		6,616		$	5.46
Authorized	1,000		—			—
Grant, *	(6,836	)	6,836			2.47	$	1.97
Exercised	—		(298	)		3.56
Cancelled**	5,458		(5,458	)		5.83

Balance at March 31, 2008	350		7,696		$	2.61

*: Includes 227,500, 51,250 and 146,875 options granted to non-employee directors in the year ended March 31, 2008, the three-month transition period ended March 31, 2007 and the year ended December 31, 2006, respectively, and an additional 250,000 options originally granted to the Company's vice chairman of the board of directors, who also serves as a consultant, during the three-month transition period ended March 31, 2007, were repriced under the Company repricing program on March 4, 2008.
**: Includes 4,071,469 stock options cancelled and granted as part of the repricing program.

F-31

Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

12. Stockholders' Equity (Continued)

Stock Option Plans Details

The following table summarizes information concerning outstanding and exercisable options under stock option plans as of March 31, 2008:

	Options outstanding					Options exercisable
Range of exercise prices	Number Outstanding	Weighted average exercise price per share		Weighted average remaining contractual life	Aggregate intrinsic value	Number exercisable	Weighted average exercise price per share		Aggregate intrinsic value
(In U.S. $)	(In thousands)	(In U.S. $)		(In years)	(In U.S. $)	(In thousands of U.S. $)	(In U.S. $)		(In U.S. $)
Fixed Plans:
0.10	53	$	0.10	2.67	16,275	53	$	0.10	16,275
0.99-1.40	5,437		1.39	4.36	—	1,697		1.40	—
2.27-3.40	436		3.24	3.19	—	393		3.23	—
3.92-5.86	751		4.91	3.70	—	594		5.00	—
6.22-9.00	983		7.16	4.12	—	807		7.14	—
9.60-10.50	36		10.11	0.26	—	15		9.60	—

	7,696	$	2.61	4.17	16,275	3,559	$	3.52	16,275

The number of options exercisable as of March 31, 2008, March 31, 2007 and December 31, 2006 was 3,559,000, 3,005,000 and 3,111,000, respectively.

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value, based on the Company's stock price of $0.41 as of March 31, 2008, less the weighted average exercise price per range. This presents the total amount receivable by the option holders exercised their options as of that date. The total number of in-the-money options exercisable as of March 31, 2008 was 52,500.

The total intrinsic value of options exercised during the year ended March 31, 2008, the three-month transition period ended March 31, 2007 and the year ended December 31, 2006 was $691,000, $589,000 and 2,394,000 respectively.

Expenses related to stock-based compensation are included in the following line items in the Statements of Operations:

	Year Ended				Three-Month Transition Period Ended March 31, 2007
	March 31, 2008		December 31, 2006		Three-Month Transition Period Ended March 31, 2007
	(In thousands of U.S. $)
Cost of products sold	$	32	$	83	$	18

Research and development	$	440	$	820	$	130

Selling and marketing	$	1,768	$	1,543	$	291

General and administrative	$	2,863	$	2,956	$	447

F-32

Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

13. Income Taxes

U.S. Income Taxes

Due to the Company's loss provision, there is no federal or material state income tax expense. Foreign withholding taxes of ($3,034,000), $250,000 and $802,000 have been provided and recorded in provision for income tax expenses for the year ended March 31, 2008, the three-month transition period March 31, 2007 and the year ended December 31, 2006 and, respectively.

The tax provision for income taxes differs from the amounts computed by applying the combined rate of statutory federal income tax and state tax of approximately 40% to income before income taxes. The source and tax effects of the differences are as follows:

	Year Ended						Three-Month Transition Period Ended March 31, 2007
	March 31, 2008			December 31, 2006			Three-Month Transition Period Ended March 31, 2007
Current:
Federal		—			—			—
State		—			—			—
Foreign	$	(3,034	)	$	802		$	250

Total Current	$	(3,034	)	$	802		$	250

Deferred:
Federal		—			—			—
State		—			—			—
Foreign		—			—			—

Total deferred		—			—			—

Total	$	(3,034	)	$	802		$	250

At statutory rate	$	(11,210	)	$	(9,759	)	$	(3,668	)
State taxes		(1,912	)		(1,665	)		(626	)
Net operating losses not recognized		12,727			10,405			2,752
Non-deductible expenses related to debt restructuring		—			—			1,334
Promissory note		—			442			129
Non-deductible stock compensation		362			390			71
Foreign withholding taxes		(3,034	)		802			250
Other		33			187			8

Total*	$	(3,034	)	$	802		$	250

*: see note 8 regarding withholding tax

As of March 31, 2008, the Company had United States federal net operating loss carryforwards of approximately $94,148,000 which will expire between 2011 through 2028 and state net operating losses of approximately $75,046,000 which will expire between 2008 through 2018. The utilization of net operating loss carryforwards may be subject to substantial annual limitations if there has been a significant "change in ownership." Such a "change in ownership,"' as described in Section 382 of the

F-33

Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

13. Income Taxes (Continued)

Internal Revenue Code, may substantially limit the Company's utilization of these net operating loss carryforwards.

Israeli Income Taxes

As of March 31, 2008, the Company's Israeli subsidiaries have net operating loss carryforwards of approximately $110,000,000. The Israeli loss carryforwards have no expiration date.

The Company's Israeli subsidiaries have been granted "approved enterprise"" status for several investment programs. These programs entitle these subsidiaries to tax exemption periods, ranging from two to six years, on undistributed earnings commencing in the year in which taxable income is attained as well as a reduced corporate tax rate of 10% to 25% (as opposed to the usual Israeli corporate tax rate of 27% for 2008) for the remaining term of the program on the program's proportionate share of income.

Since the subsidiaries do not have taxable income, the tax benefits periods have not yet commenced. The subsidiaries losses are expected to offset certain future earnings of the subsidiaries during the tax-exempt period; therefore, the utilization of the net operating losses will generate no tax benefits. Accordingly deferred tax assets from such losses have not been included in the financial statements. Entitlement to the above benefits is conditional upon the subsidiaries fulfilling the conditions stipulated by the law, regulations published thereunder and the instruments of approval for the specific investments in approved enterprises.

One of the Company's subsidiaries is taxed at the regular Israeli corporate tax rate. Following a series of changes in Israeli tax rates, the corporate tax rates are as follows: 2006: 31%, 2007: 29%, 2008: 27%, 2009: 26% and for 2010 and thereafter: 25%.

Deferred Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets are as follows:

		March 31, 2008			March 31, 2007			December 31, 2006
		(In thousands of U.S. $)
Deferred tax assets:
	U.S. net operating loss carryforwards	$	36,389		$	22,813		$	21,076
	Foreign net operating loss carryforwards		27,500			24,250			24,000
	Capital loss carryforward		6,166			6,166			6,166
	Other		124			124			150
	Depreciation		(129	)		(149	)		76
	Reserves & Accruals		6,483			4,008			3,644

			76,533			57,212			55,112
Valuation allowance			(76,533	)		(57,212	)		(55,112	)

Net deferred tax assets			—			—			—

F-34

Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

13. Income Taxes (Continued)

The valuation allowance increased by $19,322,000, $2,100,000 and $7,314,000 for the year ended March 31, 2008, the three-month transition ended March 31, 2007, and the year ended December 31, 2006, respectively. Approximately $1,337,000 of the valuation allowance is attributable to stock option deductions, the benefit of which will be credited to equity if and when realized.

FASB Statement No. 109, "Accounting for Income Taxes," requires the recognition of deferred tax assets if realization of such assets is more likely than not based upon the weight of available evidence, which includes historical operating performance and the reported cumulative net losses in all prior years. The Company has provided a full valuation allowance against net deferred tax assets as the future realization of the tax benefit is not sufficiently assured.

Loss before income taxes is composed of the following components for the:

		Year Ended,					Three-Month Transition Period Ended March 31, 2007
		March 31, 2008			December 31, 2006		Three-Month Transition Period Ended March 31, 2007
		(In thousands of U.S. $)
Losses before taxes in United States		$	42,329		$	14,577	$	7,600
Losses (income) before taxes from continuing operations of Israeli subsidiaries			(9,356	)		14,125		3,189

	Total loss before taxes	$	32,973		$	28,702	$	10,789

14. Financial Income (Expenses), Net

Financial income (expenses), net is comprised of the following:

	Year Ended						Three-Month Transition Period Ended March 31, 2007
	March 31, 2008			December 31, 2006			Three-Month Transition Period Ended March 31, 2007
	(In thousands of U.S. $)
Interest income		971		$	1,214		$	244
Foreign exchange differences		(97	)		(73	)		(4	)
Other		(23	)		(40	)		5
Interest expenses for related party*		(1,751	)		(1,322	)		(438	)
Accretion of 2005 Syntek Note Discount**		(1,099	)		(1,111	)		(323	)
Accretion of 2007 Goldman Note and $10,000,0000 2006 Note and $7,500,000 2006 Note*		(30	)		(359	)		(3,392	)

	$	(2,029	)	$	(1,691	)	$	(3,918	)

*: See note 10.
**: See note 7.

F-35

Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

15. Related Parties

Transactions with Mr. Gilo

During the year ended December 31, 2006, the Company (a) reimbursed entities related to Mr. Gilo, for general and administrative expenses, net of $43,000; (b) a related party, an entity controlled by Mr. Gilo, for general and administrative expenses of $58,000; and (c) recorded various general and administrative expenses in connection with several charters of an aircraft for business travel purposes, provided by an unaffiliated third party management company, of $27,000. The aircraft used in providing these services is leased by the same related party controlled by Mr. Gilo.

The Company incurred no such expenses during the year ended March 31, 2008 and the three-month transition period ended March 31, 2007.

Other Related Party Transactions

During the year ended March 31, 2008, the three-month transition period ended March 31, 2007 and the year ended December 31, 2006, the Company paid legal and professional fees of $108,000, $61,000 and $133,000, respectively, for various professional and consulting services provided by a legal consulting firm under the control of Avraham Fisher, a stockholder and director of the Company. In addition, Mr. Fisher has a relationship with ANI as described in note 4.

With respect to the amendment of the Syntek Promissory Note payable to a stockholder, see notes 5 and 7.

With respect to the equipment purchase agreement with ANI, see note 4. During the year ended March 31, 2008, the Company was reimbursed by a subsidiary of ANI for general and administrative and research and development expenses of $52,000.

With respect to the $10,000,000 2006 Note, the $7,500,000 2006 Note and the 2007 Goldman Note, see note 10. During the year ended March 31, 2008 and the three-month transition period ended March 31, 2007, the Company recorded interest expenses of $1,751,000 and $438,000, respectively related to the notes delivered in the 2007 financing. During the twelve months ended December 31, 2006 the Company recorded interest expenses of $1,322,000 related to the notes delivered in the 2006 financing.

During the year ended March 31, 2008, the three-month transition period ended March 31, 2007 and the year ended December 31, 2006, the Company recorded consulting fees and expenses of $372,000, $84,000 and $150,000, respectively, related to professional and consulting services provided by an executive search firm in which Margaret A. Bellville, a director of the Company, is a partner (in the year ended December 31, 2006, $63,000 of the listed expenses relate to a period before the director became a related party). This director also had a personal consulting agreement with the Company which expired in October 2007. In the year ended March 31, 2008, the three-month transition period ended March 31, 2007 and the year ended December 31, 2006, Ms. Bellville received $14,000, $6,000 and $0, respectively.

F-36

Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

15. Related Parties (Continued)

Amounts due to or from related parties are as follows:

	March 31, 2008		March 31, 2007		December 31, 2006
	(In thousands of U.S. $)
Accounts receivable		—		—	$	991

Current assets	$	69	$	3	$	3

Debt issuance costs, net	$	120	$	150	$	1,074

Accounts payable	$	5	$	2	$	25

Accrued liabilities	$	317	$	44	$	362

Deferred revenues (Current liabilities)	$	400	$	400	$	400

Deferred revenues (Long-term liabilities)	$	2,946	$	3,279	$	3,395

$7,500,000 2006 Note		—		—	$	5,085

$10,000,000 2006 Note	$	35,000	$	35,000	$	10,097

16. Operating Segments and Geographic Information

Historically, the Company operated in two reportable operating segments which were strategic businesses differentiated by the nature of their products, activities and customers. As part of the Company's restructure plan, the Company ceased the marketing and support efforts for its wireless solutions segment in March 2008, and it has no current wireless operations. However, the Company still has limited involvement with this business as discussed in note 4.

The cable solutions business enables MSOs and other customers to operate private HFC networks for communications to customers. The cable solutions segment represents the results of Xtend's operations, which were consolidated with the Company's operations beginning July 1, 2004, and provides infrastructure solutions that expand the bandwidth of cable television lines. During 2006, the Company began to focus substantially all of its efforts and internal resources on its cable solutions segment. The wireless solutions segment ceased sales and support efforts in March 2008. The Company no longer has any wireless operations.

The measurement of losses and assets of the reportable segments is based on the same accounting principles applied in the consolidated financial statements. Segment losses reflect the loss from operations of the segment and do not include interest income (expenses), net, since this interest income (expenses) is not allocated to the segments.

F-37

Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

16. Operating Segments and Geographic Information (Continued)

Financial data relating to reportable operating segments is as follows:

			Year Ended						Three-Month Transition Period Ended March 31, 2007
			March 31, 2008			December 31, 2006			Three-Month Transition Period Ended March 31, 2007
			(In thousands of U.S. $)
Revenues from sales to unaffiliated customers from continuing operations in Cable Solutions and Wireless Solutions
	Cable Solutions:
		United States	$	2,988		$	1,084		$	462
		Rest of the world		59			—			—

			$	3,047		$	1,084		$	462
	Wireless Solutions:
		United States, related party		4,561			6,721		$	161
		United States		—			148			—
		Rest of the world		59			47			—

				4,620			6,916			161

Consolidated revenue			$	7,667		$	8,000		$	623

Operating loss from continuing operations:
	Cable Solutions			(22,951	)		(15,386	)		(5,605	)
	Wireless Solutions			(7,993	)		(11,625	)		(1,266	)

Total consolidated operating loss from continuing operations				(30,944	)		(27,011	)		(6,871	)
Gain resulting from amendment to
	Financial income			971			1,214			244
	Financial expenses			(3,000	)		(2,905	)		(4,162	)
	Income taxes			3,034			(802	)		(250	)

Loss from continuing operations			$	(29,939	)	$	(29,504	)	$	(11,039	)

The following provides information on the Company's assets:

	March 31, 2008		March 31, 2007		December 31, 2006
	(In thousands of U.S. $)
Cash, cash equivalents and short-term investments	$	6,021	$	31,154	$	18,688
Restricted cash		5,000		5,000		5,000
Debt issuance costs, net		120		150		1,074
Cable Solutions		4,434		3,370		3,139
Wireless Solutions		241		3,224		4,248

	$	15,816	$	42,898	$	32,149

F-38

Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

16. Operating Segments and Geographic Information (Continued)

		Year Ended				Three-Month Transition Period Ended March 31, 2007
		March 31, 2008		December 31, 2006		Three-Month Transition Period Ended March 31, 2007
		(In thousands of U.S. $)
Expenditures for long-lived assets:
	Cable Solutions	$	308	$	845	$	148
	Wireless Solutions		52		96		58

		$	360	$	941	$	206

Depreciation and amortization expenses:
	Cable Solutions	$	763	$	552	$	158
	Wireless Solutions		276		298		60

		$	1,039	$	850	$	218

The following is a summary of operations within geographic areas, classified by the Company's country of domicile and by foreign countries:

		Year Ended
		Year Ended				Three-Month Transition Period Ended March 31, 2007
		March 31, 2008		December 31, 2006		Three-Month Transition Period Ended March 31, 2007
		(In thousands of U.S. $)
Cable Solutions:
	United States	$	2,988	$	1,084	$	462
	Rest of the world		59		—		—

		$	3,047	$	1,084	$	462
Revenues from sales to unaffiliated customers from continuing operations in Cable Solutions and Wireless Solutions segments:
	United States, related party	$	4,561	$	6,721	$	161
	United States		—		148		—
	Rest of the world		59		47		—

		$	4,620	$	6,916	$	161

		$	7,667	$	8,000	$	623

	March 31, 2008		March 31, 2007		December 31, 2006
	(In thousands of U.S. $)
Property and equipment, net
Israel	$	422	$	1,020	$	1,008
United States		491		642		668

	$	913	$	1,662	$	1,676

F-39

Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

16. Operating Segments and Geographic Information (Continued)

Sales to major customers in the cable solutions and wireless solutions segments out of total revenues are as follows:

	Year Ended
	March 31, 2008		December 31, 2006		Three-Month Transition Period Ended March 31, 2007
Customer A (related party)	59	%	84	%	26	%
Customer B	39	%	13	%	72	%

Sales to customer A were of the Company's wireless solutions. Customer B is an MSO.

17. Subsequent Events

2005 Syntek Note

The Company previously delivered a $5,000,000 letter of credit in connection with the 2005 Syntek Note. The amount of this letter of credit was reflected as "Restricted cash" on the Company's Balance Sheets. In accordance with the terms of the 2005 Syntek Note, on April 14, 2008, Syntek drew upon the letter of credit for payment of the $5,000,000. See note 5 and note 7 for a description of the restricted cash and the 2005 Syntek Note.

2008 Financing

On June 13, 2008, the Company received $4,500,000 of new funding after closing a financing of $41,000,000, which included $38,000,000 from Goldman and $3,000,000 from Syntek (the "2008 Financing"). In the 2008 Financing, the Company delivered to Goldman a $38,000,000 20% Senior Secured Convertible Note, payable on December 13, 2008 (the "2008 Goldman Note"), $35,000,000 of which the Company used to payoff the outstanding 2007 Goldman Note. The Company also delivered to Syntek a $3,000,000 20% Senior Secured Convertible Note, payable on December 13, 2008 (the "2008 Syntek Note"), $1,500,000 of which the Company used to payoff the 2005 Syntek Note. Following these payoffs, the Company's net proceeds were approximately $4,400,000. Concurrent with the 2008 Financing, the Company paid approximately $400,000 to Goldman and Syntek for accrued interest on the 2007 Goldman Note and the 2005 Syntek Note which resulted in approximately $4,000,000 of cash available for general corporate purposes. The Company's obligations under the 2008 Notes are guarantied by certain of its subsidiaries and secured by a security interest in substantially all of its assets of those of its subsidiaries.

The 2008 Notes are convertible into shares of the Company's common stock as follows: (a) at the holder's option, if there occurs a Qualified Equity Investment (as defined in the 2008 Notes), at a price per share equal to the price per share paid for Equity Securities (as defined in the 2008 Notes) in such Qualified Equity Investment by investors unaffiliated with the Company; (b) at the holder's option, if there occurs a Non-Qualified Equity Investment (as defined in the 2008 Notes), at a price per share equal to 90% of the price per share paid for Equity Securities (as defined in the 2008 Notes) in such Non-Qualified Equity Investment by investors unaffiliated with the Company; and (c) at the holder's option at any time at an initial conversion price of $5 per share. In addition, a pro rata portion of the 2008 Syntek Note in the ratio of 35:1.5 will be automatically converted into shares of the Company's

F-40

Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

17. Subsequent Events (Continued)

common stock upon the conversion of all or any portion of the 2008 Goldman Note pursuant to the Qualified Equity Investment option or the Non-Qualified Equity Investment option.

In the event of a Fundamental Transaction (as defined in the 2008 Notes to include sales of the Company's assets and certain business combination transactions), the holder may, at its option, require the Company to redeem all or any portion of the 2008 Notes at a price equal to 101% of the principal amount, plus all accrued and unpaid interest, if any, and subject to specified conditions, may be entitled to a cash "make-whole" premium, calculated in accordance with the terms of the 2008 Notes. In addition, a pro rata portion of the 2008 Syntek Note in the ratio of ¹/2:1 will be automatically redeemed upon the redemption of all or any portion of the 2008 Goldman Note pursuant to the Fundamental Transaction option.

Under the Amended and Restated Registration Rights Agreement executed in connection with the 2008 Notes, at any time after June 1, 2010, the Company must register and offer publicly all or any part of its securities owned by Goldman or Syntek if Goldman or Syntek demands such a registration and offer, subject to certain conditions. In addition, Goldman and Syntek have "piggyback" registration rights to include any of the Company's securities owned by them in a registered offering of our securities, subject to certain conditions.

F-41

INDEX TO EXHIBITS

Exhibit Number		Exhibit Title
2.1		Share Exchange Agreement dated as of June 30, 2004 by and among the Registrant, Xtend Cable Solutions Inc., Xtend Networks Ltd., and Shareholders of Xtend Networks Ltd. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on July 15, 2004, and incorporated herein by reference.
3.1		Fifth Amended and Restated Certificate of Incorporation. Previously filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2007, and incorporated herein by reference.
3.2		Amended and Restated Bylaws. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on November 20, 2007, and incorporated herein by reference.
4.1		Reference is made to Exhibits 3.1, 3.2, 10.23, 10.30, 10.31, 10.32, 10.33, 10.36, 10.37, 10.39, 10.40, 10.41, 10.42, 10.43 and 10.45
10.1*		Form of Indemnification Agreement. Previously filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2007, and incorporated herein by reference.
10.2*		Fourth Amended and Restated 2000 Employee and Consultant Equity Incentive Plan. Previously filed as an appendix to the Registrant's Schedule 14A for its annual meeting of stockholders held on May 10, 2007, and incorporated herein by reference.
10.3*		Employment Agreement with Davidi Gilo, dated as of February 10, 2006. Previously filed as an exhibit to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2005, and incorporated herein by reference.
10.4*		Amended and Restated Employment Agreement with Davidi Gilo, effective as of April 5, 2007. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on April 11, 2007, and incorporated herein by reference.
10.5*		Amended and Restated Employment Agreement with Davidi Gilo, effective as of February 1, 2008.
10.6*		Employment Agreement with Wayne H. Davis, dated as of March 21, 2007. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on March 26, 2007, and incorporated herein by reference.
10.7*		Employment Agreement of Robert K. Mills, effective as of August 1, 2007. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on July 17, 2007, and incorporated herein by reference.
10.8*		Employment Agreement of David Feldman, effective as of July 15, 2007. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on July 5, 2007, and incorporated herein by reference.
10.9*		Employment Agreement of Tashia L. Rivard, effective as of September 1, 2007. Previously filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2007, and incorporated herein by reference.
10.10*		Employment Agreement of Walter J. Ungerer, effective as of September 1, 2007. Previously filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2007, and incorporated herein by reference.
10.11*		Offer Letter of Avner Kol, effective as of November 1, 2005. Previously filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, and incorporated herein by reference.

10.12*		Separation Agreement and Release of Avner Kol, effective as of March 14, 2008.
10.13*		Consulting Agreement of Avner Kol.
10.14*		Separation Agreement and Release of Arik Levi, effective as of April 8, 2008.
10.15*		Consulting Agreement with James A. Chiddix, dated as of March 21, 2007. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on March 26, 2007, and incorporated herein by reference.
10.16*		Amended and Restated Consulting Agreement with James A. Chiddix, effective February 1, 2008. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on February 4, 2008, and incorporated herein by reference.
10.17*		Consulting Agreement with Margaret A. Bellville, dated as of November 13, 2006. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on November 16, 2006, and incorporated herein by reference.
10.18*		Separation Agreement and Release of Michael Corwin, effective as of January 27, 2006. Previously filed as an exhibit to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2005, and incorporated herein by reference.
10.19*		Separation Agreement and Release of Andrew Fradkin, effective as of February 25, 2006. Previously filed as an exhibit to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2005, and incorporated herein by reference.
10.20*		Separation Agreement and Release of Amir Hochbaum, effective as of March 8, 2007. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on March 9, 2007, and incorporated herein by reference.
10.21*		Separation Agreement and Release of Gil Brosh, effective as of March 22, 2007. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on March 23, 2007, and incorporated herein by reference.
10.22		Indemnification Agreement among the Registrant and certain selling stockholders in connection with the September 2000 offering.
10.23		Amended Promissory Note made on December 16, 2005 to Syntek Capital AG. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on July 15, 2004, and incorporated herein by reference.
10.24		Office lease, dated November 4, 2004, by and between Vyyo Ltd. and Airport City Ltd. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on February 4, 2005, and incorporated herein by reference.
10.25		Office lease, dated November 2004, by and between Xtend Networks Inc. and Airport City Ltd. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on February 4, 2005, and incorporated herein by reference.
10.26		Lease Agreement dated December 2004, by and between Corners Realty Corporation and Xtend Networks Inc. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on January 21, 2005, and incorporated herein by reference.
10.27		First Amendment to Lease, dated July 17, 2006, by and between I&G Peachtree Corners, L.L.C. and Xtend Networks Inc. Previously filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2006, and incorporated herein by reference.

10.28		Guaranty of the Registrant, dated as of July 17, 2006. Previously filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2006, and incorporated herein by reference.
10.29		Agreement between the Registrant and Vyyo Ltd., effective as of June 29, 2007. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on July 6, 2007, and incorporated herein by reference.
10.30		Securities Purchase Agreement between the Registrant and Goldman, Sachs & Co., dated as of March 18, 2006. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on March 20, 2006, and incorporated herein by reference.
10.31		Form of $10,000,000 10% Convertible Note of Vyyo Inc. payable to Goldman, Sachs & Co. issued March 22, 2006. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on March 20, 2006, and incorporated herein by reference.
10.32		Form of $7,500,000 9.5% Senior Secured Note of Vyyo Inc. payable to Goldman, Sachs & Co. issued March 22, 2006. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on March 20, 2006, and incorporated herein by reference.
10.33		Guaranty and Security Agreement between the Registrant and Goldman, Sachs & Co., dated as of March 22, 2006. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on March 20, 2006, and incorporated herein by reference.
10.34		Registration Rights Agreement between the Registrant and Goldman, Sachs & Co., dated as of March 22, 2006. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on March 20, 2006, and incorporated herein by reference.
10.35**		Equipment Purchase Agreement between the Registrant and Arcadian Networks, Inc., dated March 31, 2006. Previously filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2006, and incorporated herein by reference.
10.36		Securities Purchase Agreement between the Registrant and Goldman, Sachs & Co., dated as of March 28, 2007. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on March 28, 2007, and incorporated herein by reference.
10.37		Form of $35,000,000 5% Convertible Note of the Registrant payable to Goldman, Sachs & Co. issued March 28, 2007. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on March 28, 2007, and incorporated herein by reference.
10.38		Amended and Restated Registration Rights Agreement between the Registrant and Goldman, Sachs & Co., dated as of March 28, 2007. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on March 28, 2007, and incorporated herein by reference.
10.39		Form of Amended and Restated Senior Secured Note, dated as of March 28, 2007. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on March 28, 2007, and incorporated herein by reference.
10.40		Form of Amended and Restated Convertible Note, dated as of March 27, 2007. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on March 28, 2007, and incorporated herein by reference.
10.41		Securities Purchase Agreement between the Registrant, Goldman Sachs Investment Partners Master Fund, L.P. and Syntek Capital AG dated as of June 13, 2008.
10.42		Form of $38,000,000 20% Senior Secured Convertible Note of the Registrant payable to Goldman Sachs Investment Partners Master Fund, L.P. issued June 13, 2008.

10.43		Form of $3,000,000 20% Senior Secured Convertible Note of the Registrant payable to Syntek Capital AG issued June 13, 2008.
10.44		Amended and Restated Registration Rights Agreement between the Registrant, Goldman Sachs Investment Partners Master Fund, L.P. and Syntek Capital AG, dated as of June 13, 2008.
10.45		Guaranty and Security Agreement between the Registrant, Goldman Sachs Investment Partners Master Fund, L.P. and Syntek Capital AG, dated as of June 13, 2008.
14.1		Code of Conduct and Ethics. Previously filed as Exhibit 14 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2003, and incorporated herein by reference.
21.1		Subsidiaries of the Registrant.
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*: Indicates management contract or compensatory plan or arrangement.
**: Confidential treatment has been requested for certain portions omitted from this exhibit pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. Confidential portions of this exhibit have been separately filed with the Securities and Exchange Commission.

QuickLinks

Forward-Looking Statements
PART I

Item 1. Business

Item 1A. Risk Factors

Item 1B. Unresolved Staff Comments

Item 2. Properties

Item 3. Legal Proceedings

Item 4. Submission of Matters to a Vote of Security Holders

PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Item 6. Selected Financial Data

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Item 8. Financial Statements and Supplementary Data

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A(T). Controls and Procedures

Item 9B. Other Information

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13. Certain Relationships and Related Transactions and Director Independence

Item 14. Principal Accountant Fees and Services

PART IV

Item 15. Exhibits and Financial Statement Schedules

SIGNATURES
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Vyyo Inc. Consolidated Balance Sheets (In thousands of U.S. $, except share data)
Vyyo Inc. Consolidated Statements of Operations (In thousands of U.S. $, except per share data)
Vyyo Inc. Consolidated Statements of Changes in Stockholders' Equity (Capital Deficiency) (In thousands of U.S. $, except share data)
Vyyo Inc. Consolidated Statements of Cash Flows (In thousands of U.S. $)
Vyyo Inc. Notes to Consolidated Financial Statements
EX-10.5 2 a2186625zex-10_5.htm EXHIBIT 10.5

Exhibit 10.5

AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

OF DAVIDI GILO

WITH

VYYO INC.

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”), made and entered into as of February 1, 2008 (the “Restatement Date”), by and between VYYO INC., a Delaware corporation (hereinafter the “Corporation”), and DAVIDI GILO (hereinafter “Gilo”).

RECITALS

A. The Corporation previously employed Gilo as Chief Executive Officer and Chairman of the Corporation’s Board of Directors pursuant to the terms of an Employment Agreement between the Corporation and Gilo made and entered into as of February 10, 2006 (the “Effective Date”), and as Chairman of the Corporation’s Board of Directors pursuant to the terms of an Amended and Restated Employment Agreement between the Corporation and Gilo made and entered into as of April 5, 2007, subject to election to the Board of Directors by the Corporation’s stockholders and until Gilo’s successor is duly appointed and elected. The Corporation and Gilo now desire to enter this Agreement as of the Restatement Date under the terms set forth below.

B. In connection with Gilo’s employment with the Corporation, the Corporation and Gilo desire to enter into this Agreement according to the terms and conditions set forth below.

AGREEMENT

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

1. Employment Duties.

a. General. The Corporation hereby agrees to employ Gilo, and Gilo hereby agrees to accept employment with the Corporation, on the terms and conditions hereinafter set forth.

b. Corporation’s Duties. The Corporation shall allow Gilo to, and Gilo shall, perform responsibilities normally incident to the position of Chairman of the Board of Directors, commensurate with his background, education, experience and professional standing. The Corporation shall provide Gilo with such office equipment, supplies, customary services and cooperation suitable for the performance of his duties.

c. Gilo’s Duties. Unless otherwise agreed to by the parties, Gilo shall serve as Chairman of the Board of the Corporation, subject to the vote of the stockholders and Board of Directors as applicable, and until Gilo’s successor is duly appointed and elected. Gilo shall devote approximately twenty (20) hours per week to the business of the Corporation, and shall not become engaged to render similar services on behalf of any other entity while employed hereunder which is in any way competitive to the Corporation, without the consent of the Corporation’s Board of Directors. Gilo shall report directly to the Corporation’s Board of Directors.

2. Term. The initial term of this employment agreement is three (3) years from the Effective Date (the “Initial Term”). Thereafter, this Agreement may be renewed by Gilo and the Corporation on such terms as the parties may agree to in writing. Absent written notice to the contrary, thirty (30) days prior to the end of the Initial Term, this Agreement will be automatically renewed for consecutive one (1) year extensions (together with the Initial Term, the “Term”). Should the Initial Term not be renewed after the expiration of the first three (3) year term, Gilo shall be entitled to severance in exchange for a release as to any and all claims Gilo may have against the Corporation as provided in Section 6.d.

3. Compensation. Gilo shall be compensated as follows:

a. Fixed Salary. Gilo shall receive Twelve Thousand Dollars ($12,000) fixed annual salary. The Corporation agrees to review the fixed salary on or before December 31, 2007, and thereafter at the end of each calendar year during the Term based upon Gilo’s services and the financial results of the Corporation, and to make any increase as may be determined appropriate in the sole discretion of the Corporation’s Compensation Committee or Board of Directors.

b. Payment. Gilo’s fixed salary shall be payable on a semi-monthly basis, in accordance with the Corporation’s usual payroll practices.

c. Bonus Compensation. During the Term, Gilo shall participate in such bonus plan(s) adopted by the Corporation’s Board of Directors, from time to time. Gilo shall be entitled to receive an additional annual bonus based on his performance and that of the Corporation each year as determined by the Board of Directors of this Corporation, or its Compensation Committee; provided, however, that in no event will such date be later than the date that is two and one-half months from the end of the later of (i) Gilo’s first taxable year in which Gilo’s bonus is determined or (ii) the Corporation’s taxable year in which the bonus award is determined. The bonus shall be prorated should Gilo’s employment terminate prior to the full calendar year.

d. Stock Options. Gilo shall be eligible for certain stock options that may be awarded by the Corporation, from time to time.

e. Vacation. Gilo shall accrue paid vacation at the rate of thirty (30) days for each twelve (12) months of employment, up to a maximum of 60 working days. Gilo shall be compensated at his usual rate of compensation during any such vacation. Gilo shall be entitled to paid holidays as generally given by the Corporation. Gilo shall receive sick leave or disability leave in accordance with the terms of the Corporation’s standard sick leave or disability leave policy.

f. Benefits. During the Term, Gilo and his dependents shall be entitled to participate in any group plans or programs maintained by the Corporation for any employees relating to group health, disability, life insurance and other related benefits as in effect from time to time. Gilo shall also be entitled to Director and Officer (“D&O”) insurance in such amounts and coverage and such indemnification provisions as are afforded other officers and directors of the Corporation. Benefits under this Section 3.f. will be paid by the Corporation.

g. Expenses. The Corporation shall reimburse Gilo for his normal and reasonable expenses incurred for travel, entertainment and similar items in promoting and carrying out the business of the Corporation in accordance with the Corporation’s general policy as adopted by the Corporation’s management from time to time. In addition, Gilo shall be reimbursed for the reasonable costs associated with cellular telephone usage and shall be entitled to reimbursement for such reasonable continuing professional education, memberships and certifications as are deemed normal and appropriate for a Chairman of the Board of Directors. As a condition of payment or reimbursement, Gilo agrees to provide the Corporation with copies of all available invoices and receipts, and otherwise account to the Corporation in sufficient detail to allow the Corporation to claim an income tax deduction for such paid item, if such item is deductible. Reimbursements shall be made on a monthly or more frequent basis in accordance with the Corporation’s reimbursement policies. In no event shall any reimbursement payment be made later than the end of Gilo’s taxable year following the taxable year in which the expense is incurred.

4. Confidentiality and Competitive Activities. Gilo agrees that during the Term he is in a position of special trust and confidence and has access to confidential and proprietary information about the Corporation’s business and plans. Gilo agrees that he will not directly or indirectly, either as an employee, employer, consultant, agent, principal, partner, stockholder, corporate officer, director, or in any similar individual or representative capacity, engage or participate in any business that is in competition, in any manner whatsoever, with the Corporation. Notwithstanding anything in the foregoing to the contrary, Gilo shall be allowed to invest as a shareholder in publicly traded companies, or through a venture capital firm or an investment pool.

5. Trade Secrets.

a. Special Techniques. It is hereby agreed that the Corporation has developed or acquired certain products, technology, unique or special methods, manufacturing and assembly processes and techniques, trade secrets, special written marketing plans and special customer arrangements, and other proprietary rights and confidential information and shall during the employment term continue to develop, compile and acquire said items (all hereinafter collectively referred to as the “Corporation’s Property”). It is expected that Gilo will gain knowledge of and utilize the Corporation’s Property during the course and scope of his employment with the Corporation, and will be in a position of trust with respect to the Corporation’s Property.

b. Corporation’s Property. It is hereby stipulated and agreed that the Corporation’s Property shall remain the Corporation’s sole property. In the event that Gilo’s employment is terminated, for whatever reason, Gilo agrees not to copy, make known, disclose or use, any of the Corporation’s Property without the Corporation’s prior written consent. In such event, Gilo further agrees not to endeavor or attempt in any way to interfere with or induce a breach of any prior proprietary contractual relationship that the Corporation may have with any employee, customer, contractor, supplier, representative, or distributor for nine (9) months after any termination of this Agreement. Gilo agrees upon termination of employment to deliver to the Corporation all confidential papers, documents, records, lists and notes (whether prepared by Gilo or others) comprising or containing the Corporation’s Property. Gilo recognizes that violation of covenants and agreements contained in this Section 5 may result in irreparable injury to the Corporation which would not be fully compensable by way of money damages.

6. Termination.

a. General. The Corporation may terminate this Agreement without cause, on ninety (90) days written notice. Gilo may voluntarily terminate his employment hereunder upon ninety (90) days’ advance written notice to the Corporation.

b. Termination for Cause. The Corporation may immediately terminate Gilo’s employment at any time for cause. Termination for cause shall be effective from the receipt of written notice thereof to Gilo specifying the grounds for termination and all relevant facts. Cause shall be deemed to include: (i) material neglect of his duties or a significant violation of any of the provisions of this Agreement, which continues after written notice and a reasonable opportunity (not to exceed thirty (30) days) in which to cure; (ii) fraud, embezzlement, defalcation or conviction of any felonious offense; or (iii) intentionally imparting confidential information relating to the Corporation or any of its subsidiaries or their business to competitors or to other third parties other than in the course of carrying out his duties hereunder. The Corporation’s exercise of its rights to terminate with cause shall be without prejudice to any other remedies it may be entitled at law, in equity, or under this Agreement.

c. Termination Upon Death or Disability. This Agreement shall automatically terminate upon Gilo’s death. In addition, if any disability or incapacity of Gilo to perform his duties as the result of any injury, sickness, or physical, mental or emotional condition continues for a period of thirty (30) business days (excluding any accrued vacation) out of any one hundred twenty (120) calendar day period, the Corporation may terminate Gilo’s employment upon written notice. Payment of salary to Gilo during any sick leave shall only be to the extent that Gilo has accrued sick leave or vacation days.

d. Severance Pay. If this Agreement is terminated by the Corporation without cause pursuant to Section 6.a. (above) and Gilo experiences a “Separation From Service” as defined under Section 409A of the Internal Revenue Code and the regulations and guidance promulgated thereunder (“Section 409A”), the Corporation shall pay Gilo a severance fee equal to the greater of (a) the full amount of the compensation that he could have expected under this Agreement (based on Gilo’s total compensation (salary and bonus) earned in 2007), as and when payable under this Agreement, through the end of the Initial Term; or (b) the full amount of the compensation that he could have expected under this Agreement for eighteen (18) months (based on Gilo’s total compensation (salary and bonus) earned in 2007 as and when payable under the Agreement), without deduction except for tax withholding amounts, and any unvested options held by Gilo shall vest immediately, in exchange for the execution of a binding release as to any and all claims Gilo may have against the Corporation. If this Agreement is terminated without cause after the Initial Term and Gilo experiences a Separation From Service, the Corporation shall pay Gilo a severance fee equal to the full amount of the compensation that he could have expected under this Agreement for eighteen (18) months (based on Gilo’s total compensation (salary and bonus) earned in 2007 as and when payable under this Agreement), without deduction except for tax withholding amounts, and any unvested options held by Gilo shall vest immediately, in exchange for the execution of a binding release as to any and all claims Gilo may have against the Corporation. If this Agreement is terminated by the Corporation for cause, pursuant to Section 6.b, the Corporation shall pay to Gilo a severance fee equal to the full amount of the compensation that he could have expected under this Agreement for three (3) months (based on Gilo’s total compensation (salary and bonus) earned in 2007 as and when payable under this Agreement), without deduction except for tax withholding amounts, in exchange for the execution of a binding release as to any and all claims Gilo may have against the Corporation. If this Agreement is terminated voluntarily by Gilo, the Corporation shall pay to Gilo a severance fee equal to the amount of the compensation that he could have expected under this Agreement for nine (9) months (based on Gilo’s total compensation (salary and bonus) earned in 2007 as and when payable under this Agreement), without deduction except for tax withholding amounts, in exchange for the execution of a binding release as to any and all claims Gilo may have against the Corporation.

e. Change in Control. If Gilo becomes entitled to severance pay under Section 6.d. above on or after January 1, 2009, and within one year following a Change in Control (as defined below), then the severance pay shall be calculated as provided under Section 6.d. but paid in a lump sum within five (5) business days of the Change in Control. If Gilo becomes entitled to severance pay under Section 6.d. during 2008 following a Change in Control (as defined below) that occurs during 2008, then the severance pay shall be calculated and paid as provided under Section 6.d. until January 1, 2009, at which time the remaining unpaid severance pay shall be paid in a lump sum. A “Change in Control” means the occurrence of any of the following events:

i. any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing 50% or more of the then outstanding shares of the Corporation’s common stock or the total voting power represented by the Corporation’s then outstanding voting securities (other than pursuant to a Business Combination which is covered by clause (iii) below);

ii. the consummation of the sale or other disposition (including in whole or in part through licensing arrangement(s)) of all or substantially all of the Corporation’s assets, other than sales, other dispositions or licenses of assets made to a parent or a wholly-owned subsidiary of the Company, or an entity under common control with the Company;

iii. the consummation of a reorganization, merger, statutory share exchange or consolidation or similar transaction involving the Corporation or the acquisition of assets or stock of another entity by the Corporation or any of its subsidiaries, or a series of related such transactions (each, a “Business Combination”), in each case unless following such Business Combination (A) the voting securities of the Corporation outstanding immediately prior thereto continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any entity (a “Parent”) that, as a result of such transaction, owns the Corporation or the surviving entity or all or substantially all of the Corporation’s or surviving entity’s assets directly or through one or more subsidiaries) at least 50% of the total voting power represented by the Corporation’s voting securities or such surviving entity or Parent outstanding immediately after such Business Combination; and (B) no person (excluding any entity resulting from such Business Combination or a Parent or any employee benefit plan (or related trust) of the Corporation or such entity resulting from such Business Combination or Parent) beneficially owns, directly or indirectly, 50% or more of, respectively, the then-outstanding shares of common stock of the entity resulting from such Business Combination or the total voting power of the then-outstanding voting securities of such entity, except to the extent that the ownership in excess of 50% existed prior to the Business Combination; or

iv. approval by the Corporation’s stockholders of a complete liquidation or dissolution of the Corporation other than in the context of a transaction or series of related transactions that would not constitute a Change of Control under clause (iii) above.

7. Delay in Payment.

a. Release Delay. Except as provided in Section 7.b., any amount payable pursuant to Section 6.d. that is subject to Section 409A shall commence on the first payroll on or after the fifty-third (53^rd) day after Gilo’s Separation From Service without regard to whether Gilo earlier signs the binding release or waives his revocation right prior to the expiration of the fifty-three (53) day period. Except as provided in Section 7.b., any amount payable pursuant to Section 6.e. that is subject to Section 409A shall be paid on the fifty-third (53^rd) day after Gilo’s Separation From Service without regard to whether Gilo earlier signs the binding release or waives his revocation prior to the expiration of the fifty-three (53) day period.

b. Specified Employee Delay. Notwithstanding any other timing provision in this Agreement, if at the time the payments under Section 6.d. would commence, Gilo is a “specified employee” as defined by Section 409A, then to the extent necessary to avoid the imposition of excise taxes or other penalties under Section 409A, no payment may be paid before the date that is six (6) months after Gilo’s Separation From Service. Payments to which Gilo would otherwise have been entitled during that six months will be accumulated and paid on the first day after six months following the date of Gilo’s Separation From Service. All payments that would otherwise be made more than six (6) months following the date of Gilo’s Separation From Service will be made in accordance with the general timing provisions provided in this Agreement.

8. Corporate Opportunities.

a. Duty to Notify. In the event that Gilo, during the Term, shall become aware of any material and significant business opportunity directly related to any of the Corporation’s significant businesses, Gilo shall promptly notify the Corporation’s Board of Directors of such opportunity. Gilo shall not appropriate for himself or for any other person other than the Corporation, or any affiliate of the Corporation, any such opportunity unless, as to any particular opportunity, the Board of Directors of the Corporation fails to take appropriate action within thirty (30) days. Gilo’s duty to notify the Corporation and to refrain from appropriating all such opportunities for thirty (30) days shall neither be limited by, nor shall such duty limit, the application of the general law of Delaware relating to the fiduciary duties of an agent or employee.

b. Failure to Notify. In the event that Gilo fails to notify the Corporation of, or so appropriates, any such opportunity without the express written consent of the Corporation, Gilo shall be deemed to have violated the provisions of this Section notwithstanding the following:

i. The capacity in which Gilo shall have acquired such opportunity; or

ii. The probable success in the Corporation’s hands of such opportunity.

8. Miscellaneous.

a. Entire Agreement. This Agreement constitutes the entire agreement and understanding between the parties with respect to the subject matters herein, and supersedes and replaces any prior agreements and understandings, whether oral or written between them with respect to such matters. The provisions of this Agreement may be waived, altered, amended or repealed in whole or in part only upon the written consent of both parties to this Agreement.

b. No Implied Waivers. The failure of either party at any time to require performance by the other party of any provision hereof shall not affect in any way the right to require such performance at any time thereafter, nor shall the waiver by either party of a breach of any provision hereof be taken or held to be a waiver of any subsequent breach of the same provision or any other provision.

c. Personal Services. It is understood that the services to be performed by Gilo hereunder are personal in nature and the obligations to perform such services and the conditions and covenants of this Agreement cannot be assigned by Gilo. Subject to the foregoing, and except as otherwise provided herein, this Agreement shall inure to the benefit of and bind the successors and assigns of the Corporation.

d. Severability. If for any reason any provision of this Agreement shall be determined to be invalid or inoperative, the validity and effect of the other provisions hereof shall not be affected thereby, provided that no such severability shall be effective if it causes a material detriment to any party.

e. Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware.

f. Notices. All notices, requests, demands, instructions or other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given upon delivery, if delivered personally, or if given by prepaid telegram, or mailed first-class, postage prepaid, registered or certified mail, return receipt requested, shall be deemed to have been given seventy-two (72) hours after such delivery, if addressed to the other party at the addresses as set forth on the signature page below. Either party hereto may change the address to which such communications are to be directed by giving written notice to the other party hereto of such change in the manner above provided.

g. Merger, Transfer of Assets, or Dissolution of the Corporation. This Agreement shall not be terminated by any dissolution of the Corporation resulting from either merger or consolidation in which the Corporation is not the consolidated or surviving corporation or a transfer of all or substantially all of the assets of the Corporation. In such event, the rights, benefits and obligations herein shall automatically be assigned to the surviving or resulting corporation or to the transferee of the assets. Upon such merger all unvested options held by Gilo shall be vested immediately.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

VYYO INC.		DAVIDI GILO
a Delaware corporation
6625 The Corners Parkway, Suite 100
Norcross, Georgia 30092

By:	/s/ Lewis S. Broad	/s/ David Gilo
Lewis Broad, Chairman of		(Signature)
the Compensation Committee

EX-10.12 3 a2186625zex-10_12.htm EXHIBIT 10.12

Exhibit 10.12

SEPARATION AGREEMENT AND RELEASE

This Separation Agreement and Release (the “Agreement”) is between VYYO INC. (“Vyyo”) and Avner Kol (“Mr. Kol”). The terms “Avner Kol” and “Mr. Kol” include Avner Kol and any of his heirs, executors, beneficiaries and assigns. The terms “Vyyo Inc.” and “Vyyo” include all affiliates, subsidiaries, predecessor and successor corporations of Vyyo Inc., and any of its present, former and future stockholders, agents, officers, directors and employees. This Agreement shall be effective on the date which is eight days after it is signed by both parties (the “Effective Date”).

RECITALS

· Effective January 30, 2008 (the “Termination Date”), Mr. Kol’s employment with Vyyo terminated.

· Even though Mr. Kol has made no claims against Vyyo, Mr. Kol and Vyyo desire to resolve any and all claims and potential claims Mr. Kol may have against Vyyo.

· This Agreement supersedes all previous agreements and understandings regarding Mr. Kol’s employment with Vyyo or his termination of employment with Vyyo, including, but not limited to, the offer letter dated November 1, 2005 and any prior severance agreements. This Agreement is also an amendment of the offer letter for purposes of compliance with Section 409A of the Internal Revenue Code (“Section 409A”).

ACCORDINGLY, the parties agree as follows:

1. Termination of Employment. Mr. Kol’s employment with Vyyo terminated on the Termination Date in a manner that constituted a “separation from service” under Section 409A. As of the Termination Date, Mr. Kol’s duties at Vyyo ceased.

2. Separation Consideration.

(a) Severance. In exchange for this Agreement, Vyyo will pay to Mr. Kol as severance One Hundred Four Thousand One Hundred Sixty-Six Dollars and Sixty-Seven Cents ($104,166.67), which amount constitutes five (5) month’s salary, subject to applicable tax withholding (“Severance Payment”). The Severance Payment consists of the severance payments set forth in Mr. Kol’s offer letter dated November 1, 2005, and is inclusive of all amounts due and/or payable by Vyyo to Mr. Kol however classified, including any accrued paid-time off and any relocation expenses. The Severance Payment will be made in the form of salary continuation payments and will be paid on regular Vyyo paydays. Payments hereunder will commence the first payday as soon as administratively possible after this Agreement has been fully executed and received by Vyyo’s Legal Department and the applicable revocation periods described in this Agreement have expired. Mr. Kol understands that Vyyo may change payroll dates or schedules, or otherwise modify its payroll plans for its active employees, and that to the extent he is entitled to any such coverage after the Termination Date, those changes will be applied to him as well, unless the change would violate Section 409A. Except as required by applicable law or provided in this Agreement, as of the Termination Date, Mr. Kol will cease to be eligible to participate under, or covered by, any insurance or self-insured welfare benefit, bonus, incentive compensation, commission, life insurance, retirement or other compensation or benefit plans, and has no rights under any of those plans, unless the terms of the plan provide for coverage following separation from employment. The Severance Payment will be paid in full no later than December 31, 2008.

(b) COBRA. If Mr. Kol elects COBRA coverage under Vyyo’s health insurance plans, Vyyo shall pay to Vyyo’s health insurance provider One Thousand Six Hundred Ninety-One Dollars and Seventy Cents ($1,691.70) per month, constituting the cost of Mr. Kol’s health insurance premiums for the period beginning on the Effective Date and continuing through the earlier of the date that Mr. Kol is covered under a health insurance program other than through Vyyo or December 31, 2008, subject to applicable tax and paid on regular Vyyo paydays. If Mr. Kol elects COBRA coverage under Vyyo’s health insurance plans, Mr. Kol shall have an affirmative obligation to promptly advise Vyyo when he is covered under another health insurance program or plan, after which time Vyyo’s obligation to make the payments in this Section 2(b) shall immediately cease.

(c) Reimbursable Expenses. To the extent Mr. Kol has not already done so, he will promptly submit to Vyyo, and Vyyo will promptly reimburse him for, all of his business expenses (incurred consistent with Vyyo’s policies in effect on the Termination Date) attributable to the period on or before the Termination Date.

(d) Status of Stock Options. As of December 31, 2008, Mr. Kol shall hold fully-vested stock options to purchase 237,334 shares of Vyyo common stock (being 40,000 shares vested under grant number 880, the exercise period of which shall be extended to March 31, 2009 as set forth below in this section; 12,643 shares vested under grant number 1360; 53,233 shares vested under grant number 1361; 80,000 shares vested under grant number 1444; and 51,458 shares vested under grant number 1497) (the “Vested Options”). The remaining unvested stock options under grant numbers 1185, 1186, 1194, 1195, 1202, 1203, 1360, 1361, 1496 and 1497 shall be forfeited and Mr. Kol shall have no further rights in such grants. As of the Termination Date and December 31, 2008, Mr. Kol does not and will not hold any other stock options, exercisable and outstanding or otherwise. For the avoidance of doubt, Mr. Kol will be allowed to exercise the Vested Options (and only the Vested Options) as set forth above no later than three (3) months after December 31, 2008, being March 31, 2009. In the event of any inconsistency between any stock option agreement and this Agreement, the provisions of this Agreement shall control.

(e) Delay in Payment. Notwithstanding any other timing provision in this Agreement, if, at the time the Severance Payment would commence, Mr. Kol is a “specified employee” as defined by Section 409A, then to the extent necessary to avoid the imposition of excise taxes or other penalties under Section 409A, no payment may be paid before the date that is six months after the termination of Mr. Kol’s employment. Payments to which Mr. Kol would otherwise have been entitled during that six months will be accumulated and paid on the first day after six months following the date of Mr. Kol’s termination of employment. All payments that would otherwise be made more than six months following the date of Mr. Kol’s termination of employment will be made in accordance with the general timing provisions described above.

3. Employee Proprietary Information and Inventions Agreement. Mr. Kol acknowledges that he is bound by the Employee Proprietary Information and Inventions Agreement executed in connection with his commencement of employment, and as a result of such employment with Vyyo, Mr. Kol had access to Vyyo’s proprietary information and trade secrets. Mr. Kol shall hold all such proprietary information and trade secrets in strictest confidence and shall not make use of such proprietary information and trade secrets on behalf of anyone. Mr. Kol further confirms that he has delivered to Vyyo all documents and data of any nature containing or pertaining to such proprietary information and trade secrets and that he has not taken with him any such documents or data or any reproduction thereof.

4. Release. Except as set forth in the second paragraph of this Section, Mr. Kol and Vyyo (each, a “Releasing Party”) hereby unconditionally, irrevocably and completely release and forever discharge the other party hereto (a “Released Party”) from any and all claims, rights, demands, actions, obligations, liabilities and causes of action of every kind and character, known or unknown, mature or unmatured, which the Releasing Party may now have or has ever had, whether based on tort, contract (express or implied), or any federal, state or local law, statute or regulation (collectively, the “Released Claims”). Released Claims shall include all statutory, common law, constitutional and other claims, including but not limited to: any claims arising under (a) Title VII of the Civil Rights Act of 1964 or the Civil Rights Act of 1991, which prohibit discrimination based on race, color, national origin, ancestry, religion or sex; (b) the Age Discrimination in Employment Act, which prohibits discrimination based on age; (c) the Equal Pay Act, which prohibits paying men and women unequal pay for equal work; (d) the Americans with Disabilities Act and Sections 503 and 504 of the Rehabilitation Act of 1973, which prohibit discrimination based on disability; (e) the federal Worker Adjustment and Retraining Notification Act (WARN) and any similar applicable state statute or regulation, which require that advance notice be given of certain workforce reductions; (f) the Employee Retirement Income Security Act and any similar applicable state statute or regulation, which, among other things, protects employee benefits; (g) the Fair Labor Standards Act of 1938 and any similar applicable state statute or regulation, which regulate wage and hour matters; (h) the Family and Medical Leave Act and any similar applicable state statute or regulation, which require employers to provide leaves of absence under certain circumstances; (i) the Sarbanes-Oxley Act of 2002, which, among other things, provides whistleblower protection; (j) the labor and civil codes and constitution of any applicable state; or (k) any other law prohibiting retaliation based on exercise of a Released Party’s rights under any law, providing whistleblowers protection or otherwise prohibiting retaliation; providing workers’ compensation benefits; protecting union activity; mandating leaves of absence; prohibiting discrimination based on veteran status, military service or any other factors; restricting an employer’s right to terminate employees or otherwise regulating employment; enforcing express or implied employment contracts; requiring an employer to deal with employees fairly or in good faith; providing recourse for alleged wrongful or constructive termination or discharge; tort, physical or personal injury, emotional distress, fraud, negligent misrepresentation, defamation and similar or related claims and any other law relating to salary, commission, compensation, benefits and other matters. Mr. Kol specifically represents that he has not been treated adversely on account of age, nor has he otherwise been treated wrongfully in connection with employment with Vyyo or separation from employment and that he has no basis for a claim under the Age Discrimination in Employment Act. Except as provided in this Agreement, Mr. Kol specifically waives any right he may have to receive benefits under any Vyyo severance plan, bonus plan, sick leave policy, vacation pay policy, life or health insurance plans, offer letter or other similar employment-related agreement or any other employee benefit plan. Mr. Kol acknowledges that Vyyo relied on the representations and promises in this Agreement in agreeing to pay the benefits described in subsection 2(a). The Releasing Party likewise releases the Released Party from any and all obligations for attorneys’ fees incurred in regard to the above claims or otherwise.

Notwithstanding the foregoing, Released Claims shall not include: (a) any claims based on obligations created by or reaffirmed in this Agreement; (b) any claims based on any indemnification obligations created by or reaffirmed in any indemnification agreement between the parties hereto, in the Bylaws or Certificate of Incorporation of Vyyo, or under applicable state laws and regulations; or (c) any claims, rights, demands, actions, obligations, liabilities and causes of action of every kind and character which Vyyo has or may have in the future as a result of the gross negligence or willful misconduct of Mr. Kol. Moreover, the release in this Agreement shall not interfere with Mr. Kol’s ability to participate in any manner in an investigation, proceeding or hearing conducted by the federal Equal Employment Opportunity Commission or any state equivalent.

5. Release Applies to All Unknown or Unanticipated Damages. The parties agree as further consideration and inducement for this compromise settlement that this Agreement shall apply to all unknown and unanticipated damages, including all future claims or causes of action which may be alleged as a result of all acts and omissions in any way related to Mr. Kol’s employment with Vyyo, or otherwise, subject to the exclusions from the definition of Released Claims set forth in Section 4 above.

6. Waiver. The parties understand and agree that the Released Claims include not only claims presently known to the Releasing Party, but also include all unknown and unanticipated claims, rights, demands, actions, obligations, liabilities and causes of action of every kind and character that would otherwise come within the scope of the Released Claims as described in this Agreement. The Releasing Party understands that he or it may hereafter discover facts different from what he or it now believes to be true, which if known could have materially affected this Agreement, but he or it nevertheless waives any claims or rights based on different or additional facts.

The only Released Claims not waived and released under this Section are those concerning health insurance continuation benefits under COBRA, accrued but unpaid paid-time-off and vested retirement benefits, if any exist.

7. Confidentiality. The parties understand and agree that this Agreement and each of its terms, and the negotiations surrounding it, are confidential and shall not be disclosed by Mr. Kol or Vyyo to any entity or person other than attorneys or tax advisors, for any reason, at any time, without the prior written consent of the other party, except as required by law. Any party violating this Section shall pay to the other party the sum of Five Thousand Dollars ($5,000) for each violation by him or it of the obligations of this Section. Because the injury resulting from such a violation would be impractical or extremely difficult to ascertain or estimate, this sum is agreed upon as liquidated damages and is intended as compensation for this injury and not as a penalty. The liquidated damages provided by this Section shall be in addition to any other available remedy, and not in lieu thereof.

8. Covenant Not to Sue. A Releasing Party shall not sue or initiate against a Released Party any compliance review, action or proceeding, or participate in the same, individually or as a member of a class, under any contract (express or implied), or any federal, state or local law, statute or regulation pertaining in any manner to the Released Claims. The Releasing Party will withdraw with prejudice any such lawsuit or other legal action that may already be pending. Although this Agreement does not preclude the Releasing Party from filing a charge with any administrative agency, the Releasing Party promises never to seek or accept any damages, remedies or other relief for the Releasing Party personally (any right to which is hereby waived) by prosecuting such a charge, or otherwise, with respect to any claim purportedly released by this Agreement.

9. Employee in Good Standing. Mr. Kol understands that if his employment continues beyond the date that this Agreement is signed, he must perform his job at a performance level acceptable to Vyyo and otherwise remain in good standing through the Termination Date. Mr. Kol understands that resignation prior to the Termination Date; engaging in misconduct; termination for cause, for performance problems, for job abandonment or due to other circumstances within

Mr. Kol’s control, or failure to perform duties in a manner acceptable to Vyyo prior to the Termination Date, will render this Agreement null and void. In addition, any misconduct or performance problems discovered after the Termination Date, will render this Agreement null and void and will result in forfeiture of all remaining separation pay, benefits and other consideration described in Section 2(a), as well as the obligation to repay all Severance Payments through the date of discovery, but will not affect any other rights or obligations under the Agreement.

10. Future Cooperation. Mr. Kol agrees to cooperate with Vyyo (including its employees, officers, directors, attorneys and representatives) and to furnish complete and truthful information, testimony or affidavits in connection with any matter that arose during his employment. Such cooperation may be performed at reasonable times and places and in a manner as not to interfere with any other employment in which Mr. Kol may then be engaged.

11. Non-Solicitation. During the one-year period after this Agreement, Mr. Kol will not directly or indirectly recruit any employee with whom he worked or directly or indirectly supervised during employment with Vyyo (other than any secretarial, clerical or custodial employees) to work for another company or business; nor will Mr. Kol assist anyone else in recruiting or hiring any such employee to work for another company or business or discuss with any such person his or her leaving the employ of Vyyo to engage in a business activity in competition with Vyyo. During this same one-year period, Mr. Kol also will not directly or indirectly solicit or encourage any customer of Vyyo (with whom Mr. Kol had material contact during his employment with Vyyo) to purchase any product or service of a type offered by or competitive with any product or service provided by Vyyo, or to reduce the amount or level of business purchased by such customer from Vyyo. These provisions shall be fully enforceable to the fullest extent permitted by applicable law in such circumstances.

12. Nonadmission. The parties understand and agree that this is a compromise settlement of potential disputed claims and that the furnishing of the consideration for this Agreement shall not be deemed or construed at any time or for any purpose as an admission of liability by Vyyo. The liability for any and all claims is expressly denied by Vyyo.

13. Amendments. This Agreement may not be amended except by an instrument in writing, signed by each of the parties.

14. Assignment. The parties hereto agree that they will not assign, sell, transfer, delegate or otherwise dispose of, whether voluntarily or involuntarily, or by operation of law, any rights or obligations under this Agreement. Any such purported assignment, transfer or delegation shall be null and void. The parties hereto represent that they have not previously assigned or transferred any claims or rights released by them pursuant to this Agreement. Subject to the foregoing, this Agreement shall be binding upon and shall inure to the benefit of the parties and their respective heirs, successors, attorneys and permitted assigns. In particular, any payments to be made hereunder to Mr. Kol shall be paid to his heirs in the event of his death. This Agreement also shall inure to the benefit of any Released Party. This Agreement shall not benefit any other person or entity except as specifically enumerated in this Agreement.

15. Return of Vyyo Property. Mr. Kol acknowledges that any and all computer (including applicable software licenses), telephone and other similar equipment, credit cards or any other property provided to him by Vyyo are the property of Vyyo and will be returned to Vyyo prior to or on the Termination Date; provided, however, that Mr. Kol may keep the laptop currently in Mr. Kol’s possession.

16. Integration. The parties understand and agree that the preceding Sections recite the sole consideration for this Agreement; that no representation or promise has been made by Mr. Kol or Vyyo concerning the subject matter of this Agreement, except as expressly set forth in this Agreement; and that all agreements and understandings between the parties concerning the subject matter of this Agreement are embodied and expressed in this Agreement. This Agreement shall supersede all prior or contemporaneous agreements and understandings between Mr. Kol and Vyyo whether written or oral, express or implied.

17. Severability. If any provision of this Agreement, or its application to any person, place or circumstance, is held by a court of competent jurisdiction to be invalid, unenforceable or void, such provision shall be deemed severable and shall not affect the validity and enforceability of the remaining provisions of this Agreement. In addition, to the extent any such provision shall be determined by a court to be unenforceable to any extent or to any degree, that provision shall not be rendered invalid, but instead shall be automatically amended to such lesser time period, degree, scope and/or extent as shall grant Vyyo the maximum protection allowed by applicable law in such circumstances. In addition to and not in lieu of its other legal rights, Vyyo shall have the right to an injunction (without any required bond) to prevent any actual or threatened violation of any provisions of the Sections of this Agreement regarding confidentiality or non-solicitation, and to recover and/or cease making any payments called for by this Agreement.

18. Attorneys’ Fees. In any legal action, arbitration or other proceeding brought to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to recover reasonable attorneys’ fees and costs.

19. Governing Law. This Agreement shall be governed by and construed in accordance with the law of the State of Georgia, without regard to or application of its conflicts of law principles.

20. Interpretation. This Agreement shall be construed as a whole, according to its fair meaning, and not in favor of or against any party. By way of example and not limitation, this Agreement shall not be construed in favor of the party receiving a benefit nor against the party responsible for any particular language in this Agreement. Captions are used for reference purposes only and should be ignored in the interpretation of the Agreement.

21. Knowing Consent to Agreement. The parties acknowledge that (a) they have had the opportunity to consult counsel in regard to this Agreement; (b) they have read and understand the Agreement and are fully aware of its legal effect; and (c) they are entering into this Agreement freely and voluntarily, and based on each party’s own judgment and not on any representations or promises made by the other party, other than those contained in this Agreement.

22. Non-Disparagement. Mr. Kol agrees to conduct himself in a professional and positive manner in all of his dealings, communications and contacts concerning Vyyo, his employment or separation from employment. Mr. Kol agrees not to criticize, denigrate, disparage or make any derogatory statements about Vyyo. In particular, Mr. Kol agrees not to make any derogatory statements about Vyyo (including any subsidiaries or affiliates), its business plans, policies and practices, or about any of its officers, employees or former officers or employees, to

customers, competitors, suppliers, employees, former employees, members of the public, members of the media or any other person, nor shall Mr. Kol harm or in any way adversely affect the reputation and goodwill of Vyyo. Mr. Kol also agrees not to damage any Vyyo property or harm Vyyo in any way, including financially. Mr. Kol agrees not to make any statement or announcement concerning his departure from Vyyo except as may be reviewed and approve in writing by Vyyo in advance. Nothing in this Section shall prevent Mr. Kol from giving truthful testimony or information to law enforcement entities, administrative agencies or courts or in any other legal proceedings as required by law or otherwise by court order, including, but not limited to, assisting in an investigation or proceeding brought by any governmental or regulatory body or official related to alleged violations of any law relating to fraud or any rule or regulation of the Securities and Exchange Commission. If Mr. Kol violates this Section, he shall pay to Vyyo the sum of Five Thousand Dollars ($5,000) for each violation by him of the obligations of this Section. Because the injury resulting from such a violation would be impractical or extremely difficult to ascertain or estimate, this sum is agreed upon as liquidated damages and is intended as compensation for this injury and not as a penalty. The liquidated damages provided by this Section shall be in addition to any other available remedy, and not in lieu thereof.

23. Older Workers Benefit Protection Act. Mr. Kol hereby represents and warrants that:

(a) He has carefully read this Agreement and fully understands all of the provisions of this Agreement;

(b) He has had an opportunity to consult with an attorney of his choice as to the terms of this Agreement to the full extent that he desired before signing this Agreement;

(c) He understands that this Agreement forever releases Vyyo from any legal action arising prior to the date of execution of this Agreement;

(d) He has had the opportunity to review and consider this Agreement for a period of at least 45 days before signing it;

(e) He understands that he shall have seven days following the execution of this Agreement to revoke this Agreement. To be effective, the revocation must be in writing, delivered to Tashia L. Rivard, General Counsel, Vyyo Inc., 6625 The Corners Parkway, Suite 100, Norcross, Georgia 30092, within the applicable revocation period, or sent to Vyyo, at such address, by certified mail, return receipt requested, postmarked within the applicable revocation period;

(f) In signing this Agreement, he does not rely on nor has he relied on any representation or statement (written or oral) not specifically set forth in this Agreement by Vyyo or by any of Vyyo’s agents, representatives or attorneys with regard to the subject matter, basis or effect of this Agreement or otherwise; and

(g) He was not coerced, threatened or otherwise forced to sign this Agreement, and he is voluntarily signing and delivering this Agreement of his own free will, and that his signature appearing hereafter is genuine.

If Mr. Kol exercises his right of revocation under this Section, Vyyo will have the right to terminate this Agreement in its entirety.

Dated: 3/6/, 2008

Dated: 3/6, 2008

VYYO INC.


By:	/s/ Wayne H. Davis		/s/ Avner Kol
Name:		Wayne H. Davis	Avner Kol
Title:		Chief Executive Officer

EX-10.13 4 a2186625zex-10_13.htm EXHIBIT 10.13

Exhibit 10.13

CONSULTING AGREEMENT

THIS AGREEMENT is made effective on the date which is eight days after it is signed by both parties (the “Effective Date”), by and between Vyyo Ltd., an Israeli company (the “Company”), having principal offices at 4 Ha’Negev St, Airport City, P.O. Box 197 Zip 70100 Ben Gurion Airport Israel, and Avner Kol (the “Consultant”).

WHEREAS, Consultant was employed by Vyyo Inc., the parent corporation of the Company, as its Chief Operating Officer from November 1, 2005 to January 30, 2008; and

WHEREAS, Consultant’s employment with Vyyo Inc. has been terminated and Consultant acknowledges that he has received from Vyyo Inc. any and all payments due to him in connection with his employment with Vyyo Inc. or any subsidiary or termination thereof; and

WHEREAS, the Company desires to have Consultant provide certain consulting services inter-alia for the purpose of adequately transferring his former position with Vyyo Inc., and Consultant desires to provide such consulting services upon the following terms and conditions; and

WHEREAS, the parties wish to memorialize the terms for their agreement.

NOW, THEREFORE, it is hereby agreed as follows:

1. The Services. During the Term, Consultant shall provide certain services (the “Consulting Services”) necessary for the transfer of his former position with Vyyo Inc., to his replacement. Consultant shall render the Consulting Services from time to time in accordance with the Company’s reasonable needs, and the dates and places to perform the Consulting Services shall be determined mutually by the Consultant and the Company.

2. Best Efforts. Consultant shall devote his best efforts, abilities, expertise, experience and attention to the performance of the Consulting Services, and the Consultant agrees that he owes duties of care, loyalty and confidentiality to the Company in the performance of his duties hereunder.

3. Considerations.

3.1. Compensation. As full and complete consideration for the Consulting Services to be rendered hereunder Consultant shall be entitled to an amount of US $20,833 per month, including VAT. Such amount shall be paid in New Israeli Shekels at the representative rate of exchange on the date prior to payment. Payment shall be made against presentation of a tax invoice issued by Consultant to the Company

3.2. Taxes and Social Benefits. Consultant expressly agrees that the Company shall not be responsible in any way for any social or other benefits to Consultant including, without limitation, contributions or deductions with respect to National Insurance or social security, health tax or unemployment insurance (the “Social Benefits”) and that any and all tax consequences or requirements to pay Social Benefits arising out of this Agreement shall be borne by the Consultant, provided, however, that the Company shall be entitled (but not required) to withhold any such applicable taxes and Social Benefits if it believes that it is legally required to do so. To the extent that any demands are made upon the Company by

any authorities for payment of taxes or Social Benefits with respect to the compensation paid under this Agreement (and which have not been deducted or withheld by the Company), then Consultant shall fully indemnify the Company in respect thereof upon demand by the Company.

4. Term; Termination.

4.1. The term of this Agreement shall begin on July 1, 2008 hereof and shall continue for a period of six (6) months (the “Term”).

4.2. Notwithstanding the foregoing, the Company may terminate this Agreement at any time for “Cause” (as hereinafter defined). In such event this Agreement shall be deemed effectively terminated as of the time of delivery of such notice and the Company shall have no obligation to make any additional payments of Compensation hereunder.

For the purpose hereof, the term “Cause” shall mean: (i) Consultant’s theft, dishonesty or falsification of any documents or records of the Company or any affiliates thereof; (ii) Consultant’s improper use or disclosure of the confidential or proprietary information of the Company; (iii) any intentional action by Consultant which has a detrimental effect on the reputation or business of the Company, including a breach of any covenant in this Agreement; or (iv) any material breach by Consultant of any provision of this Agreement, which breach is not cured within three (3) days following notice thereof, or breach of Consultant’s duty of trust or fiduciary duty toward the Company or its affiliates.

4.3. Consultant agrees to conduct himself in a professional and positive manner in all of his dealings, communications and contacts concerning the Company, the conduct of his obligations hereunder or the termination of this Agreement. Consultant agrees not to criticize, denigrate, disparage or make any derogatory statements about the Company. In particular, Consultant agrees not to make any derogatory statements about the Company (including any subsidiaries or affiliates), its business plans, policies and practices, or about any of its officers, employees or former officers or employees, to customers, competitors, suppliers, employees, former employees, members of the public, members of the media or any other person, nor shall Consultant harm or in any way adversely affect the reputation and goodwill of the Company. Consultant also agrees not to damage any of the Company’s property or harm the Company in any way, including financially. Consultant agrees not to make any statement or announcement concerning he departure from the Company except as may be reviewed and approved in writing by the Company in advance. Nothing in this Section 4.3 shall prevent Consultant from giving truthful testimony or information to law enforcement entities, administrative agencies or courts or in any other legal proceedings as required by law or otherwise by court order, including, but not limited to, assisting in an investigation or proceeding brought by any governmental or regulatory body or official related to alleged violations of any law relating to fraud or any rule or regulation. If Consultant violates this Section 4.3, he shall pay to the Company the sum of Five Thousand Dollars ($5,000) for each violation by him of the obligations of this Section. Because the injury resulting from such a violation would be impractical or extremely difficult to ascertain or estimate, this sum is agreed upon as liquidated damages and is intended as compensation for this injury and not as a penalty. The liquidated damages provided by this Section 4.3 shall be in addition to any other available remedy, and not in lieu thereof.

5. Proprietary Information; Non-Competition.

5.1. Proprietary Information. Consultant shall not use any Information for any purpose except in connection with the provision of Consulting Services. Consultant shall not disclose the Information to any other person or entity for any purpose without the prior

written consent of the Company. The Information shall at all times remain the property of the Company and Consultant shall have no rights or ownership of any kind to the Information. For the purposes of this Agreement “Information” means confidential information belonging to the Company, including (without limitation) information related to its business, computer software, programs and hardware, designs, data, know-how, specifications, applications, materials, trade secrets, compilations, developments, discoveries (whether patentable or not), studies, drawings, schematics, samples, prototypes and other devices, whether written, oral, or electronically recorded, market information, customer lists and similar information related to the Company’s business.

5.2. Non-Compete. During the term hereof and for a period of twelve (12) months thereafter, Consultant shall not directly or indirectly, either as an employee, employer, consultant, agent, principal, partner, corporate officer, director, or in any other individual or representative capacity, engage in or participate in any activities which conflict with, are the same as, or are competitive with the activities in which the Company or any of its affiliates is engaged.

5.3. In the event that any business opportunity related to the business of the Company shall come to Consultant’s knowledge, Consultant shall promptly notify Company’s Board of Directors of such opportunity. Consultant shall not appropriate for himself or for any other person other than the Company, any such opportunity, except with the express written consent of the Board of Directors, in advance. Consultant’s duty to notify the Company and to refrain from appropriating all such opportunities shall neither be limited by, nor shall such duty limit, the application of the general law of Israel relating to the fiduciary duties of an agent or employee.

5.4. All work performed pursuant to this Agreement, and all materials and deliverables developed, discovered or prepared by Consultant in the course of providing the Consulting Services specifically including but not limited to software and source code, and all derivatives of the above, as well as all marketing, customer and similar information relating to the Company, shall be the property of the Company, and all title and interest therein shall vest in the Company and shall be deemed to be a work made for hire in the course of the Consulting Services rendered hereunder. To the extent that title to any such works may not, by operation of law, vest in the Company, or such works may not be considered works for hire, all rights, title and interest therein are hereby irrevocably assigned to the Company. All such materials shall belong exclusively to the Company, and the Company shall have the right to obtain and to hold in its own name all patents, copyrights, registrations, or other forms of protection as may be appropriate to the subject matter, together with any extensions and renewals thereof. Consultant agrees to provide the Company with such assistance as shall be required to perfect or enforce the rights described in this Section 5.4.

6. Independent Contractor.

6.1. Consultant is an independent contractor and not an employee of the Company and shall not be entitled to any employee benefits, whether by contract, by operation of applicable laws or otherwise. By executing this Agreement, Consultant acknowledges and agrees that as a service provider to the Company, he is not entitled to receive from the Company any Social Benefits (including without limitation, paid vacation days, paid sick leave, severance payments, pension funds, etc.).

6.2. If, despite the parties’ express representations and agreements hereunder, it shall, at any time, be determined by a court of competent jurisdiction or by any other governmental authority, that employer-employee relations exist between the Company and Consultant, and as a result of such decision Consultant shall become entitled to any rights and/or payments resulting from the existence of such relations, or the Company shall be required to bear any additional expenses or costs (including any taxes or obligatory payments to the tax authorities, the National Insurance authorities, etc.), Consultant undertakes to indemnify Company for any such loss, cost, payment, expense or damage caused to the Company as a result of such decision., and the following provisions shall apply:

6.2.1. In lieu of any and all consideration that was paid to the Consultant by the Company as of the date hereof (the “Consideration”), Consultant shall be deemed to be entitled to a reduced consideration, which equals to 66% of the Consideration (the “Reduced Consideration”). Consultant’s entitlement to the Reduced Consideration shall be regarded as gross compensation and shall apply retroactively as of the date hereof.

6.2.2. Consultant shall be under a duty to immediately refund to the Company any amount paid on account of the Consideration by the Company as of the date hereof in excess of the Reduced Consideration.

7. Representations and Warranties. Each of Consultant and the Company represents and warrants to the other party that he/it is entitled to enter into this Agreement and to assume all the obligations pursuant hereto, and that the execution and delivery of this Agreement and the fulfillment of the terms hereof (i) will not constitute a default under or conflict with any agreement or other instrument to which he or it is a party or by which he/it is bound; (ii) will not result in a breach of any confidentiality undertaking to any third party (and in performing the Consulting Services hereunder, he shall not use any proprietary information of any third party), (iii) do not require the consent of any person or entity, and (iv) there are no contracts, impediments, hindrances or restrictive covenants preventing the full performance of his or it duties and obligations hereunder, and nothing contained in this Agreement shall require or permit Consultant or the Company to do any act inconsistent with the requirements of any statue, regulation or rule under any applicable law that maybe in effect from time to time.

8. Remedies and Injunctive Relief. The parties agree that in the event of any breach or threatened breach of any of the covenants in Section 4.3, the damage or imminent damage to the value and the goodwill of the Company’s business will be irreparable and extremely difficult to estimate, making any remedy at law or in damages inadequate. Accordingly, the parties agree that the Company shall be entitled to injunctive relief against Consultant in the event of any breach or threatened breach of any such provisions by Consultant, in addition to any other relief (including damages) available to the Company under this Agreement or under law.

9. Miscellaneous. This Agreement constitutes the entire understanding between the parties with respect to the matters referred to herein. This Agreement shall be governed by the laws of the State of Israel, excluding its conflict of law rules, and the competent courts of Tel-Aviv - Jaffa shall have exclusive jurisdiction over the parties. This Agreement may not be amended or modified, except by the written consent of both parties hereto. No failure or delay on the part of any party hereto in exercising any right, power or remedy hereunder shall operate as a waiver thereof. No waiver of any right hereunder shall be effective for any purpose unless in writing and signed by the Party hereto possessing said right. No such waiver shall be construed to be a waiver of any subsequent right, term or provision of this Agreement. Headings to Sections herein are for the convenience of the parties only, and are

not intended to be or to affect the meaning or interpretation of this Agreement. In the event that any covenant, condition or other provision contained in this Agreement is held to be invalid, void or illegal by any court of competent jurisdiction, the same shall be deemed severable from the remainder thereof, and shall in no way affect, impair or invalidate any other covenant, condition or other provision therein contained. All notices required to be delivered under this Agreement shall be effective only if in writing and sent to the addresses first set forth above and shall be deemed received by fax, upon written confirmation of such receipt; by electronic communication, upon written confirmation of such receipt; by hand delivery upon receipt; or by registered mail, three days after deposit in the mail with written confirmation of receipt.

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written.

/s/ Wayne H. Davis		/s/ Avner Kol

Vyyo Ltd.		Avner Kol

By: Wayne H. Davis

Title: CEO of Vyyo Inc., parent of Vyyo Ltd.

EX-10.14 5 a2186625zex-10_14.htm EXHIBIT 10.14

Exhibit 10.14

SEPARATION AGREEMENT AND RELEASE

This Separation Agreement and Release (“Agreement”) is between VYYO LTD. (“Vyyo”) of Hanegev 4, Airport City, and Arik Levi (“Employee”). This Agreement shall be effective as of April 8, 2008 (“Effective Date”).

RECITALS

WHEREAS, Employee served as an employee of Vyyo, pursuant to an Employment Agreement dated March 1, 2000 (the “Employment Agreement”); and

WHEREAS, on March 1, 2008 Vyyo delivered a termination notice to Employee (the “Notice Date”); and

WHEREAS, Vyyo and Employee desire to amicably settle the termination of Employee’s employment relationship with Vyyo; and

WHEREAS, even though Employee has made no claims against Vyyo and Vyyo has made no claims against Employee, Vyyo and Employee desire to resolve any and all claims and potential claims as described in this Agreement.

ACCORDINGLY, the parties agree as follows:

1. Effective as of November 30^th, 2008 (the “Termination Date”), Employee’s employment with Vyyo shall cease, except as set forth in this Agreement. It is understood that effective as of the Termination Date, the employer-employee relationship between the Employee and Vyyo shall be fully and finally terminated.

2. From the Notice Date and until the Termination Date, Vyyo will pay Employee monthly base salary of NIS 65,392, plus all rights and fringe benefits under the Employment Agreement as amended from time to time.

3. Vyyo will pay Employee Recreation Pay (“Demei Havra’ah”) in the amount of NIS 2,647 on August 1^st, 2008, and NIS 882 on the Termination date.

4. On the Termination Date, Vyyo will:

4.1. Transfer to the name of Employee the ownership of Manager’s Insurance (“Bituach Menahalim”) policies, including his Manager’s Insurance policy with the Migdal Insurance company. It is agreed hereby that providing a letter instructing the insurance company to transfer the Manager’s Insurance policies to Employee’s ownership will be deemed full satisfaction of Vyyo’s obligations in connection with Employee’s rights to Manager’s Insurance.

4.2. Transfer to Employee’s name, on the date required by law, ownership in the Continuous Education Fund (“Keren Hishtalmut”) policies. It is agreed hereby, that providing a letter instructing Bank Leumi to transfer the Continuous Education Fund to the ownership of Employee will be deemed as full satisfaction of Vyyo’s obligations in connection with Employee’s rights to the Continuous Education Fund.

4.3. Pay Employee an amount of NIS 105,149 constituting the remaining severance payments (Hashlamat Pitzuii Piturin) due to the Employee in addition to the amounts accrued on his behalf on account of the severance payment in his Manager’s Insurance Policy. Provided however, that in the event that Vyyo prepays the remaining severance payments (Hashlamat Pitzuii Piturin) to all of its other employees, it shall similarly prepay such remaining severance payments to Employee.

4.4. It is agreed herein that providing a letter instructing the insurance company to transfer the Manager’s Insurance policy to the ownership of Employee, and attaching the relevant Form 161, will be deemed to effect the terms stated in paragraphs 4.1 and 4.2.

5. Employee hereby acknowledges and confirms that the total number of unused vacation days that were accrued to his benefit prior to the date hereof is 48 working days (the “Previously Accrued Vacation”). Employee undertakes to use any and all Previously Accrued Vacation until the Termination Date. In addition, Employee undertakes to use any and all vacation days that will accrue from the Notice Date and until the Termination Date (the “Remaining Vacation Days”), prior to the Termination Date.

6. No later than April 1, 2008, Employee shall return to Vyyo the leased car found in his possession and the fuel meter, in good and proper condition, in the same condition as obtained. Employee is obligated to pay all fees and parking statements pertaining to such car which are attributable to the period that ends on the date of actual return of the car by Employee to Vyyo.

7. Employee declares and confirms that in accordance with the Option Agreement dated March 25, 2003 (Vyyo Inc. internal option number (“Number”) 0000852) (“First Option Agreement”) between Employee and Vyyo Inc. (“Vyyo Inc.”), Employee was granted options to acquire 10,000 shares of Common Stock of Vyyo Inc. at an exercise price of $2.27 per share (the “First Options”). Employee also declares and confirms that in accordance with the Option Agreement dated May 13, 2003 (Number 0000867) (“Second Option Agreement”) between Employee and Vyyo Inc., Employee was granted options to acquire 30,000 shares of Common Stock of Vyyo Inc. at an exercise price of $2.90 per share (“Second Options”). Employee also declares and confirms that in accordance with the Option Agreement dated August 12, 2003 (Number 0000925) (“Third Option Agreement”) between Employee and Vyyo Inc., Employee was granted options to acquire 50,000 shares of Common Stock of Vyyo Inc. at an exercise price of $3.92 per share (“Third Options”). Employee also declares and confirms that in accordance with

the Option Agreement dated February 10, 2006 (Number 0001362) (“Fourths Option Agreement”) between Employee and Vyyo Inc., Employee was granted options to acquire 90,000 shares of Common Stock of Vyyo Inc. at an exercise price of $5.22 per share (“Fourths Options”). Employee also declares and confirms that in accordance with the Option Agreement dated march 21, 2006 (Number 001208) (“Fifth Option Agreement”) between Employee and Vyyo Inc., Employee was granted options to acquire 20,000 shares of Common Stock of Vyyo Inc. at an exercise price of $7.50 per share (“Fifth Options”). Employee also declares and confirms that in accordance with the Option Agreement dated March 21, 2006 (Number 001209) (“Sixth Option Agreement”) between Employee and Vyyo Inc., Employee was granted options to acquire 20,000 shares of Common Stock of Vyyo Inc. at an exercise price of $9.00 per share (“Sixth Options”). Employee also declares and confirms that in accordance with the Option Agreement dated March 21, 2006 (“Seventh Option Agreement”) between Employee and Vyyo Inc., Employee was granted options to acquire 20,000 shares of Common Stock of Vyyo Inc. at an exercise price of $10.50 per share (“Seventh Options”). Employee also declares and confirms that in accordance with the Option Agreement dated November 9, 2006 (Number 001443) (“Eighth Option Agreement”) between Employee and Vyyo Inc., Employee was granted options to acquire 24,000 shares of Common Stock of Vyyo Inc. at an exercise price of $3.35 per share (“Eighth Options”).

Employee declares and affirms that as of the Termination Date, options to acquire 10,000 shares of the aggregate number of options underlying the First Options, options to acquire 30,000 shares of the aggregate number of options underlying the Second Options, options to acquire 50,000 shares of the aggregate number of options underlying the Third Options, options to acquire 67,750 shares of the aggregate number of options underlying the Fourth Options, options to acquire 0 shares of the aggregate number of options underlying the Fifth Options, options to acquire 0 shares of the aggregate number of options underlying the Sixth Options, options to acquire 0 shares of the aggregate number of options underlying the Seventh Options, and options to acquire 24,000 shares of the aggregate number of options underlying the Eighth Options shall vest (hereinafter, the aggregate number of 177,750 vested options under the First Options, Second Options, Third Options, Fourth Options, Fifth Options, Sixth Options, Seventh Options and Eights Option options will be collectively referred to as “Vested Options”). All remaining options that have not vested as of the Termination Date, whether granted pursuant to the First Options, Second Options, Third Options, Fourth Options, Fifth Options, Sixth Options, Seventh Options or Eights Options, including 20,000 options granted on November 6, 2001 which were previously cancelled (i.e., 106,250 options), will be automatically cancelled on the Termination Date and Employee will have no right thereunder.

The Vested Options (and solely the Vested Options) may be exercised until March 31, 2009. The Vested Options, or any part thereof, which were not exercised will be automatically cancelled as of April 1, 2009, and Employee will not have any right to obtain shares thereby.

Employee declares and confirms that, other than his rights in the Vested Options as stated above, he has no rights of any type to purchase or receive any securities of Vyyo Inc., or of any company affiliated with it (including, without limitation, Vyyo Ltd., Xtend Networks Ltd. or any subsidiary or an affiliate of any of the foregoing companies), whatever their source, including rights in options that were not vested as of the Termination Date, and he will have no claim for such rights.

The provisions of Vyyo Inc.’s Fourth Amended and Restated 2000 Employee and Consultant Equity Incentive Plan, and the terms and conditions of the First Option Agreement and the Second Option Agreement between Vyyo Inc. and Employee will continue to apply in accordance with their terms, mutatis mutandis.

8. Employee does hereby declare, confirm and undertake that upon receipt of the funds detailed above, Vyyo, Vyyo Inc. and any subsidiary thereof, have fulfilled all of their obligations to him in connection with his employment and termination thereof, including salary and all payments, including, without limitation, any and all payments, if applicable, for the advance notice period, payment in redemption of annual vacation or holiday allowance, recreation pay, severance pay, health insurance, expense reimbursement, overtime pay, sick pay, bonuses, that are or shall be due to Employee in connection with his employment with Vyyo or the termination thereof. Subject to the provisions of Section 16 below, Employee hereby releases and forever discharges Vyyo, and its parent company, subsidiaries, partners, investors, predecessors, successors, heirs, assigns, employees, former employees, shareholders, officers, directors, agents, attorneys, insurance carriers, subsidiaries, divisions or affiliated corporations or organizations, whether previously or hereinafter affiliated in any manner, including without limitation any other entity associated with Vyyo Inc. (the “Released Party”) from any and all claims, rights, demands, actions, obligations, liabilities, and causes of action of every kind and character, known or unknown, mature or unmatured, which Employee may now have or has ever had against the Released Party, whether based on tort, contract (express or implied), or any applicable law (collectively, the “Released Claims”) EXCEPT ONLY for its/his right under this Agreement and any claims or rights which may arise under that certain indemnification and exculpation agreement dated May 10, 2007 between the Employee and Vyyo Inc. The Released Claims shall also include, but not be limited to, claims for severance pay, bonuses, stock options, shares, sick leave, vacation pay, life or health insurance, or any other fringe benefit.

9. For the avoidance of doubt, Employee hereby affirms that this document constitutes a compromise and notification of dismissal with respect to severance compensation within the meaning of section 29 of the Severance Compensation Law - 1963.

10. All tax consequences arising from the payment of funds to the Employee, from the issuance of Shares under Employee Name and from exercising all rights under this Agreement shall be borne solely by the Employee. The Employee shall indemnify the Company and hold it harmless against and from any and all liability for any such tax or interest or penalty thereon, including, without limitation, liabilities relating to the necessity to withhold or to have withheld any such tax. The Employee hereby authorizes the Company to withhold the issuance of any Shares to the Employee pending the payment of all such tax liabilities by the Employee, at the Company’s discretion.

11. Employee agrees hereby to transfer his position with Vyyo in a complete and orderly fashion, to make himself available to Vyyo in a reasonable manner, to fulfill the duties instructed by Vyyo and to assist Vyyo to the best of his ability in anything connected to transferring his position or completing his employment.

12. Without derogating from the provisions of Section 5 above, it is hereby acknowledged that Employee shall not be required to perform services for the Company following the Notice Date and may provide services to third parties, as an employee or consultant (each, an “Additional Engagement”), provided however, that such Additional Engagements shall be subject to the provisions contained in Section 10 above and subject to Employee’s obligations of confidentiality and non-competition.

13. Employee agrees to return to Vyyo, no later than the Effective Date, all documents, materials, tools and every other equipment that he used during his employment, all programs or plans in his possession, in any media whatsoever, and which was obtained in connection with his employment, where the foregoing is in as good condition as received, however, the Employee may keep the laptop that is currently in his possession. Employee further waives and foregoes any claim for delay of return of any of such equipment. Without derogating from the generality of the foregoing, Employee will return to Vyyo all information, in any manner whatsoever, and all computations received or prepared in connection with his employment, and which were in the possession of Vyyo, or in any other place, and Employee agrees that he has not and will not make any copy of any such item whatsoever.

14. Notwithstanding the foregoing, on September 1, 2008, Vyyo will return to the Employee, his cellular telephone number and the actual cellular device to his own ownership, in accordance with the agreement with the cellular company and subject to his signature on the forms of transfer required by such cellular company. All financial obligations for the use of any of such equipment until August 31, 2008 (including tax obligations and all reasonable costs for the use of such cellular device, which must be consistent with Employee’s past practice and with Vyyo’s applicable policies) will be borne solely by Vyyo.

15. Employee undertakes not to cause other employees of Vyyo to leave Vyyo and not to solicit the employment of any of the employees of Vyyo with his new place of employment.

Employee further undertakes not to directly or indirectly solicit from the clients of the Released Party any business directly or indirectly in competition with the Released Party, or that involves activities in which any entity comprising the Released Party was engaged or had already planned to be engaged while Employee provided services to Vyyo.

16. Unless otherwise expressly stated herein, this Agreement cancels all agreements, contracts or other documents between Employee and Vyyo, whether written or oral, excluding Employee’s obligations of confidentiality and non-competition with regard to Vyyo’s intellectual property (including the confidentiality and non-competition undertakings pursuant to the Employment Agreement and the confidentiality agreement signed between the Employee and Vyyo, which is attached hereto as Appendix A), which shall remain in full force and effect. Notwithstanding the foregoing, the Company shall procure that the directors and officers insurance policy of Vyyo Inc. in effect on the Effective Date shall continue to be in full force and effect as necessary to cover the liabilities of the Employee in connection with his service to the Company or to Vyyo inc. prior to the Termination Date.

17. The parties to this Agreement agree and confirm that it is known to them that a primary condition to Vyyo’s and Employee’s obligations is that each of its terms, and the negotiations surrounding it, are confidential and shall not be disclosed by them or anyone on their behalf, directly or indirectly, to any third party whatsoever, including employees and consultants of Vyyo or its past employees and consultants. Employee confirms that he knows that if he breaches his confidentiality obligations, Vyyo will be free from its obligations under this Agreement.

18. Employee acknowledges that (a) he has had the opportunity to consult with whomever he desires in regard to this Agreement; (b) he has read and understands the Agreement and is fully aware of its legal effect; and (c) he is entering into this Agreement freely and voluntarily, and based on he own judgment and not on any representations or promises made by Vyyo, other than those contained in this Agreement.

DATED: April 8, 2008

/s/ Wayne H. Davis		/s/ Arik Levi

Vyyo Ltd.		Arik Levi

By: Wayne H. Davis, CEO of Vyyo Inc.,
Parent of Vyyo Ltd.

EX-10.22 6 a2186625zex-10_22.htm EXHIBIT 10.22

Exhibit 10.22

INDEMNIFICATION AGREEMENT

This Indemnification Agreement (the “Agreement”), is entered into as of , 2000, by and among Vyyo Inc. (the “Company”), Arnon Kohavi, Michael Corwin and Eran Pilovsky (collectively, referred to herein as the (“Company Selling Stockholders”). Capitalized terms used herein but not otherwise defined shall have the meaning set forth in the Underwriting Agreement (as defined below).

In consideration of the mutual promises, representations, warranties and conditions set forth in this Agreement and as contemplated to be set forth in that certain Underwriting Agreement (the “Underwriting Agreement”), to be entered into by and among the Company, the Company Selling Stockholders and certain other stockholders of the Company and certain underwriters for the Company, on such date as the Company’s Registration Statement on Form S-1 (No. 333-45132) (the “Registration Statement”) has been declared effective by the Securities and Exchange Commission, the parties hereto agree as follows:

1. To the extent permitted by law, the Company will indemnify and hold harmless each of the Company Selling Stockholders against any losses, claims, damages, or liabilities (joint or several) to which they may become subject insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based on any inaccuracy in the representations and warranties made on the part of the Company and each Company Selling Stockholder pursuant to Section 1(A) of the Underwriting Agreement; and the Company will reimburse each such 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 indemnity agreement contained in this Section 1 shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld; provided further, that the Company Selling Stockholder had no actual knowledge of the inaccuracy in the representations or warranties when made by the Company or the Company Selling Stockholder.

2. To the extent permitted by law, the Company will indemnify and hold harmless each of the Company Selling Stockholders against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act or other federal or state law, or pursuant to the terms of the Underwriting Agreement, insofar as such losses, claims, damages or liabilities (or actions in respect thereof), including a request for indemnification by an underwriter, arise out of or are based upon any of the following statements, omissions or violations (collectively a “Violation”): (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) 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, or (iii) any violation or alleged violation by the Company or the Registration Statement or any preliminary prospectus of the Securities Act, the Exchange Act, any state securities law, or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law in connection with the public offering to be conducted pursuant to the Registration Statement; and the Company will reimburse each such 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 indemnity agreement contained in this Section 2 shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable in any such case for any such loss, claim, damage, liability, or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with the Registration by such person, or partner, officer, director, or controlling person of such person; and provided further, that the Company Selling Stockholder had no actual knowledge of the (i) untrue statement, (ii) omission, or (iii) violation.

3. Promptly after receipt by an indemnified party under Sections 1 or 2 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under Sections 1 or 2, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying party, if representation of

such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if materially prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under Section 1 or 2, as applicable, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under Sections 1 or 2.

4. If the indemnification provided for in either Sections 1 or 2 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any losses, claims, damages or liabilities referred to herein, the indemnifying party, in lieu of indemnifying such indemnified party thereunder, shall to the extent permitted by applicable law contribute to the amount paid or payable by such 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 indemnifying party on the one hand and of the indemnified party on the other in connection with the violation that resulted in such loss, claim, damage or liability, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by a court of law by reference to, among other things, with respect to Violations under Section 2 whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, that in no event shall any contribution by each of the Company Selling Stockholders hereunder exceed the net proceeds from the offering received by such person.

5. The obligations of the parties to this Agreement shall survive completion of any offering of securities pursuant to the Registration Statement. No indemnifying party, in the defense of any such claim or litigation, shall, except with the consent of each indemnifying 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 to such claim or litigation.

This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument.

In witness whereof, the parties hereto have executed this Agreement as of the date set forth in the first paragraph hereof:

By:
	Arnon Cohavi

By:
	Michael Corwin

By:
	Eran Pilovsky


Vyyo Inc.


By:

Title:

EX-10.41 7 a2186625zex-10_41.htm EXHIBIT 10.41

Exhibit 10.41

SECURITIES PURCHASE AGREEMENT

This SECURITIES PURCHASE AGREEMENT (the “Agreement”), is dated as of June 13, 2008, by and among Vyyo Inc., a Delaware corporation (the “Company”), and the investors listed on the Schedule of Investors attached hereto as Exhibit A (individually, an “Investor” and collectively, the “Investors”).

WHEREAS:

A. The Company and each Investor is executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506 of Regulation D (“Regulation D”) as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act.

B. Each Investor, severally and not jointly, wishes to purchase, and the Company wishes to sell, upon the terms and conditions stated in this Agreement that aggregate principal amount of Senior Secured Convertible Notes, in substantially the form attached hereto as Exhibit B (the “Convertible Notes”), set forth opposite such Investor’s name on the Schedule of Investors (as converted, collectively, the “Conversion Shares”).

C. The Convertible Notes and the Conversion Shares issued pursuant to this Agreement are collectively referred to herein as the “Securities.”

D. Contemporaneously with the execution and delivery of this Agreement, the parties hereto are executing and delivering (i) the Convertible Notes, (ii) an Amended and Restated Registration Rights Agreement substantially in the form attached hereto as Exhibit C (the “Registration Rights Agreement”), and (iii) a Guaranty and Security Agreement substantially in the form attached hereto as Exhibit D (the “Guaranty and Security Agreement”).

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and the Investors agree as follows:

ARTICLE I
DEFINITIONS

1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, the following terms have the meanings indicated:

“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 144 under the Securities Act.

“Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed.

“Closing” means the closing of the purchase and sale of the Securities pursuant to Section 2.1.

“Closing Date” means the date and time of the Closing and shall be 10:00 a.m., New York City time, on June 13, 2008 (or such other date and time as is mutually agreed to by the Company and each Investor).

“Collateral Agent” has the meaning assigned to such term in the Guaranty and Security Agreement.

“Common Stock” means shares of the Company’s common stock, par value $0.0001 per share.

“Conversion Shares” has the meaning set forth in the Preamble.

“Convertible Notes” has the meaning set forth in the Preamble.

“Eligible Market” means any of the New York Stock Exchange, the American Stock Exchange, the Nasdaq Global Select Market, the Nasdaq Global Market or Nasdaq Capital Market.

“Existing Notes” means, collectively, the GS Existing Note and the Syntek Existing Note.

“GS Existing Note” means the Convertible Note in the principal amount of $35,000,000, dated March 28, 2007, issued by the Company to Goldman Sachs Investment Partners Master Fund, L.P. (“Goldman Sachs”).

“Guaranty and Security Agreement” has the meaning set forth in the Preamble.

“Insignificant Subsidiaries” means Vyyo Brasil Ltd. and SHDIP Ltd.

“Intellectual Property Rights” has the meaning set forth in Section 3.1(k).

“Investor Counsel” means Proskauer Rose LLP, counsel to the Investors.

“Knowledge,” including the phrase “to the Company’s knowledge,” and words of similar import shall mean that which Davidi Gilo, Wayne H. Davis, Robert K. Mills and Tashia L. Rivard know or should have known using the exercise of reasonable due diligence.

“Lien” means any lien, charge, claim, security interest, encumbrance, right of first refusal or other restriction.

“Material Adverse Effect” has the meaning set forth in Section 3.1(a).

“Material Permits” has the meaning set forth in Section 3.1(y).

“Person” means any individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, or joint stock company.

“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened in writing.

“Registration Rights Agreement” has the meaning set forth in the Preamble.

“Rule 144,” “Rule 415,” and “Rule 424” means Rule 144, Rule 415 and Rule 424, respectively, promulgated by the SEC pursuant to the Securities Act, as such Rules may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC having substantially the same effect as such Rule.

“SEC” has the meaning set forth in the Preamble.

“SEC Reports” has the meaning set forth in Section 3.1(h).

“Securities” has the meaning set forth in the Preamble.

“Solvent” shall mean, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person; (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probably liability of such Person on its debts as they become absolute and matured; (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay as such debts and liabilities mature; and (d) such Person is not engaged in a business or transaction, and is not about to engage in a business or transaction, for which such Person’s property would constitute an unreasonably small capital. The amount of contingent liabilities (such as litigation, guarantees and pension plan liabilities) at any time shall be computed as the amount which, in light of all the facts and circumstances existing at the time, represents the amount which can be reasonably be expected to become an actual or matured liability.

“Syntek” means Syntek Capital AG.

“Syntek Existing Note” means that certain promissory note in the original principal amount of $6,500,000, dated December 16, 2005, issued by the Company to Syntek.

“Significant Subsidiary” has the meaning assigned thereto in Rule 1-02(w) of Regulation S-X, including, but not limited to: Vyyo Ltd., a corporation duly incorporated and existing under the laws of the state of Israel; Xtend Networks Ltd., a corporation duly incorporated and existing under the laws of the state of Israel; and Xtend Networks, Inc., a Delaware corporation.

“Subsidiary” means any Person in which the Company, directly or indirectly, owns capital stock or holds an equity or similar interest.

“Trading Day” means (a) any day on which the Common Stock is listed or quoted and traded on its primary Trading Market, (b) if the Common Stock is not then listed or quoted and traded on any Eligible Market, then a day on which trading occurs on the Nasdaq Global Market (or any successor thereto), or (c) if trading ceases to occur on the Nasdaq Global Market (or any successor thereto), any Business Day.

“Trading Market” means the Nasdaq Global Market or any other Eligible Market, or any national securities exchange, market or trading or quotation facility on which the Common Stock is then listed or quoted.

“Transaction” means the transaction contemplated by the Transaction Documents.

“Transaction Documents” means this Agreement, the schedules and exhibits attached hereto, the Convertible Notes, the Registration Rights Agreement, and the Guaranty and Security Agreement.

ARTICLE II
PURCHASE AND SALE

2.1 Closing.

(a) Subject to the terms and conditions set forth in Article V herein, at the Closing the Company shall issue and sell to each Investor, and each Investor shall, severally and not jointly, purchase from the Company, a Convertible Note in the aggregate principal amount set forth opposite such Investor’s name on Exhibit A hereto under the heading “Convertible Note Amount.” The date and time of the Closing and shall be 10:00 a.m., New York City time, on the Closing Date. The Closing shall take place at the offices of Investor Counsel.

(b) At the Closing, (i) each Investor shall deliver or cause to be delivered to the Company the cash purchase price set forth opposite such Investor’s name on Exhibit A hereto under the heading “Cash Purchase Price” in United States dollars and in immediately available funds, by wire transfer to an account designated in writing to such Investor by the Company for such purpose, and (ii) the outstanding principal under the GS Existing Note or the Syntek Existing Note, as the case may be, in the amount set forth opposite such Investor’s name on Exhibit A hereto under the heading “Outstanding Principal Amount of Existing Notes” shall be deemed canceled (for the avoidance of doubt, the accrued and unpaid interest under such Existing Notes will be paid by the Company to the Investors in accordance with Section 4.6 hereof).

ARTICLE III
REPRESENTATIONS AND WARRANTIES

3.1 Representations and Warranties of the Company. The Company hereby represents and warrants to each Investor that, except as set forth in the SEC Reports (as hereinafter defined) or in the Schedule of Exceptions attached as Exhibit E to this Agreement, which exceptions shall be deemed to be part of the representations and warranties made hereunder, the following representations are true and complete as of the date hereof. The Schedule of Exceptions shall be arranged in sections corresponding to the numbered and lettered

sections and subsections contained in this Section 3, and the disclosures in any section or subsection of the Schedule of Exceptions shall qualify other sections and subsections in this Section 3 only to the extent it is reasonably apparent from a reading of the disclosure that such disclosure is applicable to such other sections and subsections:

(a) Organization and Qualification. Each of the Company and the Significant Subsidiaries is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite legal authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Significant Subsidiary is in violation of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Significant Subsidiaries is duly qualified to do business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not reasonably be expected to individually or in the aggregate, (i) materially and adversely affect the legality, validity or enforceability of any Transaction Document, (ii) have or result in a material adverse effect on the results of operations, assets, business or financial condition of the Company and the Significant Subsidiaries, taken as a whole on a consolidated basis or (iii) materially and adversely impair the Company’s ability to perform fully on a timely basis its obligations under any of the Transaction Documents (any of (i), (ii) or (iii), a “Material Adverse Effect”).

(b) Subsidiaries. Other than the Significant Subsidiaries and the Insignificant Subsidiaries, the Company has no other direct or indirect Subsidiaries. The Company owns, directly or indirectly, all of the capital stock or comparable equity interests of each Subsidiary free and clear of any Lien (except as contemplated by the Guaranty and Security Agreement), and all the issued and outstanding shares of capital stock or comparable equity interest of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights. None of the Insignificant Subsidiaries (i) carries on any substantive business operations or activities or (ii) has assets or liabilities in excess of $50,000.

(c) Authorization; Enforcement. The Company has the requisite corporate authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents to which it is a party and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of each of the Transaction Documents to which it is a party by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further consent or action is required by the Company, its Board of Directors or its stockholders. Each of the Transaction Documents to which it is a party has been (or upon delivery will be) duly executed by the Company and is, or when delivered in accordance with the terms hereof, will constitute, the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as may be limited by (i) applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors rights generally, and (ii) the effect of rules of law governing the availability of specific performance and other equitable remedies.

(d) No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby do not, and will not, (i) conflict with or violate any provision of the Company’s or any Significant Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Significant Subsidiary debt or otherwise) or other understanding to which the Company or any Significant Subsidiary is a party or by which any property or asset of the Company or any Significant Subsidiary is bound, or affected, except to the extent that such conflict, default, termination, amendment, acceleration or cancellation right would not reasonably be expected to have a Material Adverse Effect or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Significant Subsidiary is subject (including federal and state securities laws and regulations and the rules and regulations of any self-regulatory organization to which the Company or its securities are subject), or by which any property or asset of the Company or a Significant Subsidiary is bound or affected, except to the extent that such violation would not reasonably be expected to have a Material Adverse Effect.

(e) Authorization of Securities. The Securities are duly authorized and, when issued and paid for in accordance with the Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens and shall not be subject to preemptive or similar rights of stockholders. Upon issuance or conversion in accordance with the Convertible Notes, the Conversion Shares will be validly issued, fully paid and nonassessable and free from all preemptive or similar rights, taxes, liens and charges with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder of Conversion Shares. As of the Closing, the Company shall have reserved from its duly authorized capital stock the number of Conversion Shares issuable upon conversion of the Convertible Notes (without taking into account any limitations on the conversion, or redemption of the Convertible Notes set forth in the Convertible Notes).

(f) Capitalization. The aggregate number of shares and type of all authorized, issued and outstanding classes of capital stock, options and other securities of the Company (whether or not presently convertible into or exercisable or exchangeable for shares of capital stock of the Company) is set forth in Schedule 3.1(f) hereto. All outstanding shares of capital stock are duly authorized, validly issued, fully paid and nonassessable and have been issued in compliance with Section 5 of the Securities Act. The Company has not issued any other options, warrants, script rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or entered into any agreement giving any Person any right to subscribe for or acquire, any shares of Common Stock, or securities or rights convertible or exchangeable into shares of Common Stock. Except for customary adjustments as a result of stock dividends, stock splits, combinations of shares, reorganizations, recapitalizations, reclassifications or other similar events, there are no anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders) and the issuance and sale of the Securities will not obligate the Company to issue shares of Common Stock or other

securities to any Person (other than the Investors) and will not result in a right of any holder of securities to adjust the exercise, conversion, exchange or reset price under such securities. To the knowledge of the Company, no Person or group of related Persons beneficially owns (as determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), or has the right to acquire, by agreement with or by obligation binding upon the Company, beneficial ownership of in excess of 5% of the outstanding Common Stock, ignoring for such purposes any limitation on the number of shares of Common Stock that may be owned at any single time.

(g) Consents. None of the Company nor any of its Significant Subsidiaries is required to obtain any consent, authorization or order of, or make any filing or registration with, any court, governmental agency or any regulatory or self-regulatory agency or any other Person in order for it to execute, deliver or perform any of its obligations under or contemplated by the Transaction Documents, in each case in accordance with the terms hereof or thereof. All consents, authorizations, orders, filings and registrations (which the Company is required to obtain pursuant to the preceding sentence) have been obtained or effected, or will have been obtained or effected, on or prior to the Closing Date, except to the extent that failure to obtain such consent would not be expected to result in a Material Adverse Effect, and the Company and its Significant Subsidiaries are unaware of any facts or circumstances that might prevent the Company from obtaining or effecting any of the registration, application or filings pursuant to the preceding sentence.

(h) SEC Reports; Financial Statements. The Company has filed all reports required to be filed by it under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the twelve months preceding the date hereof (the foregoing materials (together with any materials filed by the Company under the Exchange Act, whether or not required) being collectively referred to herein as the “SEC Reports” and, together with this Agreement and the Schedules to this Agreement, the “Disclosure Materials”) on a timely basis. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the SEC promulgated thereunder, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the SEC with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto, and fairly present in all material respects the financial position of the Company and its consolidated subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended except as may be indicated in the notes thereto and except, in the case of interim statements, for the absence of footnotes and as permitted by Form 10-Q, subject, in the case of unaudited statements, to normal, year-end audit adjustments.

(i) Termination of Registration. The Company filed Form 15-12(g) (the “Certification and Notice of Termination”) with the SEC on April 24, 2008. As of April 24, 2008, the Company satisfied the requirements of the Certification and Notice of Termination. The Certification and Notice of Termination complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC promulgated thereunder.

(j) No Adverse Changes. Since February 14, 2008, (i) there has been no event, occurrence or development that, individually or in the aggregate, has had or that would reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any material liabilities other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or required to be disclosed in filings made with the SEC, (iii) the Company has not altered its method of accounting or the identity of its auditors, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders, in their capacities as such, or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock (except for repurchases by the Company of shares of capital stock held by employees, officers, directors, or consultants pursuant to an option of the Company to repurchase such shares upon the termination of employment or services) and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock-based plans.

(k) Intellectual Property. To the Company’s knowledge, the Company and the Subsidiaries own, possess, license or have other rights to use all foreign and domestic patents, patent applications, reexams, reissues, divisional continuations, or any patent or application claiming priority therefrom, including any patent that may be issued as a result of an interference action, trade and service marks, trade and service mark registrations, trade names, copyrights, licenses, inventions, trade secrets, technology, Internet domain names, know-how and other intellectual property (collectively, the “Intellectual Property Rights”) necessary for the conduct of their respective businesses described in the SEC Reports, except where such violations or infringements would not reasonably be expected to result in a Material Adverse Effect, (a) there are no rights of third parties to any such Intellectual Property Rights; (b) to the Company’s knowledge, there is no infringement by third parties of any such Intellectual Property Rights; (c) there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others challenging the Company’s and its Significant Subsidiaries’ rights in or to any such Intellectual Property Rights, and the Company is unaware of any facts which would form a reasonable basis for any such claim; (d) there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others challenging the validity or scope of any such Intellectual Property Rights and (e) there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others that the Company and its subsidiaries infringe or otherwise violate any patent, trademark, copyright, trade secret or other proprietary rights of others, and the Company is unaware of any other fact which would form a reasonable basis for any such claim. All of the licenses and sublicenses and consent, royalty or other agreements concerning Intellectual Property Rights which are necessary for the conduct of the Company’s business as currently conducted to which the Company or the Significant Subsidiary is a party or by which any of their respective assets are bound (other than generally commercially available, non-custom, off-the-shelf software application programs having a retail acquisition price of less than $25,000 per license) (collectively, “License Agreements”) are valid and binding obligations of the Company or the Significant Subsidiaries, as the case may be

and, to the Company’s knowledge, the other parties thereto, enforceable in accordance with their respective terms, except to the extent that enforcement thereof may be limited by applicable 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 under such License Agreements.

(l) Tax Matters. The Company and each Significant Subsidiary (i) has timely prepared and filed all foreign, federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has paid all material taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith, with respect to which adequate reserves have been set aside on the books of the Company and (iii) has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. To the Company’s knowledge, there are no unpaid taxes in any material amount claimed to be past due by the taxing authority of any jurisdiction, and the Company knows of no basis for such claim. The Company has not waived or extended any statute of limitations at the request of any taxing authority. There are no outstanding tax sharing agreements or other such arrangements between the Company and any other corporation or entity and the Company is not presently undergoing any audit by a taxing authority.

(m) Absence of Litigation. Except as disclosed in the Company’s SEC Reports, there is no action, suit, claim, or proceeding, or, to the Company’s knowledge, inquiry or investigation, before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its Significant Subsidiaries that would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

(n) Environmental Matters. To the Company’s knowledge, the Company and each Significant Subsidiary (i) is not 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”), (ii) does not own or operate any real property contaminated with any substance in violation of any Environmental Laws, (iii) is not liable for any off-site disposal or contamination pursuant to any Environmental Laws and (iv) is not subject to any claim relating to any Environmental Laws; which violation, contamination, liability or claim has had or would 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.

(o) Compliance. None of the Company nor any Significant Subsidiary, except in each case as would not, individually or in the aggregate, reasonably be expected to have or result in a Material Adverse Effect, (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Significant Subsidiary under), nor has the Company or any

Significant Subsidiary received written notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any order of any court, arbitrator or governmental body or (iii) is or has been in violation of any statute, rule or regulation of any governmental authority.

(p) Title to Assets. The Company and the Significant Subsidiaries have good and marketable title in fee simple to all real property owned by them that is material to the business of the Company and the Significant Subsidiaries and good and marketable title in all personal property owned by them that is material to the business of the Company and the Significant Subsidiaries, in each case free and clear of all Liens, except for Liens that do not, individually or in the aggregate, have or would reasonably be expected to result in a Material Adverse Effect. Any real property and facilities held under lease by the Company and the Significant Subsidiaries are held by them under valid, subsisting and enforceable leases of which the Company and the Significant Subsidiaries are in material compliance.

(q) No General Solicitation; Placement Agent’s Fees. Neither the Company, nor any of its Affiliates, nor 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) in connection with the offer or sale of the Securities. The Company shall be responsible for the payment of any placement agent’s fees, financial advisory fees, or brokers’ commissions (other than for persons engaged by any Investor or its investment advisor) relating to or arising out of the issuance of the Securities pursuant to this Agreement. The Company shall pay, and hold each Investor harmless against, any liability, loss or expense (including, without limitation, reasonable attorney’s fees and out-of-pocket expenses) arising in connection with any such claim for fees arising out of the issuance of the Securities pursuant to this Agreement.

(r) Private Placement. None of the Company, its Subsidiaries, any of their Affiliates, or any Person acting on their behalf has, directly or indirectly, at any time within the past six months, made any offer or sale of any security or solicitation of any offer to buy any security under circumstances that would (i) eliminate the availability of the exemption from registration under Regulation D under the Securities Act in connection with the offer and sale by the Company of the Securities as contemplated hereby or (ii) cause the offering of the Securities pursuant to the Transaction Documents to be integrated with prior offerings by the Company for purposes of any applicable law, regulation or stockholder approval provisions, including, without limitation, under the rules and regulations of any Trading Market. The Company is not required to be registered as a United States real property holding corporation within the meaning of the Foreign Investment in Real Property Tax Act of 1980, as amended.

(s) Registration Rights. Except as described in the Registration Rights Agreement, the Company has not granted or agreed to grant to any Person any rights (including “piggy-back” registration rights) to have any securities of the Company registered with the SEC or any other governmental authority that have not been satisfied or waived.

(t) Application of Takeover Protections. There is no control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s charter documents or the laws of its state of incorporation that is or would become applicable to any of the Investors as a result of the Investors and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including, without limitation, as a result of the Company’s issuance of the Securities and the Investors’ ownership of the Securities.

(u) Disclosure. Neither this Agreement, nor any of the Transaction Documents, certificates or other documents made or delivered at the Closing, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements herein or therein not misleading.

(v) Acknowledgment Regarding Investors’ Purchase of Securities. Based upon the assumption that the transactions contemplated by this Agreement are consummated in all material respects in conformity with the Transaction Documents, the Company acknowledges and agrees that each of the Investors is acting solely in the capacity of an arm’s-length purchaser with respect to the Transaction Documents and the transactions contemplated hereby and thereby. The Company further acknowledges that no Investor is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any advice given by any Investor or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to the Investors’ purchase of the Securities. The Company further represents to each Investor that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.

(w) Insurance. The Company and the Significant Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses and location in which the Company and the Significant Subsidiaries are engaged. Neither the Company nor any Significant Subsidiary has any knowledge that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without a significant increase in cost.

(x) ERISA. As of the Closing Date, neither the Company nor any of its Significant Subsidiaries has any obligation or any liability in respect of any employee pension benefit plan subject to the provisions of Title IV of ERISA or Section 412 of the Internal Revenue Code of 1986 or Section 302 of ERISA, and in respect of which the Company or any Significant Subsidiary (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA or any multiemployer plan as defined in Section 4001(a)(3) of ERISA.

(y) Regulatory Permits. The Company and the Significant Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports, except where the failure to possess such permits does not, individually or in the aggregate, have or result in a Material Adverse Effect (“Material Permits”), and neither the Company nor any Significant Subsidiary has received any written notice of proceedings relating to the revocation or modification of any Material Permit.

(z) Transactions With Affiliates and Employees. Except as set forth in the SEC Reports made on or prior to the date hereof, 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 Significant Subsidiary or to a presently contemplated transaction (other than for ordinary course services as employees, officers and directors) that would be required to be disclosed pursuant to Item 404 of Regulation S-K promulgated under the Securities Act.

(aa) Questionable Payments. Neither the Company nor any Significant Subsidiary, nor, to the Company’s knowledge, directors, officers, employees, agents or other Persons acting on behalf of the Company or any Significant Subsidiary has, in the course of its actions for, or on behalf of, the Company: (i) used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to foreign or domestic political activity; (ii) made any direct or indirect unlawful payments to any foreign or domestic governmental officials or employees from corporate funds; (iii) violated in any respect any provision of the Foreign Corrupt Practices Act of 1977, as amended or (iv) made any other unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee which, in the aggregate of clauses (i) through (iv) would have a Material Adverse Effect.

(bb) Internal Accounting Controls. The Company and the Significant 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.

(cc) Sarbanes-Oxley Act. Through March 31, 2008, the Company was in compliance with applicable requirements of the Sarbanes-Oxley Act of 2002, as amended, and applicable rules and regulations promulgated by the SEC thereunder, except where such noncompliance would not have, individually or in the aggregate, a Material Adverse Effect.

(dd) Investment Company. Neither the Company nor any of its Significant Subsidiaries is (i) an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940 or (ii) a “holding company” as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935, as amended.

(ee) Margin Stock. Neither the Company nor any of the Significant Subsidiaries is engaged principally, or as one of their important activities, in the business of extending credit for the purpose of buying or carrying Margin Stock (as such term is defined in Regulation U). Immediately before and after giving effect to the sale of the Convertible Notes,

Margin Stock will constitute less than 25% of the Company’s assets as determined in accordance with Regulation U. No part of the proceeds of the Convertible Notes will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, to purchase, acquire or carry any Margin Stock or for any purpose that entails a violation of, or that is inconsistent with, the provisions of the regulations of the Board of Governors of the Federal Reserve System of the United States of America, including Regulation T, U or X.

(ff) Solvency. Both before and after giving effect to (a) the Convertible Notes to be made or extended on the Closing Date or such other date as the Convertible Notes requested hereunder are made or extended, (b) the disbursement of the proceeds of such Convertible Notes pursuant to the instructions of the Company, (c) the Redemption (as hereinafter defined) and (d) the payment and accrual of all transaction costs in connection with the foregoing, each of the Company and each of its Subsidiaries is Solvent.

3.2 Representations and Warranties of the Investors. Each Investor hereby, as to itself only and for no other Investor, represents and warrants to the Company as follows:

(a) Organization; Authority. Such Investor is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite corporate or partnership power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The purchase by such Investor of the Securities hereunder has been duly authorized by all necessary action on the part of, such Investor. This Agreement has been duly executed and delivered by such Investor and constitutes the valid and binding obligation of such Investor, enforceable against it in accordance with its terms, except as may be limited by (i) applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors rights generally and (ii) the effect of rules of law governing the availability of specific performance and other equitable remedies.

(b) No Public Sale or Distribution; Investment Intent. Such Investor is acquiring the Securities in the ordinary course of business for its own account and not with a view towards, or for resale in connection with, the public sale or distribution thereof, and such Investor does not have a present arrangement to effect any distribution of the Securities to or through any person or entity.

(c) Investor Status. At the time such Investor was offered the Securities, it was, and at the date hereof it is, an “accredited investor” as defined in Rule 501(a) under the Securities Act.

ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES

4.1 Transfer Restrictions.

(a) The Investors covenant that the Securities will only be disposed of pursuant to an effective registration statement under, and in compliance with the requirements of, the Securities Act or pursuant to an available exemption from the registration requirements of the Securities Act, and in compliance with any applicable state securities laws. In connection with

any transfer of Securities other than pursuant to an effective registration statement or to the Company, the Company may require the transferor to provide to the Company an opinion of counsel selected by the transferor, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration under the Securities Act. Notwithstanding the foregoing, the Company hereby consents to and agrees to register on the books of the Company and with its transfer agent, without any such legal opinion, except to the extent that the transfer agent requests such legal opinion, any transfer of Securities by an Investor to an Affiliate of such Investor, provided that the transferee makes customary representations to Company and certifies to the Company that it is an “accredited investor” as defined in Rule 501(a) under the Securities Act and provided that such Affiliate does not request any removal of any existing legends on any certificate evidencing the Securities.

(b) Such Investor understands that the instruments representing the Convertible Notes and the stock certificates representing the Conversion Shares until such time as the resale of the Conversion Shares have been registered and sold under the Securities Act, shall bear any legend as required by the “blue sky” laws of any state and a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of such stock certificates):

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR (B) IF REASONABLY REQUESTED BY THE COMPANY, AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.

The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of the Securities upon which it is stamped, if, unless otherwise required by state securities laws, (i) such Securities have been registered and sold pursuant to an effective registration statement under the Securities Act or (ii) in connection with a sale, assignment or other transfer, the Company reasonably requests that such holder provide the Company with opinion of counsel reasonably acceptable to the Company that the sale, assignment or transfer of the Securities may be made without registration under the applicable requirements of the Securities Act.

4.2 Furnishing of Information. So long as any Investor owns any Securities, the Company covenants to use commercially reasonable efforts to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act. Upon the reasonable request of any Investor, the Company shall deliver to such Investor a written certification of a duly authorized officer as to whether it has complied with the preceding sentence. The Company further covenants that it will take such further action as any holder of Securities may reasonably request to satisfy the provisions of this Section 4.2. Notwithstanding the foregoing, each

Investor acknowledges that the Company filed the Certification and Notice of Termination with the SEC on April 24, 2008, and is no longer obligated to file reports with the SEC other than the Annual Report on Form 10-K for the fiscal year ended March 31, 2008, which the Company will file with the SEC within the time period required by the SEC.

4.3 Integration. The Company shall not, and shall use its commercially reasonable efforts to ensure that no Affiliate thereof shall, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities in a manner that would require the registration under the Securities Act of the sale of the Securities to the Investors or that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of any Trading Market.

4.4 Reservation of Securities. The Company shall maintain a reserve from its duly authorized shares of Common Stock for issuance pursuant to the Transaction Documents in such amount as may be required to fulfill its obligations in full under the Transaction Documents. In the event that at any time the then authorized shares of Common Stock are insufficient for the Company to satisfy its obligations in full under the Transaction Documents, the Company shall promptly take such actions as may be required to increase the number of authorized shares.

4.5 Securities Laws Disclosure; Publicity. The Company shall disclose the material terms of the transactions contemplated hereby in its Annual Report on Form 10-K for the fiscal year ended March 31, 2008. The Company and the Investors shall consult with each other in issuing any press releases or otherwise making public statements or filings and other communications with the SEC or any regulatory agency or Trading Market with respect to the transactions contemplated hereby, and neither party shall issue any such press release or otherwise make any such public statement, filing or other communication without the prior consent of the other, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement, filing or other communication. Notwithstanding the foregoing, the Company shall not publicly disclose the name of any Investor, or include the name of any Investor in any press release without the prior written consent of such Investor. Except as required under the Transaction Documents, the Company shall not, and shall cause each of its Subsidiaries and its and each of their respective officers, directors, employees and agents not to, provide any Investor with any material nonpublic information regarding the Company or any of its Subsidiaries from and after the issuance of the above referenced press release without the express written consent of such Investor.

4.6 Use of Proceeds. Within two (2) Business Days following the Closing, the Company shall use proceeds from the sale of the Securities to pay, (i) to Goldman Sachs, all accrued and unpaid interest under the GS Existing Note, and (ii) to Syntek, all accrued and unpaid interest under the Syntek Existing Note (collectively, the “Interest Payment”), in each case, in United States dollars and in immediately available funds, by wire transfer to an account designated in writing to the Company by the applicable Investor. The Company shall use the remaining net proceeds from the sale of the Securities for working capital and general corporate purposes. Pending use for working capital and general corporate purposes, the Company intends to invest the net proceeds from the sale of the Securities in short-term, interest-bearing,

investment-grade securities, or as otherwise pursuant to the Company’s customary investment policies. Provided that the Closing has occurred in accordance with the terms of this Agreement, then, effective upon receipt of the Interest Payment in accordance with the terms of this Section 4.6, (i) Syntek hereby waives any default by the Company under the Syntek Existing Note and (ii) Goldman Sachs hereby waives any default by the Company under the GS Existing Note.

4.7 Short Sales. Each Investor represents, warrants and agrees that, since the date on which any of the Company or first contacted such Investor about the potential sale of the Securities, it has not engaged in any transactions in the securities of the Company (including, without limitation, any Short Sales involving the Company’s securities). Such Investor covenants that it will not engage in any transactions in the securities of the Company (including Short Sales) prior to the time that the transactions contemplated by this Agreement are publicly disclosed. Such Investor further covenants that it will not engage in any Short Sales in the Company’s securities for a period of 180 days from the Closing Date. For purposes hereof, “Short Sales” include, without limitation, all “short sales” as defined in Rule 3b-3 of the Exchange Act and Rule 200 promulgated under Regulation SHO under the Exchange Act, whether or not against the box, and all types of direct and indirect stock pledges, forward sales contracts, options, puts, calls, short sales, swaps, “put equivalent positions” (as defined in Rule 16a-l(h) under the Exchange Act) and similar arrangements (including on a total return basis), and sales and other transactions through non-US broker dealers or foreign regulated brokers.

ARTICLE V
CONDITIONS

5.1 Conditions Precedent to each Investor’s Obligation to Purchase. The obligation of each Investor to purchase the Securities at the Closing is subject to the satisfaction or waiver by such Investor, at or before the Closing, of each of the following conditions:

(a) The Company and each Subsidiary, as applicable, shall have duly executed and delivered to each Investor:

(i) a Convertible Note in favor of such Investor in the aggregate principal amount as is set forth opposite such Investor’s name on the Schedule of Investors;

(ii) the Guaranty and Security Agreement signed on behalf of the Company, and each Subsidiary party thereto, together with the following (subject to the provisions of the Guaranty and Security Agreement allowing delivery of certain items post-Closing):

(1) any certificated securities representing shares of capital stock or other similar interests owned by or on behalf of any Grantor (as defined in the Guaranty and Security Agreement) constituting Collateral (as defined in the Guaranty and Security Agreement) as of the Closing Date after giving effect to the Transactions;

(2) any promissory notes and other instruments evidencing all loans, advances and other debt owed or owing to any Grantor constituting Collateral as of the Closing Date after giving effect to the Transactions;

(3) stock powers and instruments of transfer, endorsed in blank, with respect to such certificated securities, promissory notes and other instruments;

(4) descriptions of all intellectual property, including all patents, trademarks and copyrights, owned by the Company and its Subsidiaries in detail reasonably satisfactory to the Investors;

(5) all instruments and other documents, including UCC financing statements, required by law or reasonably requested by the Collateral Agent to be filed, registered or recorded to create or perfect the Liens intended to be created under the Guaranty and Security Agreement; and

(6) results of a search of the UCC (or equivalent) filings made and tax and judgment lien searches with respect to the Grantors in the jurisdictions contemplated by the Guaranty and Security Agreement and copies of the financing statements (or similar documents) disclosed by such search and evidence reasonably satisfactory to the Collateral Agent that the Liens indicated by such financing statements (or similar documents) are acceptable to the Collateral Agent or have been released; and

(iii) the Registration Rights Agreement.

(b) Such Investor shall have received the opinion from the Company’s General Counsel, dated as of the Closing Date, in substantially the form of Exhibit F attached hereto.

(c) 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 the Transaction Documents and the issuance of the Securities, certifying the current versions of the Certificate and Bylaws of the Company and certifying as to the signatures and authority of persons signing this Agreement and related documents on behalf of the Company.

(d) The representations and warranties of the Company shall be true and correct in all material respects (except for those representations and warranties that are qualified by materiality or Material Adverse Effect, which shall be true and correct in all respects) as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by the Company at or prior to the Closing Date. Such Investor shall have received a certificate, executed by the Chief Executive Officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by such Investor.

(e) The Company shall have obtained all governmental, regulatory or third party consents and approvals, if any, necessary for the sale of the Securities, except for those consents and approvals set forth in Sections 3.1(d), 3.1(g) and 3.1(j) to the Schedule of Exceptions.

(f) The Investors shall have received all fees and other amounts due and payable on or prior to the Closing Date pursuant to Section 6.2 hereof.

(g) The Company shall have delivered to such Investor such other documents relating to the transactions contemplated by this Agreement as such Investor or its counsel may reasonably request.

5.2 Conditions Precedent to the Obligations of the Company. The Company’s obligation to sell and issue the Securities at the Closing is, at the option of the Company, subject to the fulfillment or waiver of the following conditions:

(a) The Investors shall have delivered payment of the purchase price to the Company for the Securities.

(b) Any authorization, approval, or permit of any governmental authority or regulatory body required to be obtained by the Company or any of the Investors in connection with the issuance of and sale of the Securities and the performance of the obligations in this Agreement shall have been obtained and effective as of the Closing Date.

(c) The representations and warranties made by the Investors in Section 3.2 hereof qualified as to materiality shall be true and correct at all times prior to and on the Closing Date as if made on and as of 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 Investors in Section 3.2 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 as if made on and as of 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.

(d) All covenants, agreements and conditions contained in this Agreement to be performed, satisfied or complied with by the Investors on or prior to the Closing Date shall have been performed, satisfied or complied with in all material respects.

ARTICLE VI
MISCELLANEOUS

6.1 Termination. This Agreement may be terminated by the Company or any Investor, by written notice to the other parties, if the Closing has not been consummated by the third Business Day following the date of this Agreement; provided that no such termination will affect the right of any party to sue for any breach by the other party (or parties).

6.2 Fees and Expenses. At the Closing, the Company shall pay to the Investor Counsel an aggregate of up to $15,000 for the legal fees and expenses incurred or to be incurred in connection with its due diligence and the preparation and negotiation of the Transaction Documents. The Company further agrees it shall pay to the Investor Counsel an aggregate of up to $50,000 for the legal fees and expenses incurred or to be incurred in connection and the registration of the Securities under the Registration Rights Agreement upon the effectiveness of such registration statement. In lieu of the foregoing payment, Goldman Sachs may retain such amount at the Closing or require the Company to pay such amount directly to Investor Counsel. Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. The Company shall pay all transfer agent fees, stamp taxes and other taxes and duties levied in connection with the initial sale and issuance of their applicable Securities to the Investors, including the conversion of the Convertible Notes.

6.3 Entire Agreement. The Transaction Documents, together with the Exhibits and Schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules. At or after the Closing, and without further consideration, the Company and the Investors will execute and deliver such further documents as may be reasonably requested in order to give practical effect to the intention of the parties under the Transaction Documents.

6.4 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section prior to 6:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day, (c) the Trading Day following the date of deposit with a nationally recognized overnight courier service, or (d) upon actual receipt by the party to whom such notice is required to be given. The addresses and facsimile numbers for such notices and communications are those set forth on the signature pages hereof, or such other address or facsimile number as may be designated in writing hereafter, in the same manner, by any such Person.

6.5 Amendments; Waivers. This Agreement may be amended and any provision hereof may be waived (either generally or in a particular instance and either retroactively or prospectively) with the written consent of each of (i) the Company, (ii) Goldman Sachs, and (iii) Syntek; provided, however, that following repayment of $1,500,000 of the principal amount under the Convertible Note issued to Syntek hereunder (plus all accrued and unpaid interest thereon), such amendment of or waiver under the Agreement shall no longer require the written consent of Syntek; provided, further, that no such amendment or waiver may materially and adversely affect the economic interest of Syntek in the Company without the written consent of Syntek.

6.6 Construction. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

6.7 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Investors. Any Investor may assign its rights under this Agreement to any Person to whom such Investor assigns or transfers any Securities, provided such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions hereof that apply to the “Investors.”

6.8 Governing Law; Venue; Waiver of Jury Trial. THE CORPORATE LAWS OF THE STATE OF NEW YORK SHALL GOVERN ALL ISSUES CONCERNING THE RELATIVE RIGHTS OF THE COMPANY AND ITS STOCKHOLDERS. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE COMPANY AND INVESTORS HEREBY IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN FOR THE ADJUDICATION OF ANY DISPUTE BROUGHT BY THE COMPANY OR ANY INVESTOR HEREUNDER, IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE COMPANY OR ANY INVESTOR, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. THE COMPANY AND INVESTORS HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY.

6.9 Survival. The representations and warranties, agreements and covenants contained herein shall survive the Closing.

6.10 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile signature page were an original thereof.

6.11 Severability. If any provision of this Agreement is held to be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement.

6.12 Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) the Transaction Documents, whenever any Investor exercises a right, election, demand or option owed to such Investor by the Company under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then, prior to the performance by the Company of the Company’s related obligation, such Investor may rescind or withdraw, in its sole discretion, from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights.

6.13 Replacement of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and the execution by the holder thereof of a customary lost certificate affidavit of that fact and an agreement to indemnify and hold harmless the Company for any losses in connection therewith. The applicants for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement Securities.

6.14 Other Engagements and Activities. The investment in the Company made by Goldman Sachs (together with any other affiliate of Goldman Sachs, the “GS Entities” or the “GS Entity”) pursuant to this Agreement, and any subsequent investments in the Company by any GS Entity after the date hereof, is made notwithstanding any engagement, prior to or subsequent to the date hereof, by the Company, of any GS Entity as financial advisor, agent or underwriter to the Company. Notwithstanding anything in the Transaction Documents to the contrary, no GS Entity shall be restricted in any way from engaging in any brokerage, investment advisory, financial advisory, financing, asset management, trading, market making, arbitrage and other similar activities conducted in the ordinary course of Goldman Sachs’s business. Further, neither the Company nor any Subsidiary shall have any right, by virtue of any of the Transaction Documents to, in or to such other ventures or activities of any GS Entity, or to the income or proceeds derived therefrom, and the pursuit of such ventures, even if competitive with the business of the Company, shall not be deemed wrongful or improper. Any GS Entity shall have the right to take for its own account or to recommend to others, any investment opportunity including investment opportunities that may be competitive with or involve the same line of business as that conducted or proposed to be conducted from time to time by the Company.

6.15 No Promotion. Except as otherwise required by law and as provided in Section 4.5 herein, the Company agrees that it will not, without the prior written consent of Goldman Sachs in each instance, (i) use in advertising, publicity, or otherwise the name of any GS Entity, or any partner or employee of any GS Entity, nor any trade name, trademark, trade device, service mark, symbol or any abbreviation, contraction or simulation thereof owned by any GS Entity or (ii) represent, directly or indirectly, that any product or any service provided by the Company has been approved or endorsed by any GS Entity. This provision shall survive termination of the Transaction Documents.

[SIGNATURE PAGES TO FOLLOW]

Investor Signature Page

By its execution and delivery of this signature page, the undersigned Investor hereby joins in and agrees to be bound by the terms and conditions of the Securities Purchase Agreement dated as of June 13, 2008 (the “Purchase Agreement”) by and among Vyyo Inc. and the investors (as defined therein), as to the number of shares of Convertible Notes set forth below, and authorizes this signature page to be attached to the Purchase Agreement or counterparts thereof.

GOLDMAN SACHS INVESTMENT
PARTNERS MASTER FUND, L.P.

By:		Goldman Sachs Investment Partners GP, LLC,
		its General Partner

By:	/s/ Nick Advani
	Name: Nick Advani
	Title: Managing Director

Address for Notice:

Goldman Sachs Investment Partners Master Fund,
L.P.
One New York Plaza
New York, NY 10004
Telephone: (212) 902-4934
Facsimile: (212) 346-3124
Attention: Nick Advani

with a copy to:

Goldman Sachs Investment Partners Master Fund,
L.P.
One New York Plaza
New York, NY 10004
Telephone:
Facsimile:
Attention: Rashid S. Alvi

and

Proskauer Rose LLP
1585 Broadway
New York, NY 10036
Facsimile: (212) 969-2900
Telephone: (212) 969-3470
Attention: Stuart Bressman, Esq.

Investor Signature Page

		Syntek Capital AG


		By:	/s/ Franco Franca
			Name: Franco Franca
			Title: CEO


		By:	/s/ Paolo Giacometti
			Name: Paolo Giacometti
			Title: CFO

		Address for Notice:

		Syntek Capital AG
		Zugspitzstrasse 15
		82049 Pullach – Germany
		Telephone: +498955277201
		Facsimile: +498955277405
		Attention: Paolo Giacometti
		Email: paolo.giacometti@syntekcapital.com

		with a copy to:

		Jeff Neurman
		Syntek Capital
		939 Union Street, #6A
		Brooklyn, NY 11215
		Email: jeff.neurman@syntekcapital.com

Company Signature Page

By its execution and delivery of this signature page, the undersigned hereby joins in and agrees to be bound by the terms and conditions of the Securities Purchase Agreement dated as of June 13, 2008 (the “Purchase Agreement”) by and among Vyyo Inc. and the investors (as defined therein), as to the number of shares of Convertible Notes set forth below, and authorizes this signature page to be attached to the Purchase Agreement or counterparts thereof.

VYYO INC.


By:	/s/ Wayne H. Davis
	Name:	Wayne H. Davis
	Title:	Chief Executive Officer

Address for Notice:

6625 The Corners Parkway, Suite 100
Norcross, GA 30092
Telephone: (678) 282-8011
Facsimile: (770) 446-1110
Attention: Tashia L. Rivard, General Counsel


with a copy to:


Warner Norcross & Judd LLP
900 Fifth Third Center
111 Lyon Street, NW
Grand Rapids, MI 49503
Telephone: (616) 752-2137
Facsimile: (616) 222-2137
Attention: Stephen C. Waterbury

Exhibits:

A Schedule of Investors

B Form of Convertible Note

C Form of Restated Registration Rights Agreement

D Form of Guaranty and Security Agreement

E Schedule of Exceptions

F Opinion of the General Counsel of the Company

Exhibit A

Schedule of Investors

Investor	Convertible Note Amount		Cash Purchase Price		Outstanding Principal Amount of Existing Notes

Goldman Sachs Investment Partners Master Fund, L.P.	$	38,000,000	$	3,000,000	$	35,000,000

Syntek Capital AG	$	3,000,000	$	1,500,000	$	1,500,000

TOTAL	$	41,000,000	$	4,500,000	$	36,500,00

EX-10.42 8 a2186625zex-10_42.htm EXHIBIT 10.42

Exhibit 10.42

NEITHER THESE SECURITIES REPRESENTED BY THIS NOTE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT, OR (B) IF REASONABLY REQUESTED BY THE COMPANY, AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.

VYYO INC.

SENIOR SECURED CONVERTIBLE NOTE

Issuance Date: June 13, 2008

Principal: U.S. $38,000,000

FOR VALUE RECEIVED, Vyyo Inc., a Delaware corporation, (the “Company”), hereby promises to pay to Goldman Sachs Investment Partners Master Fund, L.P. or registered assigns (“Holder”) the amount set out above as the Principal (as the same may be reduced or increased from time to time pursuant to the terms hereof, the “Principal”) on the Maturity Date unless earlier redeemed, prepaid or converted (in each case in accordance with the terms hereof), and to pay interest on any outstanding Principal at the rate and at such times as are set forth in Section 2 hereof, from the date set out above as the Issuance Date (the “Issuance Date”) until the same becomes due and payable unless earlier redeemed or converted. This Senior Secured Convertible Note, together with the Syntek Note, are duly authorized notes of the Company (this note being referred to as the “Note” and, together with the Syntek Note, the “Notes”), issued in the aggregate original principal amount of $41,000,000.00 pursuant to the Securities Purchase Agreement, dated as of the date hereof, by and among the Company and the Investors identified therein (the “Securities Purchase Agreement”), and is entitled to the benefits thereof and to the exercise of the remedies provided thereby or otherwise available in respect thereof. Certain capitalized terms used herein are defined in Section 31 hereof. Capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Securities Purchase Agreement.

1. MATURITY. On the Maturity Date, the Company shall pay to the Holder an amount in cash equal to the then outstanding Principal and the accrued and unpaid Interest thereon. The Company shall make such payment on the Maturity Date by wire transfer of immediately available funds to an account designated in writing by the Holder. Except as set forth in Section 8, this Note may be redeemed or prepaid, in whole or in part, without premium or penalty, at any time upon two (2) Business Days’ prior written notice to Holder. Any prepayments of this Note will be applied first to any accrued but unpaid Cash Interest and then to unpaid Principal. Notwithstanding anything contained herein to the contrary, the first $4,500,000 of funds applied by the Company to the prepayment of unpaid Principal and accrued but unpaid Interest under the Notes will be applied pro rata to this Note and the Syntek Note in the ratio of 1:½. For the avoidance of doubt and for illustrative purposes only, a prepayment of unpaid Principal and accrued but unpaid Interest under the Notes in the aggregate amount of $1,500,000 pursuant to the immediately preceding sentence would be applied $1,000,000 to this Note and $500,000 to the Syntek Note.

2. INTEREST; INTEREST RATE. Interest on this Note (“Interest”) shall accrue at the rate of 20% per annum (“Interest Rate”), of which (i) an amount equal to 5% per annum (“Cash Interest”) shall be payable in cash on each Interest Date (as defined below) by wire transfer of immediately available funds, and (ii) an amount equal to 15% per annum shall be added to the outstanding Principal amount on each Interest Date (as defined below). Interest on this Note shall commence accruing on the Issuance Date and shall be computed on the basis of a 360-day year comprised of twelve 30-day months and shall be payable in arrears for each Calendar Quarter on the first day of the succeeding Calendar Quarter during the period beginning on the Issuance Date and ending on, and including, the Maturity Date (each, an “Interest Date”), with the first Interest Date being July 1, 2008. Upon the occurrence and during the continuance of any default in the payment of the Interest or Principal when due, the Interest Rate shall be increased by two percent (2.0%) per annum (the “Default Rate”); provided, that such 2% increase shall be payable solely in cash. In the event that such Interest or Principal payment default is subsequently cured, the adjustment referred to in the preceding sentence shall cease to be effective as of the date of such cure. Interest on overdue Interest (other than Interest previously added to the Principal) shall accrue at the same rate compounded quarterly.

3. GUARANTY AND SECURITY AGREEMENT. This Note is a senior secured obligation of the Company. The Company’s obligations under this Note are (i) guarantied by certain of its Subsidiaries, and (ii) secured by a security interest in substantially all of the assets of the Company and such Subsidiaries, in each case pursuant to the terms and provisions of that certain Guaranty and Security Agreement, dated as of the date hereof, by and among the Company, the Holder, and the other parties identified therein (the “Security Agreement”). This Note is subject to the terms and provisions of the Security Agreement, and the Holder, by its acceptance of this Note, hereby acknowledges and agrees to such terms and provisions.

4. CONVERSION OF NOTES UPON EQUITY INVESTMENT.

(a) Optional Conversion Upon Qualified Equity Investment. If, on or prior to the Maturity Date, there occurs a closing of the sale and issuance of equity securities of the Company (including rights, options or warrants to acquire equity securities and any evidence of indebtedness or securities directly or indirectly convertible into or exchangeable for equity securities, the “Equity Securities”) to investors not affiliated with the Company that yields aggregate proceeds (cash or non-cash and net of fees and expenses) to the Company valued at not less than $51,000,000, including amounts in the form of forgiveness or cancellation of indebtedness represented by conversion of the Notes (the “Qualified Equity Investment”), then, at the Holder’s option upon written notice to the Company, the principal amount of this Note, and any Interest accrued hereon or thereon, shall convert into shares of such Equity Securities at a price per share equal to the price per share paid for such Equity Securities by investors not affiliated with the Company.

(b) Optional Conversion Upon Non-Qualified Equity Investment. If, on or prior to the Maturity Date, a Qualified Equity Investment does not occur, but there occurs a closing of the sale and issuance of Equity Securities of the Company to investors not affiliated with the Company in an alternative financing (a “Non-Qualified Equity Investment”), then, at the Holder’s option upon written notice to the Company, the principal amount of this Note, and any Interest accrued hereon or thereon, shall convert into shares of the Equity Securities sold in such Non-Qualified Equity Investment at a price per share equal to ninety percent (90%) of the price per share paid for such Equity Securities by investors not affiliated with the Company.

(c) Exercise of Conversion Right. The Company shall give the Holder notice of any Qualified Equity Investment or Non-Qualified Equity Investment promptly upon the occurrence of such event (the “Company Notice”). In order to exercise the conversion right in this Section 4, the Holder shall, within thirty (30) days of receipt of the Company Notice, surrender this Note to the office of the Company and shall deliver to the Company a notice (a “Conversion Notice”) at least two (2) Business Days prior to the intended exercise thereof specifying the unpaid principal amount of the Note to be converted to Equity Securities. Upon receiving any Conversion Notice, the Company shall within five (5) days (or at such later time as to which the Company and the Holder may agree) deliver to the address of the Holder as set forth in the Securities Purchase Agreement, (i) at the Company’s expense (including any stamp taxes or similar governmental charges), the appropriate number of duly or validly issued and fully paid and nonassessable shares of Equity Securities, as applicable, and one or more stock certificates therefor (in such number and

registered in such names as the Holder may direct) and, (ii) to the extent the Note is converted in part only, a new Note (with the same terms as the original Note) in principal amount equal to the unconverted portion of such Note. Any accrued or unpaid interest on the unpaid principal amount of the Note being converted, up to and including the date of conversion, shall be added to the remaining outstanding principal amount of the Note (and such amount shall bear interest and be converted into shares of Equity Securities at the time the last remaining principal amount of the Note is being converted). Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the Note, and the Holder shall be treated for all purposes as the record holder of such shares of Equity Securities as of such date.

5. AUTOMATIC CONVERSION OF SYNTEK NOTE UPON CONVERSION OF THIS NOTE. Notwithstanding anything herein to the contrary, upon the conversion from time to time of all or any portion of this Note in connection with (i) a Qualified Equity Investment or (ii) a Non-Qualified Equity Investment, a pro rata portion of the Syntek Note in the ratio of 35:1.5 shall automatically convert upon such Qualified Equity Investment or Non-Qualified Equity Investment, as applicable, in accordance with the terms of Section 4 thereof (the “Automatic Syntek Conversion”). Notwithstanding anything herein to the contrary, the aggregate Principal amount of the Syntek Note subject to the Automatic Syntek Conversion shall not exceed $1,500,000. For the avoidance of doubt and for illustrative purposes only, a conversion of $1,000,000 of Principal and accrued but unpaid Interest in respect of this Note would result in automatic conversion of $42,857.14 of Principal and accrued but unpaid Interest in respect of the Syntek Note.

6. CONVERSION OF NOTES INTO COMMON SHARES. Subject to Sections 10 and 18, this Note shall be convertible into shares of common stock of the Company, $0.0001 par value (the “Common Shares”), on the terms and conditions set forth in this Section 6.

(a) Conversion Right. At any time or times on or after the Issuance Date and prior to repayment or conversion pursuant to Section 4, the Holder shall be entitled to convert any portion of the outstanding and unpaid Conversion Amount (as defined below) into fully paid and nonassessable Common Shares in accordance with Section 6(c), at the Conversion Rate (as defined below); provided that, following a Fundamental Transaction, this Note shall be entitled to convert only into such consideration as the Common Shares outstanding prior thereto became entitled to receive, as appropriately adjusted to give effect to the Conversion Rate in this Note. The Company shall not issue any fraction of a Common Share upon any conversion. If the issuance would result in the issuance of a fraction of a Common Share, the Company shall round such fraction of a Common Share to the nearest whole share.

(b) Conversion Rate. The number of Common Shares issuable upon conversion of any Conversion Amount pursuant to Section 6(a) shall be determined by dividing (x) such Conversion Amount by (y) the Conversion Price (such number of shares, the “Conversion Rate”).

(i) “Conversion Amount” means the portion of the Principal to be converted or redeemed with respect to which this determination is being made.

(ii) “Conversion Price” means, as of any Conversion Date (as defined below) or other date of determination a price equal to $5.00, subject to adjustment as provided herein.

(c) Mechanics of Conversion. To convert any Conversion Amount into Common Shares on any date (a “Conversion Date”), the Holder shall: (A) transmit by facsimile (or otherwise deliver), for receipt on or prior to 11:59 p.m., New York Time, on such date, a copy of an executed notice of conversion (the “Common Conversion Notice”) to the Company and (B) if required by Section 6(d), surrender this Note to the Company (or an indemnification undertaking with respect to this Note in the case of its loss, theft or destruction). On or before the first (1^st) Business Day following the date of receipt of a Common Conversion Notice, the Company shall transmit by facsimile a confirmation of receipt of such Common Conversion Notice to the Holder and the Transfer Agent. On or before the third (3rd) Business Day following the date of receipt of a Common Conversion Notice (the “Share Delivery Date”), the Company shall: (1) (x) provided that the Transfer Agent is participating in the DTC Fast Automated Securities Transfer Program, credit such aggregate number of Common Shares or other consideration to which the Holder shall be entitled to the Holder’s balance account with DTC through its Deposit Withdrawal Agent Commission system or (y) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver to the address as specified in the Common Conversion Notice, a certificate, registered in the name of the Holder, for the number of Common Shares or other consideration to which the Holder shall be entitled and (2) pay to the Holder in cash an amount equal to the accrued and unpaid Cash Interest on the Conversion Amount up to and including the Conversion Date. The Person or Persons entitled to receive the Common Shares issuable upon a conversion of this Note shall be treated for all purposes as the record holder or holders of such Common Shares on the Conversion Date.

(d) Book-Entry. Notwithstanding anything to the contrary set forth herein, upon conversion of any portion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Company unless (A) the full Conversion Amount represented by this Note is being converted or (B) the Holder has provided the Company with prior written notice

(which notice may be included in a Common Conversion Notice) requesting reissuance of this Note upon physical surrender. The Holder and the Company shall maintain records showing the Principal converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Note upon conversion.

7. RIGHTS UPON EVENT OF DEFAULT.

(a) Event of Default. Each of the following events shall constitute an “Event of Default”:

(i) The Company’s failure to convert a Note in accordance with Section 4 within the time period specified in Section 4(c);

(ii) The Company’s failure to convert a Note in accordance with Section 6 within five (5) Business Days after the applicable Conversion Date;

(iii) The Company shall fail to pay the Interest Payment pursuant to Section 4.6 of the Securities Purchase Agreement;

(iv) The Company shall fail to pay any Principal owing under this Note when due;

(v) The Company shall fail to pay any Interest owing under this Note when due, and such failure shall continue for thirty (30) days;

(vi) The Company or any Significant Subsidiary shall fail to observe or perform any other covenant, obligation, condition or agreement contained in this Note (other than those specified in clauses (iv) or (v) above) or the Security Agreement, and, to the extent such failure is capable of being cured, such failure shall continue for sixty (60) days;

(vii) The Company or any Significant Subsidiary shall (A) fail to make any payment when due under the terms of any bond, debenture, note or other evidence of indebtedness to be paid by the Company or such Significant Subsidiary (excluding this Note, which default is addressed by clauses (iv) and (v) above, but including any other evidence of indebtedness of the Company or such Significant Subsidiary) and such failure shall continue beyond any period of grace provided with respect thereto, or (B) default in the observance or performance of any other agreement, term or condition contained in any such bond, debenture, note or other evidence of indebtedness; and the effect of such failure or default in clause (A) or (B) is to cause, or permit the holder thereof to cause, indebtedness in an aggregate amount of One Million Dollars ($1,000,000) or more to become due prior to its stated date of maturity and such failure shall continue for thirty (30) days;

(viii) An involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (A) liquidation, reorganization or other relief in respect of the Company or any Significant Subsidiary or its debts, or of a substantial part of its assets, under any federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (B) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Company or any Significant Subsidiary or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for thirty (30) days or an order or decree approving or ordering any of the foregoing shall be entered;

(ix) The Company or any Significant Subsidiary shall (A) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (B) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (viii) of this Section, (C) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Company or any Significant Subsidiary or for a substantial part of its assets, (D) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (E) make a general assignment for the benefit of creditors or (F) take any action for the purpose of effecting any of the foregoing;

(x) One or more judgments for the payment of money in an amount in excess of Five Million Dollars ($5,000,000) in the aggregate, outstanding at any one time, shall be rendered against the Company or any Significant Subsidiary and the same shall remain undischarged for a period of sixty (60) days during which execution shall not be effectively stayed, or any judgment, writ, assessment, warrant of attachment, or execution or similar process shall be issued or levied against a substantial part of the property of the Company or any Significant Subsidiary and such judgment, writ, or similar process shall not be released, stayed, vacated or otherwise dismissed within sixty (60) days after issue or levy;

(xi) This Note or the Security Agreement shall cease, for any reason, to be in full force and effect, or the Company or any Significant Subsidiary shall so assert in writing or shall disavow any of its obligations thereunder;

(xii) Any Lien purported to be created under the Security Agreement shall cease to be, or shall be asserted by the Company or any Significant Subsidiary not to be, a valid and perfected Lien on any Collateral, with the priority required by the Security Agreement; or

(xiii) The Company shall fail to observe or perform any other covenant, obligation, condition or agreement contained in this Note or the Security Agreement and, to the extent such failure is capable of being cured, such failure shall continue for sixty (60) days.

(b) Event of Default Redemption Right. Promptly after the occurrence of an Event of Default with respect to this Note, the Company shall deliver written notice thereof via facsimile and overnight courier (an “Event of Default Notice”) to the Holder. The Holder, by written notice to the Company, may declare all outstanding amounts payable by the Company hereunder to be immediately due and payable without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein to the contrary notwithstanding (“Redemption Price”). Upon the occurrence or existence of any Event of Default described in Sections (viii), (ix) or (x) hereof, immediately and without notice, all outstanding amounts payable by the Company hereunder shall automatically become immediately due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein to the contrary notwithstanding. In addition to the foregoing remedies, upon the occurrence or existence of any Event of Default, the Holder may exercise, upon the approval of Holders holding more than a majority of the aggregate principal balance of the Notes, any other right, power or remedy permitted to it by law, either by suit in equity or by action at law, or both.

8. REDEMPTION RIGHT UPON FUNDAMENTAL TRANSACTION. No sooner than twenty (20) days nor later than ten (10) days prior to the consummation of a Fundamental Transaction, but not prior to the public announcement of such Fundamental Transaction, the Company shall deliver written notice thereof via facsimile and overnight courier to the Holder (a “Fundamental Transaction Notice”). At any time during the period (the “Fundamental Transaction Period”) beginning after the Holder’s receipt of a Fundamental Transaction Notice and ending on the date that is one (1) Business Day before the Fundamental Transaction Effective Date, the Holder, at its option, may require the Company to redeem all or any portion of this Note by delivering written notice thereof (“Fundamental Transaction Redemption Notice”) to the Company, which Fundamental Transaction Redemption Notice shall indicate the Conversion Amount the Holder is electing to redeem. The portion of this Note subject to redemption pursuant to this Section 8 shall be redeemed by the Company in cash at a price equal to 101% of the Principal plus any accrued but unpaid Interest thereon up to, but not

including, the Fundamental Transaction Effective Date (the “Fundamental Transaction Redemption Price”) on the Fundamental Transaction Effective Date. Redemptions required by this Section 8 shall have priority to payments to stockholders in connection with a Fundamental Transaction. To the extent redemptions required by this Section 8 are deemed or determined by a court of competent jurisdiction to be prepayments of the Note by the Company, such redemptions shall be deemed to be voluntary prepayments. Notwithstanding anything to the contrary in this Section 8, until the Fundamental Transaction Redemption Price (together with interest thereon) is paid in full, the Conversion Amount submitted for redemption under this Section 8 may be converted, in whole or in part pursuant to Section 6. The parties hereto agree that in the event of the Company’s redemption of any portion of the Note under this Section 8, the Holder’s damages would be uncertain and difficult to estimate because of the parties’ inability to predict future interest rates and the uncertainty of the availability of a suitable substitute investment opportunity for the Holder. Accordingly, any redemption premium due under this Section 8 is intended by the parties to be, and shall be deemed, a reasonable estimate of the Holder’s actual loss of its investment opportunity and not as a penalty.

9. AUTOMATIC REDEMPTION OF SYNTEK NOTE UPON REDEMPTION OF THIS NOTE. Notwithstanding anything herein to the contrary, upon the redemption of all or any portion of this Note in connection with a Fundamental Transaction, a pro rata portion of the Syntek Note, in the ratio of 1:½, shall automatically be redeemed by the Company in accordance with the terms of Section 9 of the Syntek Note (the “Automatic Syntek Redemption”). Notwithstanding anything contained herein to the contrary, the aggregate Principal amount of the Syntek Note subject to the Automatic Syntek Redemption shall not exceed $1,500,000. For the avoidance of doubt and for illustrative purposes only, a redemption of $1,000,000 of Principal and accrued but unpaid Interest in respect of this Note would result in automatic redemption of $500,000 of Principal and accrued but unpaid Interest in respect of the Syntek Note.

10. RIGHTS UPON CERTAIN OTHER CORPORATE EVENTS. Subject to Section 8 and 9 herein, prior to the consummation of any Fundamental Transaction pursuant to which holders of Common Shares are entitled to receive securities or other assets with respect to or in exchange for Common Shares (a “Corporate Event”), the Company shall make appropriate provision to ensure that the Holder will thereafter have the right to receive upon a conversion of this Note, such securities or other assets received by the holders of Common Shares in connection with the consummation of such Corporate Event in such amounts as the Holder would have been entitled to receive had this Note initially been issued with conversion rights for the form of such consideration (as opposed to Common Shares) at a conversion rate for such consideration commensurate with the Conversion Rate. The provisions of this Section shall apply similarly and equally to successive Corporate Events unless or until the Note is redeemed or repaid.

11. ADJUSTMENT OF CONVERSION PRICE UPON SUBDIVISION OR COMBINATION OF COMMON SHARES. If the Company at any time on or after the Issuance Date subdivides (by any share split, share dividend, recapitalization or otherwise) one or more classes of its outstanding Common Shares into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. If the Company at any time on or after the Issuance Date combines (by combination, reverse share split or otherwise) one or more classes of its outstanding Common Shares into a smaller number of shares, the Conversion Price in effect immediately prior to such combination will be proportionately increased.

12. COVENANTS.

(a) Affirmative Covenants. Until all Principal and Interest and any other amounts due and payable under this Note have been paid in full in cash, the Company shall, and shall cause each Significant Subsidiary to:

(i) provide prompt written notice to the Holder of (x) the occurrence of any Event of Default, or any event which with the giving of notice or lapse of time, or both, would constitute an Event of Default, hereunder; and (y) any loss or damage to any Collateral (as defined in the Security Agreement) in excess of $500,000;

(ii) do or cause to be done all things reasonably necessary to preserve, renew and keep in full force and effect its legal existence; and

(iii) (A) keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities, (B) permit any representatives designated by the Holder, upon reasonable prior notice, to visit and inspect its properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times and as often as reasonably requested, and (C) provide to the Holder the same information rights as it provides to its stockholders.

(b) Negative Covenants. Until all Principal and Interest and any other amounts due and payable under this Note have been paid in full in cash, the Company shall not, and shall not permit any Subsidiary to:

(i) create, incur, assume or permit to exist any indebtedness or guarantee, directly or indirectly, except:

(A) indebtedness with respect to equipment leases or trade accounts of the Company or any Subsidiary arising in the ordinary course of business;

(B) indebtedness incurred in the ordinary course arising out of any lease agreement for the premises of the Company or any Significant Subsidiary;

(C) indebtedness incurred in the ordinary course of the Company or any Significant Subsidiary for employee-related obligations or commitments, including, but not limited to, obligations for the payment of salaries, accrued vacation days, severance, prior notice periods, managers’ insurance, pension funds and other approved employee benefits;

(D) indebtedness for Taxes (including municipality rates), assessments, levies to statutory bodies and government agencies, or similar charges, in all cases provided that such obligations were incurred in the ordinary course of business that are not yet due and payable;

(E) indebtedness under the Notes;

(F) indebtedness that is by its terms subordinate to the indebtedness under the Notes up to $5,000,000;

(G) up to $15,000,000 of indebtedness assumed by the Company in the acquisition of all or substantially all of the assets or capital stock of another Person; provided that, (a) such indebtedness existed at the time of such acquisition and was not created in anticipation thereof, (b) the aggregate amount of such indebtedness assumed in connection with such acquisition shall not exceed 25% of the aggregate amount of consideration paid by the Company for such acquisition and (c) any Liens securing such indebtedness do not at any time cover or encumber any assets or property other than the assets or property of the Person acquired which is financed by such indebtedness

(H) up to $2,500,000 of additional indebtedness in the aggregate outstanding at any time; and

(I) inter-company indebtedness for valid business purposes and consistent with the Company’s past practices.

(ii) create, incur, assume or suffer to exist any mortgage, pledge, security interest, assignment, lien (statutory or other), claim, encumbrance, license or sublicense or security interest (collectively, a “Lien”) in or upon any of its assets, except:

(A) Liens for Taxes, assessments or similar charges incurred in the ordinary course of business that are not yet due and payable,

(B) Licenses and sublicenses of the Company’s Intellectual Property Rights in the ordinary course of business;

(C) Liens created in connection with Section 12(b)(i)(B), (G), (H) and (J) above; and

(D) Liens created pursuant to the Security Agreement.

(iii) enter into any transaction, including, without limitation, the purchase, sale, or exchange of property or the rendering of any service with any Affiliate, except pursuant to the reasonable requirements of the Company’s or such Subsidiary’s business and upon fair and reasonable terms no less favorable to the Company or such Subsidiary, than would obtain in a comparable arm’s length transaction with a Person not an Affiliate as reasonably determined by the Audit Committee of the Company’s Board of Directors;

(iv) declare any cash dividends on any shares of any class of its capital stock or membership interests, or apply any of its property or assets to the purchase, redemption or other retirement of, or set apart any sum for the payment of any cash dividends on, or for the purchase, redemption or other retirement of, or make any other distribution by reduction of capital or otherwise in respect of, any shares of any class of its capital stock or membership interests, provided, however, that (i) any Subsidiary wholly owned by the Company may pay dividends directly to the Company and (ii) this restriction shall not apply to the repurchase of shares of Common Stock from employees, officers, directors, consultants or other persons performing services for the Company or any Subsidiary pursuant to agreements under which the Company has the option to repurchase such shares upon the occurrence of certain events, such as the termination of employment;

(v) sell, transfer, lease or otherwise dispose (including pursuant to a merger) of any asset with either a book or a market value greater than $1,000,000, except (a) sales, transfers, leases and other

dispositions of inventory, used, obsolete or surplus equipment or other property and investments in each case in the ordinary course of business, (b) such sales, transfers or dispositions for cash or marketable securities which are reasonably approved by the Audit Committee of the Company’s Board of Directors or (c) assets that are substantially used in the Company’s wireless business;

(vi) create or acquire any new Significant Subsidiary;

(vii) make any capital expenditures (other than with respect to normal maintenance and replacement programs in the ordinary course of business) exceeding $1,000,000 in any fiscal year for the Company and its Significant Subsidiaries in the aggregate; or

(viii) permit the Subsidiaries that are not party to the Security Agreement to have assets in an aggregate amount greater than $500,000.

13. RESERVATION OF AUTHORIZED SHARES.

(a) Reservation. The Company shall have sufficient authorized and unissued Common Shares for each of the Notes equal to the number of Common Shares necessary to effect the conversion at the Conversion Rate with respect to the Conversion Amount of each such Note as of the Issuance Date. So long as any of the Notes are outstanding, the Company shall take all action necessary to reserve and keep available out of its authorized and unissued Common Shares, solely for the purpose of effecting the conversion of the Notes, the number of Common Shares as shall from time to time be necessary to effect the conversion of all of the Notes then outstanding; provided that at no time shall the number of Common Shares so available be less than the number of shares required to be reserved by the previous sentence (without regard to any limitations on conversions) (the “Required Amount”).

14. REDEMPTION MECHANICS. In the event that the Company does not pay the applicable Redemption Price to the Holder within five (5) Business Days, at any time thereafter and until the Company pays such unpaid Redemption Price in full, the Holder shall have the option, in lieu of redemption, to require the Company to promptly return to the Holder all or any portion of this Note representing the Conversion Amount that was submitted for redemption and for which the applicable Redemption Price has not been paid. Upon the Company’s receipt of such notice, (x) the Redemption Notice shall be null and void with respect to such Conversion Amount, (y) the Company shall immediately return this Note, or issue a new Note (in accordance with Section 19(d)) to the Holder representing such Conversion Amount.

15. RIGHTS UPON DISTRIBUTION OF ASSETS. If the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of Common Shares, by way of return of capital or otherwise (including, without limitation, any distribution of cash, shares or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Note, then, in each such case any Conversion Price in effect immediately prior to the close of business on the record date fixed for the determination of holders of Common Shares entitled to receive the Distribution shall be reduced, effective as of the close of business on such record date, to a price determined by multiplying such Conversion Price by a fraction of which (i) the numerator shall be the Closing Bid Price of the Common Shares on the Business Day immediately preceding such record date minus the value of the Distribution (as determined in good faith by the Company’s Board of Directors) applicable to one Common Share, and (ii) the denominator shall be the Closing Bid Price of the Common Shares on the Business Day immediately preceding such record date.

16. VOTE TO ISSUE, OR CHANGE THE TERMS OF, NOTES. The Notes may be amended and any provision thereof may be waived by the Company with the affirmative vote or consent of each of (i) the Company, (ii) the Holder, and (iii) the holder of the Syntek Note; provided, however, that following repayment of $1,500,000 of the Principal amount of the Syntek Note (plus all accrued and unpaid Interest thereon), such amendment of or waiver under the Notes shall no longer require the written consent of the holder of the Syntek Note; provided, further, however, that no such amendment or waiver may materially and adversely affect the economic interest of the holder of the Syntek Note in the Company without the written consent of the holder of the Syntek Note. Any change or amendment approved in accordance with this Section 16 shall be binding upon all existing and future holders of this Note or the Notes, as applicable.

17. TRANSFER. This Note and any Common Shares or other Equity Securities issued upon conversion of this Note may be offered, sold, assigned or transferred by the Holder without the consent of the Company in aggregate principal amounts of at least $500,000, subject only to the provisions of Section 4.1 of the Securities Purchase Agreement and compliance with applicable law.

18. RESTRICTIONS ON CONVERSION INTO COMMON STOCK. The Company shall not effect any conversion of this Note, and the Holder of this Note shall not have the right to convert any portion of this Note pursuant to Section 6(a), to the extent that after giving effect to such conversion, and taking into account all other shares of Common Stock beneficially owned by the Holder and its Affiliates, the Holder (together with the Holder’s Affiliates) would beneficially own in excess of

14.80% (the “Maximum Percentage”) of the number of shares of Common Stock outstanding immediately after giving effect to such conversion. For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which the determination of such sentence is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) conversion of the remaining, nonconverted portion of this Note beneficially owned by the Holder or any of its Affiliates and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates, in each case if such conversion or exercise of such instrument is not permitted in order to keep the Holder’s beneficial ownership of Common Stock at or below the Maximum Percentage. Except as set forth in the preceding sentence, for purposes of this Section 18, beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act. For purposes of this Section 18, in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Form 10-K, Form 10-Q or Form 8-K, as the case may be, (y) a more recent public announcement by the Company or (z) any other notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. For any reason and at any time, upon the written or oral request of the Holder, the Company shall within one (1) Business Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. By written notice to the Company, the Holder may from time to time increase or decrease the Maximum Percentage to any other percentage specified in such notice so long as such specified Maximum Percentage shall not exceed 14.80%; provided that (i) any such increase will not be effective until the sixty-first (61^st) day after such notice is delivered to the Company, and (ii) any such increase or decrease will apply only to the Holder and not to any other holder of Notes.

19. REISSUANCE OF THIS NOTE.

(a) Transfer. If this Note is to be transferred, the Holder shall surrender this Note to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Note (in accordance with Section 19(d)), registered as the Holder may request, representing the outstanding Principal being transferred by the Holder and, if less then the entire outstanding Principal is being transferred, a new Note (in accordance with Section 19(d)) to the Holder representing

the outstanding Principal not being transferred. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of Section 6(d) following conversion or redemption of any portion of this Note, the outstanding Principal represented by this Note may be less than the Principal stated on the face of this Note.

(b) Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall execute and deliver to the Holder a new Note (in accordance with Section 19(d)) representing the outstanding Principal.

(c) Note Exchangeable for Different Denominations. This Note is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Note or Notes (in accordance with Section 19(d) and in principal amounts of at least $100,000) representing in the aggregate the outstanding Principal of this Note, and each such new Note will represent such portion of such outstanding Principal as is designated by the Holder at the time of such surrender.

(d) Issuance of New Notes. Whenever the Company is required to issue a new Note pursuant to the terms of this Note, such new Note (i) shall be of like tenor with this Note, (ii) shall represent, as indicated on the face of such new Note, the Principal remaining outstanding (or in the case of a new Note being issued pursuant to Section 19(a) or Section 19(c), the Principal designated, by the Holder which, when added to the principal represented by the other new Notes issued in connection with such issuance, does not exceed the Principal remaining outstanding under this Note immediately prior to such issuance of new Notes), (iii) shall have an issuance date, as indicated on the face of such new Note, which is the same as the Issuance Date of this Note, (iv) shall have the same rights and conditions as this Note, and (v) shall represent accrued and unpaid Interest on the Principal of this Note, from the Issuance Date.

20. REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note and any of the other Transaction Documents at law or in equity (including a decree of specific performance and/or other injunctive relief). Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its

obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction.

21. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If following an Event of Default (a) this Note is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts due under this Note or to enforce the provisions of this Note or (b) there occurs any bankruptcy, reorganization, receivership of the Company or other proceedings affecting Company creditors’ rights and involving a claim under this Note, then the Company shall pay the reasonable costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, but not limited to, attorneys’ fees and disbursements.

22. CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly drafted by the Company and all the Holders and shall not be construed against any person as the drafter hereof. The headings of this Note are for convenience of reference and shall not form part of, or affect the interpretation of, this Note.

23. FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of the Holder 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.

24. NOTICES. Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be delivered in accordance with Section 6.4 of the Securities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Note, including in reasonable detail a description of such action and the reason therefore. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon any adjustment of the Conversion Price, setting forth in reasonable detail, and certifying, the calculation of such adjustment and (ii) at least twenty (20) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Shares or (B) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder.

25. CANCELLATION. After all Principal, accrued Interest and other amounts at any time owed on this Note have been paid in full, this Note shall automatically be deemed canceled, shall be surrendered to the Company for cancellation and shall not be reissued.

26. WAIVER OF NOTICE. To the extent permitted by law, the Company hereby waives demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note and the Securities Purchase Agreement.

27. GOVERNING LAW. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than 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 state courts of New York or in the federal courts located in the State of New York and waive trial by jury. Both parties agree to submit to the jurisdiction of such courts. 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 Note 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 this Note. Nothing contained herein shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’s obligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder.

28. INDEMNIFICATION.

(a) Subject to the limitations herein, the Company shall indemnify the Holder, and each Affiliate of the Holder (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, (excluding the legal fees of counsel for any Indemnitee), incurred by or asserted against any Indemnitee by a third party arising out of, in connection with, or as a result of: (i) the execution or delivery of this Note, the performance by the Company and its Subsidiaries hereto of their respective obligations hereunder or the consummation of or the use of the proceeds therefrom, or (ii) the material breach by the Company or any Subsidiary of (a) any representation,

warranty, covenant or agreement contained herein or (b) any representation or warranty in Section 3.1 of the Securities Purchase Agreement, as they relate to this Note; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and non-appealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee.

(b) To the extent permitted by applicable law, the Company and the Holder hereof shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages arising out of, in connection with, or as a result of, the Note, the Securities Purchase Agreement and the Registration Rights Agreement or any agreement or instrument contemplated hereby or thereby, or the use of the proceeds thereof.

29. 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 Company to the Holder and thus refunded to the Company.

30. NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation or Bylaws, or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, 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 of this Note, and will at all times in good faith carry out all of the provisions of this Note and take all action as may be required to protect the rights of the Holder of this Note.

31. CERTAIN DEFINITIONS. For purposes of this Note, the following terms shall have the following meanings:

(a) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed.

(b) Calendar Quarter” means each of: the period beginning on and including January 1 and ending on and including March 31; the period beginning on and including April 1 and ending on and including June 30; the period beginning on and including July 1 and ending on and including September 30; and the period beginning on and including October 1 and ending on and including December 31.

(c) “Closing Date” shall have the meaning set forth in the Securities Purchase Agreement, which date is the date the Company initially issued Notes pursuant to the terms of the Securities Purchase Agreement.

(d) “Fundamental Transaction” means that the Company shall, directly or indirectly, in one or more related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Person, or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company to another Person, or (iii) be subject to an offer from another Person or group of related Persons (as defined in Sections 13(d) and 14(d) of the Exchange Act) other than the Holder to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding Voting Shares (not including any Voting Shares held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (iv) consummate a share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person or group of related Persons (as defined in Sections 13(d) and 14(d) of the Exchange Act) whereby such other Person or group acquires more than 50% of the outstanding Voting Shares (not including any Voting Shares held by the other Person other Persons making or party to, or associated or affiliated with the other Persons making or party to, such share purchase agreement or other business combination), or (v) enter into any “going private transaction” that meets the criteria of any transaction described under Section 13(e) of the Exchange Act and the rules promulgated thereunder, provided however, a Fundamental Transaction shall not include (i) any reorganization, recapitalization or reclassification of the Common Shares in which holders of the Company’s voting power immediately prior to such reorganization, recapitalization or reclassification continue after such reorganization, recapitalization or reclassification to hold publicly traded securities and, directly or indirectly, the voting power of the surviving entity or entities necessary to elect a majority of the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities, or (ii) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction of incorporation of the Company.

(e) “GAAP” means United States generally accepted accounting principles, consistently applied.

(f) “Maturity Date” means the earlier of (i) 11:59 p.m., New York Time, on December 13, 2008 and (ii) the date on which the Company completes a Qualified Equity Investment.

(g) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity or a government or any department or agency thereof.

(h) “Redemption Notices” means, collectively, the Event of Default Redemption Notices, and the Fundamental Transaction Redemption Notices, each of the foregoing, individually, a Redemption Notice.

(i) “Registration Rights Agreement” means that certain Amended and Restated Registration Rights Agreement, dated as of the date hereof, by and among the Company and the holders of the Notes party thereto, relating to, among other things, the registration of the resale of the Common Shares issuable upon conversion of the Notes.

(j) “Required Holders” means the holders of Notes representing at least a majority of the aggregate principal amount of the Notes then outstanding.

(k) “Syntek” means Syntek Capital AG.

(l) “Syntek Note” means that certain Senior Secured Convertible Note of even date herewith in the original principal amount of $3,000,000 issued by the Company to Syntek pursuant to the Securities Purchase Agreement.

(m) “SEC” means the United States Securities and Exchange Commission.

(n) “Tax” means any tax, levy, impost, duty or other charge or withholding of a similar nature (including any related penalty or interest).

(o) “Voting Shares” of a Person means capital shares of such Person of the class or classes pursuant to which the holders thereof have the general voting power to elect, or the general power to appoint, at least a majority of the board of directors, managers or trustees of such Person (irrespective of whether or not at the time capital shares of any other class or classes shall have or might have voting power by reason of the happening of any contingency).

[Signature Page Follows]

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as of the Issuance Date set out above.

	VYYO INC.


	By:	/s/ Wayne H. Davis
	Name: Wayne H. Davis
	Title: Chief Executive Officer

EX-10.43 9 a2186625zex-10_43.htm EXHIBIT 10.43

Exhibit 10.43

VYYO INC.

SENIOR SECURED CONVERTIBLE NOTE

Issuance Date: June 13, 2008

Principal: U.S. $3,000,000

FOR VALUE RECEIVED, Vyyo Inc., a Delaware corporation, (the “Company”), hereby promises to pay to Syntek Capital AG or registered assigns (“Holder”) the amount set out above as the Principal (as the same may be reduced or increased from time to time pursuant to the terms hereof, the “Principal”) on the Maturity Date unless earlier redeemed, prepaid or converted (in each case in accordance with the terms hereof), and to pay interest on any outstanding Principal at the rate and at such times as are set forth in Section 2 hereof, from the date set out above as the Issuance Date (the “Issuance Date”) until the same becomes due and payable unless earlier redeemed or converted. This Senior Secured Convertible Note, together with the GS Note, are duly authorized notes of the Company (this note being referred to as the “Note” and, together with the GS Note, the “Notes”), issued in the aggregate original principal amount of $41,000,000.00 pursuant to the Securities Purchase Agreement, dated as of the date hereof, by and among the Company and the Investors identified therein (the “Securities Purchase Agreement”), and is entitled to the benefits thereof and to the exercise of the remedies provided thereby or otherwise available in respect thereof. Certain capitalized terms used herein are defined in Section 31 hereof. Capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Securities Purchase Agreement.

1. MATURITY. On the Maturity Date, the Company shall pay to the Holder an amount in cash equal to the then outstanding Principal and the accrued and unpaid Interest thereon. The Company shall make such payment on the Maturity Date by wire transfer of immediately available funds to an account designated in writing by the Holder. Except as set forth in Section 8, this Note may be redeemed or prepaid, in whole or in part, without premium or penalty, at any time upon two (2) Business Days’ prior written notice to Holder. Any prepayments of this Note will be applied first to any accrued but unpaid Cash Interest and then to unpaid Principal. Notwithstanding anything contained herein to the contrary, the first $4,500,000 of funds applied by the Company to the prepayment of unpaid Principal and accrued but unpaid Interest under the Notes will be applied pro rata to this Note and the GS Note in the ratio of ½:1. For the avoidance of doubt and for illustrative purposes only, a prepayment of unpaid Principal and accrued but unpaid Interest under the Notes in the aggregate amount of $1,500,000 pursuant to the immediately preceding sentence would be applied $500,000 to this Note and $1,000,000 to the GS Note.

2. INTEREST; INTEREST RATE. Interest on this Note (“Interest”) shall accrue at the rate of 20% per annum (“Interest Rate”), of which (i) an amount equal to 5% per annum (“Cash Interest”) shall be payable in cash on each Interest Date (as defined below) by wire transfer of immediately available funds, and (ii) an amount equal to 15% per annum shall be added to the outstanding Principal amount on each Interest Date (as defined below). Interest on this Note shall commence accruing on the Issuance Date and shall be computed on the basis of a 360-day year comprised of twelve 30-day months and shall be payable in arrears for each Calendar Quarter on the first day of the succeeding Calendar Quarter during the period beginning on the Issuance Date and ending on, and including, the Maturity Date (each, an “Interest Date”), with the first Interest Date being July 1, 2008. Upon the occurrence and during the continuance of any default in the payment of the Interest or Principal when due, the Interest Rate shall be increased by two percent (2.0%) per annum (the “Default Rate”); provided, that such 2% increase shall be payable solely in cash. In the event that such Interest or Principal payment default is subsequently cured, the adjustment referred to in the preceding sentence shall cease to be effective as of the date of such cure. Interest on overdue Interest (other than Interest previously added to the Principal) shall accrue at the same rate compounded quarterly.

3. GUARANTY AND SECURITY AGREEMENT. This Note is a senior secured obligation of the Company. The Company’s obligations under this Note are (i) guarantied by certain of its Subsidiaries, and (ii) secured by a security interest in substantially all of the assets of the Company and such Subsidiaries, in each case pursuant to the terms and provisions of that certain Guaranty and Security Agreement, dated as of the date hereof, by and among the Company, the Holder, and the other parties identified therein (the “Security Agreement”). This Note is subject to the terms and provisions of the Security Agreement, and the Holder, by its acceptance of this Note, hereby acknowledges and agrees to such terms and provisions.

4. CONVERSION OF NOTES UPON EQUITY INVESTMENT.

(a) Optional Conversion Upon Qualified Equity Investment. If, on or prior to the Maturity Date, there occurs a closing of the sale and issuance of equity securities of the Company (including rights, options or warrants to acquire equity securities and any evidence of indebtedness or securities directly or indirectly convertible into or exchangeable for equity securities, the “Equity Securities”) to investors not affiliated with the Company that yields aggregate proceeds (cash or non-cash and net of fees and expenses) to the Company valued at not less than $51,000,000, including amounts in the form of forgiveness or cancellation of indebtedness represented by conversion of the Notes (the “Qualified Equity Investment”), then, at the Holder’s option upon written notice to the Company, the principal amount of this Note, and any Interest accrued hereon or thereon, shall convert into shares of such Equity Securities at a price per share equal to the price per share paid for such Equity Securities by investors not affiliated with the Company.

(b) Optional Conversion Upon Non-Qualified Equity Investment. If, on or prior to the Maturity Date, a Qualified Equity Investment does not occur, but there occurs a closing of the sale and issuance of Equity Securities of the Company to investors not affiliated with the Company in an alternative financing (a “Non-Qualified Equity Investment”), then, at the Holder’s option upon written notice to the Company, the principal amount of this Note, and any Interest accrued hereon or thereon, shall convert into shares of the Equity Securities sold in such Non-Qualified Equity Investment at a price per share equal to ninety percent (90%) of the price per share paid for such Equity Securities by investors not affiliated with the Company.

(c) Exercise of Conversion Right. The Company shall give the Holder notice of any Qualified Equity Investment or Non-Qualified Equity Investment promptly upon the occurrence of such event (the “Company Notice”). In order to exercise the conversion right in this Section 4, the Holder shall, within thirty (30) days of receipt of the Company Notice, surrender this Note to the office of the Company and shall deliver to the Company a notice (a “Conversion Notice”) at least two (2) Business Days prior to the intended exercise thereof specifying the unpaid principal amount of the Note to be converted to Equity Securities. Upon receiving any Conversion Notice, the Company shall within five (5) days (or at such later time as to which the Company and the Holder may agree) deliver to the address of the Holder as set forth in the Securities Purchase Agreement, (i) at the Company’s expense (including any stamp taxes or similar governmental charges), the appropriate number of duly or validly issued and fully paid and nonassessable shares of Equity Securities, as applicable, and one or more stock certificates therefor (in such number and

registered in such names as the Holder may direct) and, (ii) to the extent the Note is converted in part only, a new Note (with the same terms as the original Note) in principal amount equal to the unconverted portion of such Note. Any accrued or unpaid interest on the unpaid principal amount of the Note being converted, up to and including the date of conversion, shall be added to the remaining outstanding principal amount of the Note (and such amount shall bear interest and be converted into shares of Equity Securities at the time the last remaining principal amount of the Note is being converted). Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the Note, and the Holder shall be treated for all purposes as the record holder of such shares of Equity Securities as of such date.

5. AUTOMATIC CONVERSION UPON CONVERSION OF GS NOTE. Notwithstanding anything herein to the contrary, upon the conversion from time to time of all or any portion of the GS Note in connection with (i) a Qualified Equity Investment or (ii) a Non-Qualified Equity Investment, a pro rata portion of this Note in the ratio of 35:1.5 shall automatically convert upon such Qualified Equity Investment or Non-Qualified Equity Investment, as applicable, in accordance with the terms of Section 4 hereof (the “Automatic Syntek Conversion”). Notwithstanding anything herein to the contrary, the aggregate Principal amount of this Note subject to the Automatic Syntek Conversion shall not exceed $1,500,000. For the avoidance of doubt and for illustrative purposes only, a conversion of $1,000,000 of Principal and accrued but unpaid Interest in respect of the GS Note would result in automatic conversion of $42,857.14 of Principal and accrued but unpaid Interest in respect of this Note.

6. CONVERSION OF NOTES INTO COMMON SHARES. Subject to Sections 10 and 18, this Note shall be convertible into shares of common stock of the Company, $0.0001 par value (the “Common Shares”), on the terms and conditions set forth in this Section 6.

(a) Conversion Right. At any time or times on or after the Issuance Date and prior to repayment or conversion pursuant to Section 4, the Holder shall be entitled to convert any portion of the outstanding and unpaid Conversion Amount (as defined below) into fully paid and nonassessable Common Shares in accordance with Section 6(c), at the Conversion Rate (as defined below); provided that, following a Fundamental Transaction, this Note shall be entitled to convert only into such consideration as the Common Shares outstanding prior thereto became entitled to receive, as appropriately adjusted to give effect to the Conversion Rate in this Note. The Company shall not issue any fraction of a Common Share upon any conversion. If the issuance would result in the issuance of a fraction of a Common Share, the Company shall round such fraction of a Common Share to the nearest whole share.

(b) Conversion Rate. The number of Common Shares issuable upon conversion of any Conversion Amount pursuant to Section 6(a) shall be determined by dividing (x) such Conversion Amount by (y) the Conversion Price (such number of shares, the “Conversion Rate”).

(i) “Conversion Amount” means the portion of the Principal to be converted or redeemed with respect to which this determination is being made.

(ii) “Conversion Price” means, as of any Conversion Date (as defined below) or other date of determination a price equal to $5.00, subject to adjustment as provided herein.

(c) Mechanics of Conversion. To convert any Conversion Amount into Common Shares on any date (a “Conversion Date”), the Holder shall: (A) transmit by facsimile (or otherwise deliver), for receipt on or prior to 11:59 p.m., New York Time, on such date, a copy of an executed notice of conversion (the “Common Conversion Notice”) to the Company and (B) if required by Section 6(d), surrender this Note to the Company (or an indemnification undertaking with respect to this Note in the case of its loss, theft or destruction). On or before the first (1^st) Business Day following the date of receipt of a Common Conversion Notice, the Company shall transmit by facsimile a confirmation of receipt of such Common Conversion Notice to the Holder and the Transfer Agent. On or before the third (3rd) Business Day following the date of receipt of a Common Conversion Notice (the “Share Delivery Date”), the Company shall: (1) (x) provided that the Transfer Agent is participating in the DTC Fast Automated Securities Transfer Program, credit such aggregate number of Common Shares or other consideration to which the Holder shall be entitled to the Holder’s balance account with DTC through its Deposit Withdrawal Agent Commission system or (y) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver to the address as specified in the Common Conversion Notice, a certificate, registered in the name of the Holder, for the number of Common Shares or other consideration to which the Holder shall be entitled and (2) pay to the Holder in cash an amount equal to the accrued and unpaid Cash Interest on the Conversion Amount up to and including the Conversion Date. The Person or Persons entitled to receive the Common Shares issuable upon a conversion of this Note shall be treated for all purposes as the record holder or holders of such Common Shares on the Conversion Date.

(d) Book-Entry. Notwithstanding anything to the contrary set forth herein, upon conversion of any portion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Company unless (A) the full Conversion Amount represented by this Note is being converted or (B) the Holder has provided the Company with prior written notice

(which notice may be included in a Common Conversion Notice) requesting reissuance of this Note upon physical surrender. The Holder and the Company shall maintain records showing the Principal converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Note upon conversion.

7. RIGHTS UPON EVENT OF DEFAULT.

(a) Event of Default. Each of the following events shall constitute an “Event of Default”:

(i) The Company’s failure to convert a Note in accordance with Section 4 within the time period specified in Section 4(c);

(ii) The Company’s failure to convert a Note in accordance with Section 6 within five (5) Business Days after the applicable Conversion Date;

(iii) The Company shall fail to pay the Interest Payment pursuant to Section 4.6 of the Securities Purchase Agreement;

(iv) The Company shall fail to pay any Principal owing under this Note when due;

(v) The Company shall fail to pay any Interest owing under this Note when due, and such failure shall continue for thirty (30) days;

(vi) The Company or any Significant Subsidiary shall fail to observe or perform any other covenant, obligation, condition or agreement contained in this Note (other than those specified in clauses (iv) or (v) above) or the Security Agreement, and, to the extent such failure is capable of being cured, such failure shall continue for sixty (60) days;

(vii) The Company or any Significant Subsidiary shall (A) fail to make any payment when due under the terms of any bond, debenture, note or other evidence of indebtedness to be paid by the Company or such Significant Subsidiary (excluding this Note, which default is addressed by clauses (iv) and (v) above, but including any other evidence of indebtedness of the Company or such Significant Subsidiary) and such failure shall continue beyond any period of grace provided with respect thereto, or (B) default in the observance or performance of any other agreement, term or condition contained in any such bond, debenture, note or other evidence of indebtedness; and the effect of such failure or default in clause (A) or (B) is to cause, or permit the holder thereof to cause, indebtedness in an aggregate amount of One Million Dollars ($1,000,000) or more to become due prior to its stated date of maturity and such failure shall continue for thirty (30) days;

(viii) An involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (A) liquidation, reorganization or other relief in respect of the Company or any Significant Subsidiary or its debts, or of a substantial part of its assets, under any federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (B) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Company or any Significant Subsidiary or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for thirty (30) days or an order or decree approving or ordering any of the foregoing shall be entered;

(ix) The Company or any Significant Subsidiary shall (A) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (B) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (viii) of this Section, (C) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Company or any Significant Subsidiary or for a substantial part of its assets, (D) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (E) make a general assignment for the benefit of creditors or (F) take any action for the purpose of effecting any of the foregoing;

(x) One or more judgments for the payment of money in an amount in excess of Five Million Dollars ($5,000,000) in the aggregate, outstanding at any one time, shall be rendered against the Company or any Significant Subsidiary and the same shall remain undischarged for a period of sixty (60) days during which execution shall not be effectively stayed, or any judgment, writ, assessment, warrant of attachment, or execution or similar process shall be issued or levied against a substantial part of the property of the Company or any Significant Subsidiary and such judgment, writ, or similar process shall not be released, stayed, vacated or otherwise dismissed within sixty (60) days after issue or levy;

(xi) This Note or the Security Agreement shall cease, for any reason, to be in full force and effect, or the Company or any Significant Subsidiary shall so assert in writing or shall disavow any of its obligations thereunder;

(xii) Any Lien purported to be created under the Security Agreement shall cease to be, or shall be asserted by the Company or any Significant Subsidiary not to be, a valid and perfected Lien on any Collateral, with the priority required by the Security Agreement; or

(xiii) The Company shall fail to observe or perform any other covenant, obligation, condition or agreement contained in this Note or the Security Agreement and, to the extent such failure is capable of being cured, such failure shall continue for sixty (60) days.

(b) Event of Default Redemption Right. Promptly after the occurrence of an Event of Default with respect to this Note, the Company shall deliver written notice thereof via facsimile and overnight courier (an “Event of Default Notice”) to the Holder. The Holder, by written notice to the Company, may declare all outstanding amounts payable by the Company hereunder to be immediately due and payable without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein to the contrary notwithstanding (“Redemption Price”). Upon the occurrence or existence of any Event of Default described in Sections (viii), (ix) or (x) hereof, immediately and without notice, all outstanding amounts payable by the Company hereunder shall automatically become immediately due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein to the contrary notwithstanding. In addition to the foregoing remedies, upon the occurrence or existence of any Event of Default, the Holder may exercise, upon the approval of Holders holding more than a majority of the aggregate principal balance of the Notes, any other right, power or remedy permitted to it by law, either by suit in equity or by action at law, or both.

8. REDEMPTION RIGHT UPON FUNDAMENTAL TRANSACTION. No sooner than twenty (20) days nor later than ten (10) days prior to the consummation of a Fundamental Transaction, but not prior to the public announcement of such Fundamental Transaction, the Company shall deliver written notice thereof via facsimile and overnight courier to the Holder (a “Fundamental Transaction Notice”). At any time during the period (the “Fundamental Transaction Period”) beginning after the Holder’s receipt of a Fundamental Transaction Notice and ending on the date that is one (1) Business Day before the Fundamental Transaction Effective Date, the Holder, at its option, may require the Company to redeem all or any portion of this Note by delivering written notice thereof (“Fundamental Transaction Redemption Notice”) to the Company, which Fundamental Transaction Redemption Notice shall indicate the Conversion Amount the Holder is electing to redeem. The portion of this Note subject to redemption pursuant to this Section 8 shall be redeemed by the Company in cash at a price equal to 101% of the Principal plus any accrued but unpaid Interest thereon up to, but not

including, the Fundamental Transaction Effective Date (the “Fundamental Transaction Redemption Price”) on the Fundamental Transaction Effective Date. Redemptions required by this Section 8 shall have priority to payments to stockholders in connection with a Fundamental Transaction. To the extent redemptions required by this Section 8 are deemed or determined by a court of competent jurisdiction to be prepayments of the Note by the Company, such redemptions shall be deemed to be voluntary prepayments. Notwithstanding anything to the contrary in this Section 8, until the Fundamental Transaction Redemption Price (together with interest thereon) is paid in full, the Conversion Amount submitted for redemption under this Section 8 may be converted, in whole or in part pursuant to Section 6. The parties hereto agree that in the event of the Company’s redemption of any portion of the Note under this Section 8, the Holder’s damages would be uncertain and difficult to estimate because of the parties’ inability to predict future interest rates and the uncertainty of the availability of a suitable substitute investment opportunity for the Holder. Accordingly, any redemption premium due under this Section 8 is intended by the parties to be, and shall be deemed, a reasonable estimate of the Holder’s actual loss of its investment opportunity and not as a penalty.

9. AUTOMATIC REDEMPTION UPON REDEMPTION OF GS NOTE. Notwithstanding anything herein to the contrary, upon the redemption of all or any portion of the GS Note in connection with a Fundamental Transaction, a pro rata portion of this Note, in the ratio of 1:½, shall automatically be redeemed by the Company in accordance with the terms of Section 8 hereof (the “Automatic Syntek Redemption”). Notwithstanding anything herein to the contrary, the aggregate Principal amount of this Note subject to the Automatic Syntek Redemption shall not exceed $1,500,000. For the avoidance of doubt and for illustrative purposes only, a redemption of $1,000,000 of Principal and accrued but unpaid Interest in respect of the GS Note would result in automatic redemption of $500,000 of Principal and accrued but unpaid Interest in respect of this Note.

10. RIGHTS UPON CERTAIN OTHER CORPORATE EVENTS. Subject to Section 8 and 9 herein, prior to the consummation of any Fundamental Transaction pursuant to which holders of Common Shares are entitled to receive securities or other assets with respect to or in exchange for Common Shares (a “Corporate Event”), the Company shall make appropriate provision to ensure that the Holder will thereafter have the right to receive upon a conversion of this Note, such securities or other assets received by the holders of Common Shares in connection with the consummation of such Corporate Event in such amounts as the Holder would have been entitled to receive had this Note initially been issued with conversion rights for the form of such consideration (as opposed to Common Shares) at a conversion rate for such consideration commensurate with the Conversion Rate. The provisions of this Section shall apply similarly and equally to successive Corporate Events unless or until the Note is redeemed or repaid.

11. ADJUSTMENT OF CONVERSION PRICE UPON SUBDIVISION OR COMBINATION OF COMMON SHARES. If the Company at any time on or after the Issuance Date subdivides (by any share split, share dividend, recapitalization or otherwise) one or more classes of its outstanding Common Shares into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. If the Company at any time on or after the Issuance Date combines (by combination, reverse share split or otherwise) one or more classes of its outstanding Common Shares into a smaller number of shares, the Conversion Price in effect immediately prior to such combination will be proportionately increased.

12. COVENANTS.

(a) Affirmative Covenants. Until all Principal and Interest and any other amounts due and payable under this Note have been paid in full in cash, the Company shall, and shall cause each Significant Subsidiary to:

(i) provide prompt written notice to the Holder of (x) the occurrence of any Event of Default, or any event which with the giving of notice or lapse of time, or both, would constitute an Event of Default, hereunder; and (y) any loss or damage to any Collateral (as defined in the Security Agreement) in excess of $500,000;

(ii) do or cause to be done all things reasonably necessary to preserve, renew and keep in full force and effect its legal existence; and

(iii) (A) keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities, (B) permit any representatives designated by the Holder, upon reasonable prior notice, to visit and inspect its properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times and as often as reasonably requested, and (C) provide to the Holder the same information rights as it provides to its stockholders.

(b) Negative Covenants. Until all Principal and Interest and any other amounts due and payable under this Note have been paid in full in cash, the Company shall not, and shall not permit any Subsidiary to:

(i) create, incur, assume or permit to exist any indebtedness or guarantee, directly or indirectly, except:

(A) indebtedness with respect to equipment leases or trade accounts of the Company or any Subsidiary arising in the ordinary course of business;

(B) indebtedness incurred in the ordinary course arising out of any lease agreement for the premises of the Company or any Significant Subsidiary;

(C) indebtedness incurred in the ordinary course of the Company or any Significant Subsidiary for employee-related obligations or commitments, including, but not limited to, obligations for the payment of salaries, accrued vacation days, severance, prior notice periods, managers’ insurance, pension funds and other approved employee benefits;

(D) indebtedness for Taxes (including municipality rates), assessments, levies to statutory bodies and government agencies, or similar charges, in all cases provided that such obligations were incurred in the ordinary course of business that are not yet due and payable;

(E) indebtedness under the Notes;

(F) indebtedness that is by its terms subordinate to the indebtedness under the Notes up to $5,000,000;

(G) up to $15,000,000 of indebtedness assumed by the Company in the acquisition of all or substantially all of the assets or capital stock of another Person; provided that, (a) such indebtedness existed at the time of such acquisition and was not created in anticipation thereof, (b) the aggregate amount of such indebtedness assumed in connection with such acquisition shall not exceed 25% of the aggregate amount of consideration paid by the Company for such acquisition and (c) any Liens securing such indebtedness do not at any time cover or encumber any assets or property other than the assets or property of the Person acquired which is financed by such indebtedness

(H) up to $2,500,000 of additional indebtedness in the aggregate outstanding at any time; and

(I) inter-company indebtedness for valid business purposes and consistent with the Company’s past practices.

(ii) create, incur, assume or suffer to exist any mortgage, pledge, security interest, assignment, lien (statutory or other), claim, encumbrance, license or sublicense or security interest (collectively, a “Lien”) in or upon any of its assets, except:

(A) Liens for Taxes, assessments or similar charges incurred in the ordinary course of business that are not yet due and payable,

(B) Licenses and sublicenses of the Company’s Intellectual Property Rights in the ordinary course of business;

(C) Liens created in connection with Section 12(b)(i)(B), (G), (H) and (J) above; and

(D) Liens created pursuant to the Security Agreement.

(iii) enter into any transaction, including, without limitation, the purchase, sale, or exchange of property or the rendering of any service with any Affiliate, except pursuant to the reasonable requirements of the Company’s or such Subsidiary’s business and upon fair and reasonable terms no less favorable to the Company or such Subsidiary, than would obtain in a comparable arm’s length transaction with a Person not an Affiliate as reasonably determined by the Audit Committee of the Company’s Board of Directors;

(iv) declare any cash dividends on any shares of any class of its capital stock or membership interests, or apply any of its property or assets to the purchase, redemption or other retirement of, or set apart any sum for the payment of any cash dividends on, or for the purchase, redemption or other retirement of, or make any other distribution by reduction of capital or otherwise in respect of, any shares of any class of its capital stock or membership interests, provided, however, that (i) any Subsidiary wholly owned by the Company may pay dividends directly to the Company and (ii) this restriction shall not apply to the repurchase of shares of Common Stock from employees, officers, directors, consultants or other persons performing services for the Company or any Subsidiary pursuant to agreements under which the Company has the option to repurchase such shares upon the occurrence of certain events, such as the termination of employment;

(v) sell, transfer, lease or otherwise dispose (including pursuant to a merger) of any asset with either a book or a market value greater than $1,000,000, except (a) sales, transfers, leases and other dispositions of inventory, used, obsolete or surplus equipment or other property and investments in each case in the ordinary course of business, (b) such sales, transfers or dispositions for cash or marketable securities which are reasonably approved by the Audit Committee of the Company’s Board of Directors or (c) assets that are substantially used in the Company’s wireless business;

(vi) create or acquire any new Significant Subsidiary;

(vii) make any capital expenditures (other than with respect to normal maintenance and replacement programs in the ordinary course of business) exceeding $1,000,000 in any fiscal year for the Company and its Significant Subsidiaries in the aggregate; or

(viii) permit the Subsidiaries that are not party to the Security Agreement to have assets in an aggregate amount greater than $500,000.

13. RESERVATION OF AUTHORIZED SHARES.

(a) Reservation. The Company shall have sufficient authorized and unissued Common Shares for each of the Notes equal to the number of Common Shares necessary to effect the conversion at the Conversion Rate with respect to the Conversion Amount of each such Note as of the Issuance Date. So long as any of the Notes are outstanding, the Company shall take all action necessary to reserve and keep available out of its authorized and unissued Common Shares, solely for the purpose of effecting the conversion of the Notes, the number of Common Shares as shall from time to time be necessary to effect the conversion of all of the Notes then outstanding; provided that at no time shall the number of Common Shares so available be less than the number of shares required to be reserved by the previous sentence (without regard to any limitations on conversions) (the “Required Amount”).

14. REDEMPTION MECHANICS. In the event that the Company does not pay the applicable Redemption Price to the Holder within five (5) Business Days, at any time thereafter and until the Company pays such unpaid Redemption Price in full, the Holder shall have the option, in lieu of redemption, to require the Company to promptly return to the Holder all or any portion of this Note representing the Conversion Amount that was submitted for redemption and for which the applicable Redemption Price has not been paid. Upon the Company’s receipt of such notice, (x) the Redemption Notice shall be null and void with respect to such Conversion Amount, (y) the Company shall immediately return this Note, or issue a new Note (in accordance with Section 19(d)) to the Holder representing such Conversion Amount.

15. RIGHTS UPON DISTRIBUTION OF ASSETS. If the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of Common Shares, by way of return of capital or otherwise (including, without limitation, any distribution of cash, shares or other securities, property or options by way of a dividend, spin off, reclassification, corporate

rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Note, then, in each such case any Conversion Price in effect immediately prior to the close of business on the record date fixed for the determination of holders of Common Shares entitled to receive the Distribution shall be reduced, effective as of the close of business on such record date, to a price determined by multiplying such Conversion Price by a fraction of which (i) the numerator shall be the Closing Bid Price of the Common Shares on the Business Day immediately preceding such record date minus the value of the Distribution (as determined in good faith by the Company’s Board of Directors) applicable to one Common Share, and (ii) the denominator shall be the Closing Bid Price of the Common Shares on the Business Day immediately preceding such record date.

16. VOTE TO ISSUE, OR CHANGE THE TERMS OF, NOTES. The Notes may be amended and any provision thereof may be waived by the Company with the affirmative vote or consent of each of (i) the Company, (ii) the Holder, and (iii) the holder of the GS Note; provided, however, that following repayment of $1,500,000 of the Principal amount of this Note (plus all accrued and unpaid Interest thereon), such amendment of or waiver under the Notes shall no longer require the written consent of the Holder; provided, further, however, that no such amendment or waiver may materially and adversely affect the economic interest of the Holder in the Company without the written consent of the Holder. Any change or amendment approved in accordance with this Section 16 shall be binding upon all existing and future holders of this Note or the Notes, as applicable.

17. TRANSFER. This Note and any Common Shares or other Equity Securities issued upon conversion of this Note may be offered, sold, assigned or transferred by the Holder without the consent of the Company in aggregate principal amounts of at least $500,000, subject only to the provisions of Section 4.1 of the Securities Purchase Agreement and compliance with applicable law.

18. RESTRICTIONS ON CONVERSION INTO COMMON STOCK. The Company shall not effect any conversion of this Note, and the Holder of this Note shall not have the right to convert any portion of this Note pursuant to Section 6(a), to the extent that after giving effect to such conversion, and taking into account all other shares of Common Stock beneficially owned by the Holder and its Affiliates, the Holder (together with the Holder’s Affiliates) would beneficially own in excess of 14.80% (the “Maximum Percentage”) of the number of shares of Common Stock outstanding immediately after giving effect to such conversion. For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which the determination of such sentence is being made, but shall exclude the number of shares of Common Stock

which would be issuable upon (A) conversion of the remaining, nonconverted portion of this Note beneficially owned by the Holder or any of its Affiliates and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates, in each case if such conversion or exercise of such instrument is not permitted in order to keep the Holder’s beneficial ownership of Common Stock at or below the Maximum Percentage. Except as set forth in the preceding sentence, for purposes of this Section 18, beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act. For purposes of this Section 18, in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Form 10-K, Form 10-Q or Form 8-K, as the case may be, (y) a more recent public announcement by the Company or (z) any other notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. For any reason and at any time, upon the written or oral request of the Holder, the Company shall within one (1) Business Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. By written notice to the Company, the Holder may from time to time increase or decrease the Maximum Percentage to any other percentage specified in such notice so long as such specified Maximum Percentage shall not exceed 14.80%; provided that (i) any such increase will not be effective until the sixty-first (61^st) day after such notice is delivered to the Company, and (ii) any such increase or decrease will apply only to the Holder and not to any other holder of Notes.

19. REISSUANCE OF THIS NOTE.

(a) Transfer. If this Note is to be transferred, the Holder shall surrender this Note to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Note (in accordance with Section 19(d)), registered as the Holder may request, representing the outstanding Principal being transferred by the Holder and, if less then the entire outstanding Principal is being transferred, a new Note (in accordance with Section 19(d)) to the Holder representing the outstanding Principal not being transferred. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of Section 6(d) following conversion or redemption of any portion of this Note, the outstanding Principal represented by this Note may be less than the Principal stated on the face of this Note.

(b) Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall execute and deliver to the Holder a new Note (in accordance with Section 19(d)) representing the outstanding Principal.

(c) Note Exchangeable for Different Denominations. This Note is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Note or Notes (in accordance with Section 19(d) and in principal amounts of at least $100,000) representing in the aggregate the outstanding Principal of this Note, and each such new Note will represent such portion of such outstanding Principal as is designated by the Holder at the time of such surrender.

(d) Issuance of New Notes. Whenever the Company is required to issue a new Note pursuant to the terms of this Note, such new Note (i) shall be of like tenor with this Note, (ii) shall represent, as indicated on the face of such new Note, the Principal remaining outstanding (or in the case of a new Note being issued pursuant to Section 19(a) or Section 19(c), the Principal designated, by the Holder which, when added to the principal represented by the other new Notes issued in connection with such issuance, does not exceed the Principal remaining outstanding under this Note immediately prior to such issuance of new Notes), (iii) shall have an issuance date, as indicated on the face of such new Note, which is the same as the Issuance Date of this Note, (iv) shall have the same rights and conditions as this Note, and (v) shall represent accrued and unpaid Interest on the Principal of this Note, from the Issuance Date.

20. REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note and any of the other Transaction Documents at law or in equity (including a decree of specific performance and/or other injunctive relief). Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction.

21. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If following an Event of Default (a) this Note is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts due under this Note or to enforce the provisions of this Note or (b) there occurs any bankruptcy, reorganization, receivership of the Company or other proceedings affecting Company creditors’ rights and involving a claim under this Note, then the Company shall pay the reasonable costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, but not limited to, attorneys’ fees and disbursements.

22. CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly drafted by the Company and all the Holders and shall not be construed against any person as the drafter hereof. The headings of this Note are for convenience of reference and shall not form part of, or affect the interpretation of, this Note.

23. FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of the Holder 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.

24. NOTICES. Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be delivered in accordance with Section 6.4 of the Securities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Note, including in reasonable detail a description of such action and the reason therefore. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon any adjustment of the Conversion Price, setting forth in

reasonable detail, and certifying, the calculation of such adjustment and (ii) at least twenty (20) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Shares or (B) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder.

25. CANCELLATION. After all Principal, accrued Interest and other amounts at any time owed on this Note have been paid in full, this Note shall automatically be deemed canceled, shall be surrendered to the Company for cancellation and shall not be reissued.

26. WAIVER OF NOTICE. To the extent permitted by law, the Company hereby waives demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note and the Securities Purchase Agreement.

27. GOVERNING LAW. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than 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 state courts of New York or in the federal courts located in the State of New York and waive trial by jury. Both parties agree to submit to the jurisdiction of such courts. 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 Note 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 this Note. Nothing contained herein shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’s obligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder.

28. INDEMNIFICATION.

(a) Subject to the limitations herein, the Company shall indemnify the Holder, and each Affiliate of the Holder (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, (excluding the legal fees of counsel for any Indemnitee), incurred by or asserted against any Indemnitee by a third party arising out of, in connection with, or as a result of: (i) the execution or delivery of this Note, the performance by the Company and its Subsidiaries hereto of their respective obligations hereunder or the consummation of or the use of the proceeds therefrom, or (ii) the material breach by the Company or any Subsidiary of (a) any representation, warranty, covenant or agreement contained herein or (b) any representation or warranty in Section 3.1 of the Securities Purchase Agreement, as they relate to this Note; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and non-appealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee.

(b) To the extent permitted by applicable law, the Company and the Holder hereof shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages arising out of, in connection with, or as a result of, the Note, the Securities Purchase Agreement and the Registration Rights Agreement or any agreement or instrument contemplated hereby or thereby, or the use of the proceeds thereof.

29. 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 Company to the Holder and thus refunded to the Company.

30. NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation or Bylaws, or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, 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 of this Note, and will at all times in good faith carry out all of the provisions of this Note and take all action as may be required to protect the rights of the Holder of this Note.

31. CERTAIN DEFINITIONS. For purposes of this Note, the following terms shall have the following meanings:

(a) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed.

(b) Calendar Quarter” means each of: the period beginning on and including January 1 and ending on and including March 31; the period beginning on and including April 1 and ending on and including June 30; the period beginning on and including July 1 and ending on and including September 30; and the period beginning on and including October 1 and ending on and including December 31.

(c) “Closing Date” shall have the meaning set forth in the Securities Purchase Agreement, which date is the date the Company initially issued Notes pursuant to the terms of the Securities Purchase Agreement.

(d) “Fundamental Transaction” means that the Company shall, directly or indirectly, in one or more related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Person, or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company to another Person, or (iii) be subject to an offer from another Person or group of related Persons (as defined in Sections 13(d) and 14(d) of the Exchange Act) other than the Holder to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding Voting Shares (not including any Voting Shares held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (iv) consummate a share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person or group of related Persons (as defined in Sections 13(d) and 14(d) of the Exchange Act) whereby such other Person or group acquires more than 50% of the outstanding Voting Shares (not including any Voting Shares held by the other Person other Persons making or party to, or associated or affiliated with the other Persons making or party to, such share purchase agreement or other business combination), or (v) enter into any “going private transaction” that meets the criteria of any transaction described under Section 13(e) of the Exchange Act and the rules promulgated thereunder, provided however, a Fundamental Transaction shall not include (i) any reorganization, recapitalization or reclassification of the Common Shares in which holders of the Company’s voting power immediately prior to such reorganization, recapitalization or reclassification continue after such reorganization, recapitalization or reclassification to hold publicly traded securities and, directly or indirectly, the voting power of the surviving entity or entities necessary to elect a majority of the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities, or (ii) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction of incorporation of the Company.

(e) “GAAP” means United States generally accepted accounting principles, consistently applied.

(f) “GS” means Goldman Sachs Investment Partners Master Fund, L.P.

(g) “GS Note” means that certain Senior Secured Convertible Note of even date herewith in the original principal amount of $38,000,000 issued by the Company to GS pursuant to the Securities Purchase Agreement.

(h) “Maturity Date” means the earlier of (i) 11:59 p.m., New York Time, on December 13, 2008 and (ii) the date on which the Company completes a Qualified Equity Investment.

(i) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity or a government or any department or agency thereof.

(j) “Redemption Notices” means, collectively, the Event of Default Redemption Notices, and the Fundamental Transaction Redemption Notices, each of the foregoing, individually, a Redemption Notice.

(k) “Registration Rights Agreement” means that certain Amended and Restated Registration Rights Agreement, dated as of the date hereof, by and among the Company and the holders of the Notes party thereto, relating to, among other things, the registration of the resale of the Common Shares issuable upon conversion of the Notes.

(l) “Required Holders” means the holders of Notes representing at least a majority of the aggregate principal amount of the Notes then outstanding.

(m) “Syntek” means Syntek Capital AG.

(n) “Syntek Note” means that certain Senior Secured Convertible Note of even date herewith in the original principal amount of $3,000,000 issued by the Company to Syntek pursuant to the Securities Purchaser Agreement.

(o) “SEC” means the United States Securities and Exchange Commission.

(p) “Tax” means any tax, levy, impost, duty or other charge or withholding of a similar nature (including any related penalty or interest).

(q) “Voting Shares” of a Person means capital shares of such Person of the class or classes pursuant to which the holders thereof have the general voting power to elect, or the general power to appoint, at least a majority of the board of directors, managers or trustees of such Person (irrespective of whether or not at the time capital shares of any other class or classes shall have or might have voting power by reason of the happening of any contingency).

[Signature Page Follows]

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as of the Issuance Date set out above.

	VYYO INC.


	By:	/s/ Wayne H. Davis
	Name: Wayne H. Davis
	Title: Chief Executive Officer

EX-10.44 10 a2186625zex-10_44.htm EXHIBIT 10.44

Exhibit 10.44

AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT

This AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this “Agreement”), is dated as of June 13, 2008, by and among Vyyo Inc., a Delaware corporation (the “Company”), and the undersigned Investors (each, an “Investor,” and collectively, the “Investors”).

WHEREAS:

A. In connection with the Securities Purchase Agreements dated March 18, 2006, March 28, 2007, and June 13, 2008 (collectively, the “Securities Purchase Agreements”) by and among the parties hereto, as applicable, the Company has agreed, upon the terms and subject to the conditions set forth in the Securities Purchase Agreements, to issue and sell to the Investors: (i) shares of the Company’s common stock (“Common Shares”), par value $0.0001 per share, (ii) convertible notes of the Company, including those issued with even date hereof (the “Convertible Notes”) which will, among other things, be convertible into shares of Common Stock (the “Conversion Shares”) in accordance with the terms of the Convertible Notes, and (iii) Warrants (the “Warrants”) have been exercised to purchase additional shares of Common Shares (as exercised collectively, the “Warrant Shares”);

B. Goldman Sachs Investment Partners Master Fund, L.P. (“Goldman”) possesses registration rights and other rights pursuant to an Amended and Restated Registration Rights Agreement dated as of March 28, 2007, between the Company and Goldman (the “Prior Agreement”);

C. Goldman is a Required Holder (as defined in the Prior Agreement), and desires to terminate the Prior Agreement and to accept the rights created pursuant hereto in lieu of the rights granted to it under the Prior Agreement; and

D. The Investors are parties to the Securities Purchase Agreement of even date herewith among the Company and the Investors, certain of the Company’s and such Investors’ obligations under which are conditioned upon the execution and delivery of this Agreement by such Investors and the Company.

NOW, THEREFORE, in consideration of the mutual promises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and each of the Investors hereby agree as follows:

1. Definitions.

Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth in the Securities Purchase Agreements. As used in this Agreement, the following terms shall have the following meanings:

(a) “Business Day” means any day other than Saturday, Sunday or any other day on which commercial banks in The City of New York are authorized or required by law to remain closed.

(b) “Closing Date” shall mean the date of this Agreement.

(c) “Effective Date” means the date the Registration Statement (as defined below) has been declared effective by the SEC.

(d) “Effectiveness Deadline” means the date which is one hundred and eighty (180) days after the after the Closing Date.

(e) “Investor” means an Investor or any transferee or assignee thereof to whom an Investor assigns its rights under this Agreement and who agrees to become bound by the provisions of this Agreement in accordance with Section 12 and any transferee or assignee thereof to whom a transferee or assignee assigns its rights under this Agreement and who agrees to become bound by the provisions of this Agreement in accordance with Section 12.

(f) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof.

(g) “register,” “registered,” and “registration” refer to a registration effected by preparing and filing one or more Registration Statements in compliance with the Securities Act and pursuant to Rule 415 and the declaration or ordering of effectiveness of such Registration Statement(s) by the SEC (as defined below).

(h) “Registrable Securities” means (i) the Common Shares, (ii) the Conversion Shares issued or issuable upon conversion of the Convertible Notes, (iii) the Warrant Shares issued upon exercise of the Warrants and (iv) any share capital of the Company issued or issuable with respect to the Common Shares, Conversion Shares or the Warrant Shares as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise, without regard to any limitations on conversions of the Convertible Notes or exercises of the Warrants; provided that, such Shares will not be deemed to be “Registrable Securities” if such Shares are sold or sellable under Rule 144 without restriction of the volume limitations of Rule 144(e).

(i) “Registration Statement” means a registration statement or registration statements of the Company filed under the Securities Act covering the Registrable Securities.

(j) “Required Holders” means the holders of at least a majority of the outstanding Registrable Securities.

(k) “Rule 415” means Rule 415 under the Securities Act or any successor rule providing for offering securities on a continuous or delayed basis.

(l) “SEC” means the United States Securities and Exchange Commission.

(m) “Securities Act” means the Securities Act of 1933, as amended.

2. Request for Registration.

(a) If the Company’s applicable Registrable Securities are eligible for listing on, and approved for listing by, any Eligible Market, and if the Company shall receive at any time after June 1, 2010 a written request from the Required Holders that the Company file a Registration Statement registering shares with an aggregate public offering price that would, net of underwriting discounts and commissions, exceed $10,000,000, then the Company shall, within ten (10) days of the receipt thereof, give written notice of such request to all Investors and shall, subject to the limitations of subsection 2(b), use its commercially reasonable efforts to effect as soon as practicable, and in any event within 60 days of the receipt of such request, the registration under the Securities Act on Form S-1 (or any comparable successor form) of all Registrable Securities which the Investors request to be registered, as specified by notice given by such Investors to the Company within twenty (20) days of the mailing of such notice by the Company in accordance with Section 11.

(b) If the Investors initiating the registration request hereunder (“Initiating Investors”) intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to this Section 2(b) and the Company shall include such information in the written notice referred to in Section 2(a). The underwriter will be selected by the Company and shall be acceptable to a majority in interest of the Initiating Investors. In such event, the right of any Investor to include its Registrable Securities in such registration shall be conditioned upon such Investor’s participation in such underwriting and the inclusion of such Investor’s Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Investors and such Investor) to the extent provided herein. All Investors proposing to distribute their securities through such underwriting shall, together with the Company, enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting. Notwithstanding any other provision of this Section 2(b), if the underwriter advises the Initiating Investors in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Initiating Investors shall so advise all Investors holding Registrable Securities which would otherwise be underwritten pursuant hereto, and the number of shares of Registrable Securities that may be included in the underwriting shall be allocated among all holders thereof, including the Initiating Investors, in proportion (as nearly as practicable) to the amount of Registrable Securities of the Company owned by each holder; provided, however, that the number of shares of Registrable Securities to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting. If any Investor would thus be entitled to include more securities than such Investor requested to be registered, the excess shall be allocated among the other remaining requesting Investors in the manner described in the immediately preceding sentence.

(c) Notwithstanding the foregoing, if the Company shall furnish to Investors requesting a Registration Statement pursuant to this Section 2, a certificate signed by the Chief Executive Officer of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its stockholders for such Registration Statement to be filed owing to a material pending transaction or

development and it is therefore essential to defer the filing of such Registration Statement, the Company shall have the right to defer taking action with respect to such filing for a period of not more than ninety (90) days after receipt of the request of the Initiating Investors; provided, however, that the Company may not utilize this right more than once in any twelve (12)- month period.

(d) In addition, the Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to this Section 2:

(i) in any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration, qualification or compliance, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act;

(ii) after the Company has effected two such (2) registrations on behalf of the Investors pursuant to this Section 2. For purposes of this paragraph, a Registration Statement shall not be counted until such time as such Registration Statement has been declared effective by the SEC, unless the Initiating Investors withdraw their request for such registration other than as a result of material adverse information concerning the business or financial condition of the Company which was not known to the Initiating Investors prior to the date on which such registration was requested and elect not to pay the registration expenses therefor;

(iii) during the ninety (90) day period prior to the Company’s good faith estimate of the date of filing of, and ending on a date one hundred eighty (180) days after the effective date of, a Company initiated registration subject to Section 3 hereof; provided that the Company is actively employing in good faith its commercially reasonable efforts to cause such registration statement to become effective and that the Company’s estimate of the date of filing such registration statement is made in good faith; or

(iv) if the Initiating Investors propose to dispose of shares of Registrable Securities that may be immediately registered on Form S-3 pursuant to a request made pursuant to Section 4 below.

3. Company Registration. If (but without any obligation to do so) the Company proposes to register (including for this purpose a registration effected by the Company for stockholders other than the Investors) any of its stock or other securities under the Securities Act in connection with the public offering of such securities solely for cash (other than a registration relating solely to the sale of securities to participants in a Company stock plan, a registration on any form which does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities or a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities which are also being registered), the Company shall, at such time, promptly give each Investor written notice of such registration. Upon the written request of each Investor given within twenty (20) days after mailing of such notice by the Company in accordance with Section 15, the Company shall, subject to the provisions of Section 6(q), use its

commercially reasonable efforts to cause to be registered under the Securities Act all of the Registrable Securities that each such Investor has requested to be registered; provided that the Company shall have the right to postpone or withdraw any registration statement pursuant to this Section 3 without obligation to any Investors.

4. Form S-3 Registration. In case the Company shall receive from any Investor or Investors a written request or requests that the Company effect a registration on Form S-3 and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by such Investor or Investors, the Company will:

(a) promptly give written notice of the proposed registration, and any related qualification or compliance, to all other Investors;

(b) as soon as practicable, effect such registration and all such qualifications and compliances as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Investor’s or Investors’ Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other Investor joining in such request as are specified in a written request given within 15 days after receipt of such written notice from the Company; provided, however, that the Company shall not be obligated to effect any such registration, qualification or compliance, pursuant to this Section 4: (1) if Form S-3 is not available for such offering by the Investors; (2) if the Investors, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) at an aggregate price to the public (net of any underwriters’ discounts or commissions) of less than $2,000,000; (3) if the Company shall furnish to the Investors a certificate signed by the Chief Executive Officer of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its stockholders for such Form S-3 Registration to be effected at such time owing to a material pending transaction or development, in which event the Company shall have the right to defer the filing of the Form S-3 registration statement for a period of not more than ninety (90) days after receipt of the request of the Investor or Investors under this Section 4; provided, however, that the Company shall not utilize this right more than once in any twelve (12)- month period; (4) if the Company has, within the twelve (12) month period preceding the date of such request, already effected two (2) registrations on Form S-3 for the Investors pursuant to this Section 4; (5) in any particular jurisdiction in which the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance or (6) during the period ending one hundred eighty (180) days after the effective date of a registration statement subject to Section 3; and

(c) subject to the foregoing, the Company shall file a registration statement covering the Registrable Securities and other securities so requested to be registered as soon as practicable after receipt of the request or requests of the Investors. Registrations effected pursuant to this Section 4 are in addition to, and not in lieu of, their right to registration under Sections 2 and 3 and shall not be counted as demands for registration or registrations effected pursuant to Sections 2 or 3, respectively.

5. Legal Counsel. Subject to Section 8 hereof, the Required Holders shall have the right to select one legal counsel to review and oversee any registration pursuant to this Section 5 (“Legal Counsel”), which shall be Proskauer Rose LLP or such other counsel as thereafter designated by the Required Holders. The Company and Legal Counsel shall reasonably cooperate with each other in performing the Company’s obligations under this Agreement.

6. Related Obligations.

At such time as the Company is obligated to file a Registration Statement with the SEC pursuant to Sections 2, 3, or 4, the Company will use commercially reasonable efforts to effect the registration of the Registrable Securities in accordance with the intended method of disposition thereof and, pursuant thereto, the Company shall have the following obligations:

(a) Subject to sub-section (c) below, the Company shall submit to the SEC, within five (5) Business Days after the Company learns that no review of a particular Registration Statement will be made by the staff of the SEC or that the staff has no further comments on a particular Registration Statement, as the case may be, a request for acceleration of effectiveness of such Registration Statement to a time and date not later than 48 hours after the submission of such request. If the Required Holders request a shelf Registration Statement, the Company shall use commercially reasonable efforts to keep such Registration Statement effective pursuant to Rule 415 at all times until the earlier of (i) the date as of which the Investors may sell all of the Registrable Securities covered by such Registration Statement without the volume limitations pursuant to Rule 144(e) (or any successor thereto), (ii) such time as the Registrable Securities have been sold pursuant to such Registration Statement, or (iii) two years from the effectiveness of the first Registration Statement filed hereunder; provided however, that after such two years if counsel to an Investor (which may be in-house counsel) advises an Investor in writing that such Investor is unable to freely sell Registrable Securities pursuant to Rule 144(k), then the Company shall maintain an effective Registration Statement for the Conversion Shares until clause (i) or (ii) is satisfied, but not to exceed a period of up to an additional two years (together, the “Registration Period”) if such Investor has continuously held such Conversion Shares (or the Notes relating thereto two years from the date hereof). The Company shall take commercially reasonable efforts to ensure that each Registration Statement (including any amendments or supplements thereto and prospectuses contained therein) shall 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 (in the case of prospectuses, in the light of the circumstances in which they were made) not misleading.

(b) The Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to a Registration Statement and the prospectus used in connection with such Registration Statement, which prospectus is to be filed pursuant to Rule 424 promulgated under the Securities Act, as may be necessary to keep such Registration Statement effective at all times during the Registration Period, and, during such period, comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities of the Company covered by such Registration Statement until such time as all of such Registrable Securities shall have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth in such Registration Statement. In the case of amendments and supplements to a Registration Statement which are required to be

filed pursuant to this Agreement (including pursuant to this Section 6(b)) by reason of the Company filing a report on Form 10-Q, Form 10-K or any analogous report under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company shall have incorporated such report by reference into such Registration Statement, if applicable, or, if necessary, shall file such amendments or supplements with the SEC on the same day on which the Exchange Act report is filed which created the requirement for the Company to amend or supplement such Registration Statement.

(c) The Company shall (A) permit Legal Counsel to review and comment upon (i) a Registration Statement at least five (5) Business Days prior to its filing with the SEC and (ii) all amendments and supplements to all Registration Statements (except for Annual Reports on Form 10-K, and Reports on Form 10-Q and any similar or successor reports) within a reasonable number of days prior to their filing with the SEC, and (B) not file any Registration Statement or amendment or supplement thereto in a form to which Legal Counsel reasonably and timely objects. The Company shall not submit a request for acceleration of the effectiveness of a Registration Statement or any amendment or supplement thereto without the prior approval of Legal Counsel, which consent shall not be unreasonably withheld. The Company shall furnish to Legal Counsel, without charge, (i) copies of any correspondence from the SEC or the staff of the SEC to the Company or its representatives relating to any Registration Statement, (ii) promptly after the same is prepared and filed with the SEC, one copy of any Registration Statement and any amendment(s) thereto, including financial statements and schedules, all documents incorporated therein by reference, if requested by an Investor, and all exhibits and (iii) upon the effectiveness of any Registration Statement, one copy, of the prospectus included in such Registration Statement and all amendments and supplements thereto. The Company shall reasonably cooperate with Legal Counsel in performing the Company’s obligations pursuant to this Section 6.

(d) The Company shall furnish to each Investor whose Registrable Securities are included in any Registration Statement, without charge, (i) promptly after the same is prepared and filed with the SEC, at least one copy of such Registration Statement and any amendment(s) thereto, including financial statements and schedules, all documents incorporated therein by reference, if requested by an Investor, all exhibits and each preliminary prospectus, (ii) upon the effectiveness of any Registration Statement, ten (10) copies of the prospectus included in such Registration Statement and all amendments and supplements thereto (or such other number of copies as such Investor may reasonably request) and (iii) such other documents, including copies of any preliminary or final prospectus, as such Investor may reasonably request from time to time in order to facilitate the disposition of the Registrable Securities owned by such Investor.

(e) The Company shall use commercially reasonable efforts to (i) register and qualify, unless an exemption from registration and qualification applies, the resale by Investors of the Registrable Securities covered by a Registration Statement under such other securities or “blue sky” laws of all said jurisdictions in the United States where Investors intend to sell Shares, (ii) prepare and file in those jurisdictions, such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Registration Period, (iii) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all times during

the Registration Period, and (iv) take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (x) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 6(e) or where qualification necessitates undue time or expense, (y) subject itself to general taxation in any such jurisdiction, or (z) file a general consent to service of process in any such jurisdiction. The Company shall promptly notify Legal Counsel and each Investor who holds Registrable Securities of the receipt by the Company of any notification with respect to the suspension of the registration or qualification of any of the Registrable Securities for sale under the securities or “blue sky” laws of any jurisdiction in the United States or its receipt of actual notice of the initiation or threatening of any proceeding for such purpose.

(f) The Company shall notify Legal Counsel and each Investor in writing of the happening of any event, as promptly as practicable after becoming aware of such 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 omission to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (provided that in no event shall the Company deliver such notice to the Investors without the Investors’ prior consent if such notice contains any material, nonpublic information), and, subject to Section 6(r), promptly prepare a supplement or amendment to such Registration Statement to correct such untrue statement or omission, and deliver ten (10) copies of such supplement or amendment to Legal Counsel and each Investor (or such other number of copies as Legal Counsel or such Investor may reasonably request). The Company shall also promptly notify Legal Counsel and each Investor in writing (i) when a prospectus or any prospectus supplement or post-effective amendment has been filed, and when a Registration Statement or any post-effective amendment has become effective (notification of such effectiveness shall be delivered to Legal Counsel and each Investor by facsimile or e-mail on the same day of such effectiveness and by overnight mail), (ii) of any request by the SEC for amendments or supplements to a Registration Statement or related prospectus or related information, and (iii) of the Company’s reasonable determination that a post-effective amendment to a Registration Statement would be appropriate.

(g) The Company shall use commercially reasonable efforts to prevent the issuance of any stop order or other suspension of effectiveness of a Registration Statement, or the suspension of the qualification of any of the Registrable Securities for sale in any jurisdiction and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest possible moment and to notify Legal Counsel and each Investor who holds Registrable Securities being sold of the issuance of such order and the resolution thereof or its receipt of actual notice of the initiation or threat of any proceeding for such purpose.

(h) The Company agrees that, if Goldman (together with any affiliate of Goldman, the “GS Entities” or the “GS Entity”) or any GS Entity could reasonably be deemed to be an “underwriter,” as defined in Section 2(a)(11) of the Securities Act, in connection with any registration of the Company’s securities of any GS Entity pursuant to this Agreement, and any amendment or supplement thereof (any such registration statement or amendment or supplement a “GS Underwriter Registration Statement”), then the Company will cooperate with such GS Entity in allowing such GS Entity to conduct customary “underwriter’s due

diligence” with respect to the Company and satisfy its obligations in respect thereof. In addition, at Goldman’s request, the Company will use commercially reasonable efforts to cause its auditor or counsel to furnish to Goldman, on the first date of the effectiveness of the GS Underwriter Registration Statement (i) a letter, dated such date, from the Company’s independent certified public accountants in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to Goldman, and (ii) an opinion, dated as of such date, of counsel representing the Company for purposes of such GS Underwriter Registration Statement, in form, scope and substance as is customarily given in an underwritten public offering, including, without limitation, a standard “10b-5” statement for such offering, addressed to Goldman; such comfort letter, legal opinion and/or 10b-5 statement shall be furnished to Goldman (A) at no additional cost to Goldman if they are already provided to another party in connection with a GS Underwriter Registration or (B) at Goldman’s expense if such comfort letter, legal opinion and/or 10b-5 statement are not otherwise being provided in connection with a GS Underwriter Statement. The Company will also permit legal counsel to Goldman to review and comment upon any such GS Underwriter Registration Statement at least five (5) business days prior to its filing with the SEC and all amendments and supplements to any such GS Underwriter Registration Statement within a reasonable number of days prior to their filing with the SEC and not file any GS Underwriter Registration Statement or Amendment or supplement thereto in a form to which Goldman’s legal counsel reasonably and timely objects.

(i) The Company shall use commercially reasonable efforts either to (i) cause all of the Registrable Securities covered by a Registration Statement to be listed on each securities exchange on which securities of the same class or series issued by the Company are then listed, if any, if the listing of such Registrable Securities is then permitted under the rules of such exchange, or (ii) secure designation and quotation of all of the Registrable Securities covered by a Registration Statement on the American Stock Exchange or (iii) if, despite the Company’s commercially reasonable efforts to satisfy the preceding clauses (i) or (ii) the Company is unsuccessful in satisfying the preceding clauses (i) or (ii), to secure the inclusion for quotation on The Nasdaq Capital Market for such Registrable Securities and, without limiting the generality of the foregoing, to use its best efforts to arrange for at least two market makers to register with the U.S. Financial Industry Regulatory Authority (formerly the National Association of Securities Dealers Inc.) as such with respect to such Registrable Securities. The Company shall pay all fees and expenses in connection with satisfying its obligation under this Section 6(i).

(j) The Company shall cooperate with the Investors who hold Registrable Securities being offered and, to the extent applicable, facilitate the timely preparation and delivery of certificates (not bearing any restrictive legend) representing the Registrable Securities to be offered and resold pursuant to a Registration Statement and enable such certificates to be in such denominations or amounts, as the case may be, as the Investors may reasonably request and registered in such names as the Investors may request.

(k) If requested by an Investor, the Company shall (i) as soon as practicable incorporate in a prospectus supplement or post-effective amendment such information as an Investor reasonably requests to be included therein relating to the sale and distribution of Registrable Securities, including, without limitation, information with respect to the number of Registrable Securities being offered or sold, the purchase price being paid therefor and any other

terms of the offering of the Registrable Securities to be sold in such offering; (ii) as soon as practicable make all required filings of such prospectus supplement or post-effective amendment after being notified of the matters to be incorporated in such prospectus supplement or post-effective amendment; and (iii) as soon as practicable, supplement or make amendments to any Registration Statement if reasonably requested by an Investor holding any Registrable Securities.

(l) The Company shall use commercially reasonable efforts to cause the Registrable Securities covered by a Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to consummate the disposition of such Registrable Securities.

(m) The Company shall make generally available to its security holders as soon as practical, but not later than ninety (90) days after the close of the period covered thereby, an earnings statement (in form complying with, and in the manner provided by, the provisions of Rule 158 under the Securities Act) covering a twelve (12)- month period beginning not later than the first day of the Company’s fiscal quarter next following the effective date of a Registration Statement.

(n) The Company shall otherwise use commercially reasonable efforts to comply with all applicable rules and regulations of the SEC in connection with any registration hereunder.

(o) Within two (2) Business Days after a Registration Statement which covers Registrable Securities is declared effective by the SEC, the Company shall deliver, and shall cause legal counsel for the Company to deliver, to the transfer agent for such Registrable Securities (with copies to the Investors whose Registrable Securities are included in such Registration Statement) confirmation that such Registration Statement has been declared effective by the SEC.

(p) Notwithstanding anything to the contrary herein, at any time the Company may delay filing the Registration Statement or amendment or supplement thereto or the disclosure of material, non-public information concerning the Company, if, in the good faith opinion of the Board of Directors, the disclosure of which at the time would be seriously detrimental to the Company and its stockholders, (a “Grace Period”); provided, that the Company shall promptly (i) notify the Investors in writing of the existence of material, non-public information giving rise to a Grace Period (provided that in each notice the Company will not disclose the content of such material, non-public information to the Investors without the prior written consent of the Investors) and the date on which the Grace Period will begin, and (ii) notify the Investors in writing of the date on which the Grace Period ends; and, provided further, that the aggregate days in the Grace Periods shall not exceed ninety (90) days during any three hundred sixty five (365) day period (an “Allowable Grace Period”). For purposes of determining the length of a Grace Period above, the Grace Period shall begin on and include the date the Investors receive the notice referred to in clause (i) and shall end on and include the later of the date the Investors receive the notice referred to in clause (ii) and the date referred to in such notice. The provisions of Section 6(g) hereof shall not be applicable during the period of any Allowable Grace Period. Upon expiration of the Grace Period, the Company shall again be bound by the first sentence of Section 6(f) with respect to the information giving rise thereto

unless such material, non-public information is no longer applicable. Notwithstanding anything to the contrary, the Company shall cause its transfer agent to deliver unlegended Common Shares to a transferee of an Investor in accordance with the terms of the Securities Purchase Agreements in connection with any sale of Registrable Securities with respect to which an Investor has otherwise complied with the requirements therein and entered into a contract for sale, and delivered a copy of the prospectus included as part of the applicable Registration Statement, prior to the Investor’s receipt of the notice of a Grace Period and for which the Investor has not yet settled.

(q) In the event of an underwritten public offering, any participant in the offering shall be required to enter into an underwriting agreement under the terms and conditions reasonably negotiated between the Company and the managing underwriter. All Investors proposing to distribute their securities through such underwriting shall (together with the Company) enter into an underwriting agreement in customary form with the managing underwriter selected for such underwriting by the Company. Notwithstanding any other provision of Section 6 herein, if the managing underwriter determines in its reasonable discretion that the success of the offering will be jeopardized without a limitation on the number of shares to be underwritten, the managing underwriter may in its reasonable discretion limit the Registrable Securities or other securities to be distributed through such underwriting pro rata, and if necessary, exclude all selling stockholders, to the extent that other stockholders of the Company that have registration rights have been similarly limited. If any Investor disapproves of the terms of any such underwriting, such Investor may elect to withdraw therefrom by written notice to the Company and the managing underwriter.

7. Obligations of the Investors.

(a) At least five (5) Business Days prior to the first anticipated filing date of a Registration Statement, the Company shall notify each Investor in writing of the information the Company requires from each such Investor if such Investor elects to have any of such Investor’s Registrable Securities included in such Registration Statement. It shall be a condition precedent to the obligations of the Company to complete the registration pursuant to this Agreement with respect to the Registrable Securities of a particular Investor that such Investor shall furnish 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 in accordance with the Securities Act to effect the effectiveness of the registration of such Registrable Securities and shall execute such documents in connection with such registration as the Company may reasonably request.

(b) Each Investor, by such Investor’s 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 any Registration Statement hereunder, unless such Investor has notified the Company in writing of such Investor’s election to exclude all of such Investor’s Registrable Securities from such Registration Statement.

(c) Each Investor agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 6(g) or the first sentence of 6(f), such Investor will immediately discontinue disposition of Registrable Securities pursuant to any

Registration Statement(s) covering such Registrable Securities until such Investor’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 6(g) or the first sentence of 6(f) or receipt of notice that no supplement or amendment is required. Notwithstanding anything to the contrary, the Company shall cause its transfer agent to deliver unlegended certificates representing Common Shares to a transferee of an Investor in accordance with the terms of the Securities Purchase Agreements in connection with any sale of Registrable Securities with respect to which an Investor has entered into a contract for sale prior to the Investor’s receipt of a notice from the Company of the happening of any event of the kind described in Section 6(g) or the first sentence of 6(f) and for which the Investor has not yet settled.

(d) Unless exempt from the prospectus delivery requirements of the Securities Act, pursuant to Rule 172 of the Securities Act, in connection with sales of Registrable Securities pursuant to the Registration Statement, each Investor covenants and agrees that it will comply with the prospectus delivery requirements Act as applicable to it in connection with sales of Registrable Securities pursuant to the Registration Statement.

8. Expenses of Registration.

Except as otherwise provided herein, all reasonable expenses, other than underwriting discounts and commissions, incurred in connection with registrations, filings or qualifications pursuant to Sections 2, 3, 4, 5 and 6, including, without limitation, all registration, listing and qualifications fees, printers and accounting fees, and fees and disbursements of counsel for the Company shall be paid by the Company.

9. Indemnification.

In the event any Registrable Securities are included in a Registration Statement under this Agreement:

(a) To the fullest extent permitted by law, the Company will, and hereby does, indemnify, hold harmless and defend each Investor, the directors, officers, members, partners, employees, agents, representatives of, and each Person, if any, who controls any Investor within the meaning of the Securities Act or the Exchange Act (each, an “Indemnified Person”), against any losses, claims, damages, liabilities, judgments, fines, penalties, charges, costs, reasonable attorneys’ fees, amounts paid in settlement or expenses, joint or several, (collectively, “Damages”) incurred in investigating, preparing or defending any action, claim, suit, inquiry, proceeding, investigation or appeal taken from the foregoing by or before any court or governmental, administrative or other regulatory agency, body or the SEC, whether pending or threatened, whether or not an indemnified party is or may be a party thereto (“Indemnified Damages”), to which any of them may become subject insofar as such Damages (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement of a material fact in a Registration Statement or any post-effective amendment thereto or in any filing made in connection with the qualification of the offering under the securities or other “blue sky” laws of any jurisdiction in which Registrable Securities are offered (“Blue Sky Filing”), or the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements

therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus if used prior to the effective date of such Registration Statement, or contained in the final prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in the light of the circumstances under which the statements therein were made, not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any other law, including, without limitation, any state securities law, or any rule or regulation thereunder relating to the offer or sale of the Registrable Securities pursuant to a Registration Statement (the matters in the foregoing clauses (i) through (iii) being, collectively, “Violations”). Subject to Section 9(c), the Company shall reimburse the Indemnified Persons, promptly as such expenses are incurred and are due and payable, for any reasonable legal fees or other reasonable expenses incurred by them in connection with investigating or defending any such Damages. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 9(a): (i) shall not apply to Damages incurred by an Indemnified Person arising out of or based upon a Violation which occurs in reliance upon and in conformity with information furnished in writing to the Company by such Indemnified Person expressly for use in connection with the preparation of the Registration Statement or any such amendment thereof or supplement thereto, if such prospectus was timely made available by the Company pursuant to Section 6(d); (ii) with respect to any preliminary prospectus, shall not inure to the benefit of any such Person from whom the Person asserting any such Damages purchased the Registrable Securities that are the subject thereof (or to the benefit of any Person controlling such Person) if the untrue statement or omission of material fact contained in the preliminary prospectus was corrected in the prospectus, as then amended or supplemented, if such prospectus was timely made available by the Company pursuant to Section 6(d), and the Indemnified Person was promptly advised in writing not to use the incorrect prospectus prior to the use giving rise to a violation and such Indemnified Person, notwithstanding such advice, used it or failed to deliver the correct prospectus as required by the Securities Act and such correct prospectus was timely made available pursuant to Section 6(d); (iii) shall not be available to the extent such Damages are based on a failure of the Investor to deliver or to cause to be delivered the prospectus made available by the Company, including a corrected prospectus, if such prospectus or corrected prospectus was timely made available by the Company pursuant to Section 6(d); and (iv) shall not apply to amounts paid in settlement of any Damages if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld or delayed. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person and shall survive the transfer of the Registrable Securities by the Investors pursuant to Section 12.

(b) In connection with any Registration Statement in which an Investor is participating, each such Investor agrees to severally and not jointly indemnify, hold harmless and defend, to the same extent and in the same manner as is set forth in Section 9(a), the Company, each of its directors, each of its officers who signs the Registration Statement and each Person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act (each, an “Indemnified Party”), against any Damages or Indemnified Damages to which any of them may become subject, under the Securities Act, the Exchange Act or otherwise, insofar as such Damages or actions or proceedings whether commenced or threatened in respect thereof arise out of or are based upon any Violation, in each case to the extent, and only to the extent,

that such Violation occurs in reliance upon and in conformity with written information furnished to the Company by such Investor expressly for use in connection with such Registration Statement or any post-effective amendment thereof or any prospectus contained therein; and, subject to Section 9(c), such Investor will reimburse any legal or other expenses reasonably incurred by an Indemnified Party in connection with investigating or defending any such Damages as promptly as such expenses are incurred and are due and payable; provided, however, that the indemnity agreement contained in this Section 9(b) and the agreement with respect to contribution contained in Section 10 shall not apply to amounts paid in settlement of any Damages if such settlement is effected without the prior written consent of such Investor, which consent shall not be unreasonably withheld or delayed; provided, further, however, that the Investor shall be only liable under this Section 9(b), together with any amount of contribution contained in Section 10, for only that amount of Damages or Indemnified Damages as does not exceed the net proceeds to such Investor as a result of the sale of Registrable Securities pursuant to such Registration Statement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified Party and shall survive the transfer of the Registrable Securities by the Investors pursuant to Section 12. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 9(b) with respect to any preliminary prospectus shall not inure to the benefit of any Indemnified Party if the untrue statement or omission of material fact contained in the preliminary prospectus was corrected on a timely basis in the prospectus, as then amended or supplemented.

(c) Promptly after receipt by an Indemnified Person or Indemnified Party under this Section 9 of notice of the commencement of any action or proceeding (including any governmental action or proceeding) involving Damages, such Indemnified Person or Indemnified Party shall, if a claim for Damages in respect thereof is to be made against any indemnifying party under this Section 9, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel reasonably satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party, as the case may be; provided, however, that an Indemnified Person or Indemnified Party shall have the right to retain its own counsel with the reasonable fees and expenses of not more than one counsel for such Indemnified Person or Indemnified Party to be paid by the indemnifying party, if, in the reasonable opinion of counsel retained by the indemnifying party, the representation by such counsel of the Indemnified Person or Indemnified Party and the indemnifying party would be inappropriate due to actual or potential differing interests between such Indemnified Person or Indemnified Party and any other party represented by such counsel in such proceeding. In the case of an Indemnified Person, legal counsel referred to in the immediately preceding sentence shall be selected by the Company, subject to the reasonable consent of the Investors holding at least a majority in interest of the Registrable Securities included in the Registration Statement to which the Damages relates. The Indemnified Party or Indemnified Person shall cooperate fully with the indemnifying party in connection with any negotiation or defense of any such action or Damages by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Indemnified Party or Indemnified Person which relates to such action or Damages. The indemnifying party shall keep the Indemnified Party or Indemnified Person reasonably apprised at all times as to the status of the defense or any settlement negotiations with

respect thereto. No indemnifying party shall be liable for any settlement of any action, claim or proceeding effected without its prior written consent, provided, however, that the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the prior written consent of the Indemnified Party or Indemnified Person, consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party or Indemnified Person of a release from all liability in respect to such Damages or litigation. Following indemnification as provided for hereunder, the indemnifying party shall be subrogated to all rights of the Indemnified Party or Indemnified Person with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified Person or Indemnified Party under this Section 6, except to the extent that the indemnifying party is prejudiced in its ability to defend such action.

(d) The indemnification required by this Section 9 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or Indemnified Damages are incurred.

(e) The indemnity agreements contained herein shall be in addition to (i) any cause of action or similar right of the Indemnified Party or Indemnified Person against the indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject to pursuant to the law.

10. Contribution.

To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 9 to the fullest extent permitted by law; provided, however, that: (i) no Person involved in the sale of Registrable Securities which Person is guilty of fraudulent misrepresentation (within the meaning of Section 14(f) of the Securities Act) in connection with such sale shall be entitled to contribution from any Person involved in such sale of Registrable Securities who was not guilty of fraudulent misrepresentation; and (ii) contribution by any seller of Registrable Securities, together with any amount under Section 9, shall be limited in amount to the net amount of proceeds received by such seller from the sale of such Registrable Securities pursuant to such Registration Statement.

11. Reports Under the Exchange Act.

Following the Effective Date of any Registration Statement filed in accordance with this Agreement (but not before), with a view to making available to the Investors the benefits of Rule 144 promulgated under the Securities Act or any other similar rule or regulation of the SEC that may at any time permit the Investors to sell securities of the Company to the public without registration (“Rule 144”), the Company agrees to:

(a) make and keep public information available, as those terms are understood and defined in Rule 144;

(b) use reasonable, diligent efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act so long as the Company remains subject to such requirements and the filing of such reports and other documents is required for the applicable provisions of Rule 144; and

(c) furnish to each Investor so long as such Investor owns Registrable Securities, promptly upon written request, (i) a written statement by the Company, if true, that it has complied with the reporting requirements of Rule 144, the Securities Act and the Exchange Act, (ii) a copy of the most recent annual report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested to permit the Investors to sell such securities pursuant to Rule 144 without registration.

12. Assignment of Registration Rights.

The rights under this Agreement shall be automatically assignable by the Investors to any transferee of all or any portion of at least 100,000 shares of such Investor’s Registrable Securities if: (i) the Investor agrees in writing with the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the Company within ten (10) days after such assignment; (ii) the Company is, within ten (10) days after such transfer or assignment, furnished with written notice of (a) the name and address of such transferee or assignee, and (b) the securities with respect to which such registration rights are being transferred or assigned; (iii) immediately following such transfer or assignment the further disposition of such securities by the transferee or assignee is restricted under the Securities Act and applicable state securities laws; (iv) at or before the time the Company receives the written notice contemplated by clause (ii) of this sentence the transferee or assignee agrees in writing with the Company to be bound by all of the provisions contained herein; and (v) such transfer shall have been made in accordance with the applicable requirements of the Securities Purchase Agreements and applicable laws.

13. Amendment of Registration Rights.

Provisions of this Agreement may be amended and the observance thereof 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 Required Holders; provided, however, that no such amendment or waiver hereunder may materially and adversely affect the economic interest of an Investor hereunder without the written consent of such Investor. Any amendment or waiver effected in accordance with this Section 13 shall be binding upon each Investor and the Company. No such amendment shall be effective to the extent that it applies to less than all of the holders of the Registrable Securities. No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of any of this Agreement unless the same consideration also is offered to all of the parties to this Agreement.

14. Waiver by Goldman Under Prior Agreement.

Notwithstanding anything to the contrary contained herein, effective upon the Closing under the Securities Purchase Agreement and the execution of this Agreement, Goldman hereby waives any default by the Company under the Prior Agreement.

15. Miscellaneous.

(a) A Person is deemed to be a holder of Registrable Securities whenever such Person owns or is deemed to own of record such Registrable Securities. If the Company receives conflicting instructions, notices or elections from two or more Persons with respect to the same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from such record owner of such Registrable Securities.

(b) Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one Business Day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be:

If to the Company:

Vyyo Inc.

6625 The Corners Parkway

Suite 100

Norcross, Georgia 30092

Telephone: (678) 282-8000

Facsimile: (770) 447-2405

Attention: General Counsel

With a copy to:

Warner Norcross & Judd LLP

900 Fifth Third Center

111 Lyon Street, NW

Grand Rapids, Michigan 49503

Telephone: (616) 752-2137

Facsimile: (616) 222-2137

Attention: Stephen C. Waterbury

If to an Investor, to its address and facsimile number set forth on the Schedule of Investors attached hereto, with copies to such Investor’s representatives as set forth on the Schedule of Investors, or to such other address and/or facsimile number and/or to the attention of such other Person as the recipient party has specified by written notice given to each other party five (5) days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by a courier or overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.

(c) Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.

(d) All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

(e) This Agreement, the other Transaction Documents (as defined in the Securities Purchase Agreements) and the instruments referenced herein and therein constitute the entire agreement among the parties hereto with respect to the subject matter hereof and thereof. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and therein. This Agreement, the other Transaction Documents and the instruments referenced herein and therein supersede all prior agreements and understandings among the parties hereto with respect to the subject matter hereof and thereof.

(f) Subject to the requirements of Section 12, this Agreement shall inure to the benefit of and be binding upon the permitted successors and assigns of each of the parties hereto.

(g) The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

(h) This Agreement may be executed in identical counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement. This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement.

(i) Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

(j) All consents and other determinations required to be made by the Investors pursuant to this Agreement shall be made, unless otherwise specified in this Agreement, by the Required Holders.

(k) The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent and no rules of strict construction will be applied against any party.

(l) This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

(m) The obligations of each Investor hereunder are several and not joint with the obligations of any other Investor, and no provision of this Agreement is intended to confer any obligations on any Investor vis-à-vis any other Investor. Nothing contained herein, and no action taken by any Investor pursuant hereto, 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 herein.

IN WITNESS WHEREOF, each Investor and the Company have caused their respective signature page to this Amended and Restated Registration Rights Agreement to be duly executed as of the date first written above.

COMPANY:

VYYO INC.


By:	/s/ Wayne H. Davis
	Name:	Wayne H. Davis
	Title:	Chief Executive Officer


INVESTORS:

GOLDMAN SACHS INVESTMENT
PARTNERS MASTER FUND, L.P.

By:	Goldman Sachs Investment Partners GP, LLC, its General Partner

By:	/s/ Nick Advani
	Name:	Nick Advani
	Title:	Managing Director


SYNTEK CAPITAL AG

By:	/s Franco Franca
	Name: Franco Franca
	Title: CEO


By:	/s/ Paolo Giacometti
	Name: Paolo Giacometti
	Title: CFO

SCHEDULE OF INVESTORS

Names and Addresses:

Goldman Sachs Investment Partners Master Fund, L.P.

Attn: Nick Advani

One New York Plaza

New York, New York 10004

Facsimile: 212-346-3124

Telephone: 212-902-4934

with a copy to:

Goldman Sachs Investment Partners Master Fund, L.P.

Attn: Rashid Alvi

One New York Plaza

New York, NY 10004

Facsimile:

Telephone:

and

Proskauer Rose LLP

1585 Broadway

New York, New York 10036

Attention: Stuart Bressman, Esq.

Facsimile: (212) 969-3000

Telephone: (212) 969-2900

Syntek Capital AG

Zugspitzstrasse 15

82049 Pullach – Germany

Telephone: +498955277201

Facsimile: +498955277405

Attention: Paolo Giacometti

Email: paolo.giacometti@syntekcapital.com

with a copy to:

Jeff Neurman

Syntek Capital

939 Union Street, #6A

Brooklyn, NY 11215

Email: jeff.neurman@syntekcapital.com

EX-10.45 11 a2186625zex-10_45.htm EXHIBIT 10.45

Exhibit 10.45

GUARANTY AND SECURITY AGREEMENT

among

VYYO INC.,

EACH OF THE SUBSIDIARIES PARTY HERETO,

THE INVESTORS PARTY HERETO,

and

GOLDMAN SACHS INVESTMENT PARTNERS MASTER FUND, L.P., as Collateral
Agent

Dated as of June 13, 2008

TABLE OF CONTENTS

		Page

ARTICLE 1. DEFINITIONS; GUARANTY; GRANT OF SECURITY; CONTINUING PERFECTION AND PRIORITY		1

SECTION 1.1	GENERAL DEFINITIONS	1
SECTION 1.2	OTHER DEFINITIONS; INTERPRETATION	10
SECTION 1.3	GUARANTY	11
SECTION 1.4	GRANT OF SECURITY	15

ARTICLE 2. SECURITY FOR OBLIGATIONS; NO ASSUMPTION OF LIABILITY		17

SECTION 2.1	SECURITY FOR OBLIGATIONS	17
SECTION 2.2	NO ASSUMPTION OF LIABILITY	17

ARTICLE 3. REPRESENTATIONS AND WARRANTIES AND COVENANT		17

SECTION 3.1	GENERALLY	17
SECTION 3.2	EQUIPMENT AND INVENTORY	21
SECTION 3.3	RECEIVABLES	21
SECTION 3.4	INVESTMENT PROPERTY	23
SECTION 3.5	LETTER OF CREDIT RIGHTS	26
SECTION 3.6	INTELLECTUAL PROPERTY COLLATERAL	26
SECTION 3.7	COMMERCIAL TORT CLAIMS	28
SECTION 3.8	DEPOSIT ACCOUNTS; CONTROL ACCOUNTS	28

ARTICLE 4. FURTHER ASSURANCES		29

ARTICLE 5. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT		29

ARTICLE 6. REMEDIES UPON DEFAULT		30

SECTION 6.1	REMEDIES GENERALLY	30
SECTION 6.2	APPLICATION OF PROCEEDS OF SALE	32
SECTION 6.3	INVESTMENT PROPERTY	33
SECTION 6.4	GRANT OF LICENSE TO USE INTELLECTUAL PROPERTY	34

ARTICLE 7. REIMBURSEMENT OF COLLATERAL AGENT		34

ARTICLE 8. WAIVERS; AMENDMENTS		35

ARTICLE 9. SECURITY INTEREST ABSOLUTE		36

ARTICLE 10. TERMINATION; RELEASE		36

ARTICLE 11. ADDITIONAL SUBSIDIARY GUARANTORS AND GRANTORS		37

ARTICLE 12. COLLATERAL AGENT			37

ARTICLE 13. NOTICES			39

ARTICLE 14. BINDING EFFECT; SEVERAL AGREEMENT; ASSIGNMENTS			40

ARTICLE 15. SURVIVAL OF AGREEMENT; SEVERABILITY			41

ARTICLE 16. GOVERNING LAW			41

ARTICLE 17. COUNTERPARTS			41

ARTICLE 18. HEADINGS			41

ARTICLE 19. JURISDICTION; VENUE; CONSENT TO SERVICE OF PROCESS			42

ARTICLE 20. WAIVER OF JURY TRIAL			43

SCHEDULES:

Schedule I		List of Subsidiary Guarantors and Addresses for Notices
Schedule 3.1(a)(í)		List of Chief Executive Offices, Jurisdictions of Organization, Federal Employer Identification Numbers and Company Organizational Numbers
Schedule 3.1(a)(ii)		List of Legal and Other Names
Schedule 3.1(a)(v)		List of Filing Offices
Schedule 3.2		List of Locations of Equipment and Inventory
Schedule 3.3		List of Other Receivables
Schedule 3.4		List of Pledged Collateral, Investment Property and Securities Accounts
Schedule 3.5		List of Letters of Credit
Schedule 3.6		List of Intellectual Property
Schedule 3.7		List of Commercial Tort Claims
Schedule 3.8		List of Deposit Accounts

EXHIBITS:

Exhibit A		Form of Supplement
Exhibit B		Form of Blocked Account Letter
Exhibit C		Form of Control Account Letter
Exhibit D		Form of Vyyo Ltd. Pledge Agreement
Exhibit E		Form of Xtend Networks Ltd. Pledge Agreement

GUARANTY AND SECURITY AGREEMENT, dated as of June 13, 2008 (this “Guaranty and Security Agreement”), among Vyyo Inc., a Delaware corporation (the “Company”), each of the subsidiaries of the Company listed on Schedule I (each such subsidiary, individually, a “Subsidiary Guarantor” and, collectively, the “Subsidiary Guarantors”; the Subsidiary Guarantors and the Company are referred to collectively herein as the “Grantors”), the Investors from time to time party hereto (including their successors and assigns, the “Investors”) and GOLDMAN SACHS INVESTMENT PARTNERS MASTER FUND, L.P., as collateral agent for the benefit of the Secured Parties (including its successors and assigns and in such capacity, the “Collateral Agent”).

Reference is made to the Securities Purchase Agreement, dated as of June 13, 2008, among the Company and the Investors from time to time party thereto (as amended, supplemented or otherwise modified from time to time, the “Securities Purchase Agreement”).

The Investors have agreed to purchase Senior Secured Convertible Notes in the aggregate principal amount of $41,000,000 (as amended, supplemented or otherwise modified, the “Convertible Notes”) from the Company pursuant to, and upon the terms and subject to the conditions specified in, the Securities Purchase Agreement. Each of the Subsidiary Guarantors has agreed to guarantee, among other things, all the obligations of the Company and each other Subsidiary Guarantor under the Secured Transaction Documents (as defined in Section 1.1). The obligations of the Investors to purchase the Convertible Notes are conditioned upon, among other things, the execution and delivery by the Grantors of an agreement in the form hereof to guarantee and secure the Obligations.

Accordingly, the Grantors and the Collateral Agent, on behalf of itself and each other Secured Party (and each of their respective successors or assigns), hereby agree as follows:

ARTICLE 1.

DEFINITIONS; GUARANTY; GRANT OF SECURITY;
CONTINUING PERFECTION AND PRIORITY

Section 1.1 General Definitions

As used in this Guaranty and Security Agreement, the following terms shall have the meanings specified below:

“Account Debtor” means each Person who is obligated in respect of any Receivable or any Supporting Obligation or Collateral Support related thereto.

“Accounts” means all “accounts” as defined in Article 9 of the UCC.

“Additional Subsidiary Guarantor and Grantor” has the meaning assigned to such term in Article 11.

“Applicable Date” means (i) in the case of any Grantor (other than an Additional Subsidiary Guarantor and Grantor), the date hereof, and (ii) in the case of any Additional Subsidiary Guarantor and Grantor, the date of the Supplement executed and delivered by such Additional Subsidiary Guarantor and Grantor.

“Approved Securities Intermediary” means a Securities Intermediary or commodity intermediary selected or approved by the Collateral Agent and with respect to which a U.S. Grantor has delivered to the Collateral Agent an executed Control Account Letter.

“Authorization” means, collectively, any license, approval, permit or other authorization issued by Governmental Authority.

“Bankruptcy Law” means Title 11, U.S. Code, or any similar foreign, federal or state law for the relief of debtors.

“Blockage Notice” has the meaning specified in each Blocked Account Letter.

“Blocked Account” means a Deposit Account maintained by any U.S. Grantor with a Blocked Account Bank which account is the subject of an effective Blocked Account Letter, and includes all monies on. deposit therein and all certificates and instruments, if any, representing or evidencing such Blocked Account.

“Blocked Account Bank” means a financial institution selected or approved by the Collateral Agent and with respect to which a U.S. Grantor has delivered to the Collateral Agent an executed Blocked Account Letter.

“Blocked Account Letter” means a Blocked Account Letter, substantially in the form of Exhibit B (with such changes thereto as may be agreed to by the Collateral Agent), executed by the relevant U.S. Grantor and the Collateral Agent and acknowledged and agreed to by the relevant Blocked Account Bank.

“Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed.

“Cash Collateral Account” means any Deposit Account or Securities Account established by the Collateral Agent in which cash and/or Permitted Investments may from time to time be on deposit or held therein pursuant to the Secured Transaction Documents.

“Chattel Paper” means all “chattel paper” as defined in Article 9 of the UCC.

“Claim Proceeds” means, with respect to any Commercial Tort Claim or any Collateral Support or Supporting Obligation relating thereto, all Proceeds thereof, including all insurance proceeds and other amounts and recoveries resulting or arising from the settlement or other resolution thereof, in each case regardless of whether characterized as a “commercial tort claim” under Article 9 of the UCC or “proceeds” under the UCC.

“Collateral” has the meaning assigned to such term in Section 1.4(b).

“Collateral Agent” has the meaning assigned to such term in the introductory paragrpah of this Guaranty and Security Agreement.

“Collateral Records” means all books, instruments, certificates, Records, ledger cards, files, correspondence, customer lists, blueprints, technical specifications, manuals and other documents, and all computer software, computer printouts, tapes, disks and related data processing software and similar items, in each case that at any time represent, cover or otherwise evidence any of the Collateral.

“Collateral Support” means all property (real or personal) assigned, hypothecated or otherwise securing any of the Collateral, and shall include any security agreement or other agreement granting a lien or security interest in such real or personal property.

“Commercial Tort Claims” means (i) all “commercial tort claims” as defined in Article 9 of the UCC and (ii) all Claim Proceeds with respect to any of the foregoing; including all claims described on Schedule 3.7.

“Company” has the meaning assigned to such term in the preliminary statement of this Guaranty and Security Agreement.

“Concentration Account” means a Deposit Account of the U.S. Grantors with a bank or financial institution acceptable to the Collateral Agent, which shall be a Blocked Account.

“Control Account” means a Securities Account or commodity account maintained by any U.S. Grantor with an Approved Securities Intermediary which account is the subject of an effective Control Account Letter, and includes all Financial Assets held therein and all certificates and instruments, if any, representing or evidencing the Financial Assets held therein.

“Control Account Letter” means a Control Account Letter, substantially in the form of Exhibit C (with such changes thereto as may be agreed to by the Collateral Agent), executed by any U.S. Grantor and the Collateral Agent and acknowledged and agreed to by the relevant Approved Securities Intermediary.

“Convertible Notes” has the meaning assigned to such term in the preliminary statement of this Guaranty and Security Agreement.

“Copyright License” means any written agreement, now or hereafter in effect, granting any right to any third party under any Copyright now or hereafter owned or held by or behalf of any Grantor or which any Grantor otherwise has the right to license, or granting any right to any Grantor under any Copyright now or hereafter owned by any third party, and all rights of any Grantor under any such agreement, including each agreement described on Schedule 3.6.

“Copyrights” means all of the following: (i) all copyright rights in any work subject to the copyright laws of the United States or any other country, whether as author, assignee, transferee or otherwise, and (ii) all registrations and applications for registration of any such copyright in the United States or any other country, including registrations, recordings, supplemental registrations and pending applications for registration in the United States Copyright Office or any similar offices in the United States or any other country, including those described on Schedule 3.6.

“Deposit Accounts” means all “deposit accounts” as defined in Article 9 of the UCC, including all such accounts described on Schedule 3.4.

“Documents” means all “documents” as defined in Article 9 of the UCC.

“Equipment” means (i) all “equipment” as defined in Article 9 of the UCC, (ii) all machinery, manufacturing equipment, data processing equipment, computers, office equipment, furnishings, furniture, appliances, fixtures and tools, in each case, regardless of whether characterized as “equipment” under the UCC, and (iii) all accessions or additions to any of the foregoing, all parts thereof, whether or not at any time of determination incorporated or installed therein or attached thereto, and all replacements therefor, wherever located, now or hereafter existing.

“Equity Interest” means (i) shares of corporate stock, partnership interests, membership interests, and any other interest that confers on a Person the right to receive a share of the profits and losses of, or distribution of assets of, the issuing Person, and (ii) all warrants, options or other rights to acquire any Equity Interest set forth in clause (i) of this defined term.

“Equity Related Documents” means the Securities Purchase Agreement and the Registration Rights Agreement.

“Event of Default” has the meaning assigned to such term in the Convertible Notes.

“Financial Assets” means all “financial assets” as defined in Article 8 of the UCC.

“General Intangibles” means (i) all “general intangibles” as defined in Article 9 of the UCC and (ii) all choses in action and causes of action, all indemnification claims, all goodwill, all tax refunds, all licenses, permits, concessions, franchises and authorizations, all Intellectual Property, all Payment Intangibles and all Software, in each case, regardless of whether characterized as a “general intangible” under the UCC.

“Goods” means (i) all “goods” as defined in Article 9 of the UCC and (ii) all Equipment and Inventory and any computer program embedded in goods and any supporting information provided in connection with such program, to the extent (a) such program is associated with such goods in such a manner that it is customarily considered part of such goods or (b) by becoming the owner of such goods, a Person acquires a right to use the program in connection with such goods, in each case, regardless of whether characterized as a “good” under the UCC.

“Governmental Authority” means any nation or government, any state, province, city, municipal entity or other political subdivision thereof, and any governmental, executive, legislative, judicial, administrative or regulatory agency, department, authority, instrumentality, commission, board, bureau or similar body, whether federal, state, provincial, territorial, local or foreign.

“Grantor” and “Grantors” have the meanings assigned to such terms in the preliminary statement of this Guaranty and Security Agreement.

“Guaranteed Obligations” has the meaning assigned to such term in Section 1.3(a)(i).

“Instruments” means all “instruments” as defined in Article 9 of the UCC.

“Insurance” means all insurance policies covering any or all of the Collateral (regardless of whether the Collateral Agent or any other Secured Party is an additional named insured or the loss payee thereof) and all business interruption insurance policies.

“Intellectual Property” means all intellectual and similar property of any Grantor of every kind and nature, including inventions, designs, Patents, Copyrights, Trademarks, Licenses, domain names, Trade Secrets, confidential or proprietary technical and business information, know how, show how or other data or information, software and databases and all embodiments or fixations thereof and related documentation, registrations and franchises, and all additions, improvements and accessions to, and books and records describing or used in connection with, any of the foregoing.

“Inventory” means (i) all “inventory” as defined in Article 9 of the UCC and (ii) all goods held for sale or lease or to be furnished under contracts of service or so leased or furnished, all raw materials, work in process, finished goods and materials used or consumed in the manufacture, packing, shipping, advertising, selling, leasing, furnishing or production of such inventory or otherwise used or consumed in any U.S. Grantor’s business, all goods which are returned to or repossessed by or on behalf of any U.S. Grantor, and all computer programs embedded in any goods, and all accessions thereto and products thereof, in each case, regardless of whether characterized as “inventory” under the UCC.

“Investor” has the meaning assigned to such term in the preliminary statements of this Guaranty and Security Agreement.

“Investment Property” means, collectively, all “investment property” as defined in Article 9 of the UCC including all Pledged Collateral.

“Israeli Collateral” has the meaning assigned to such term in Section 1.4(b).

“Israeli Grantor” means each Subsidiary listed on Schedule I hereto under the heading “Israeli Subsidiary” and each Additional Subsidiary Guarantor and Grantor from time to time as made a party hereto (excluding any U.S. Grantor).

“Israeli Security Interest” has the meaning assigned to such term in Section 1.4(b).

“Letter of Credit Rights” means all “letter-of-credit rights” as defined in Article 9 of the UCC and (ii) all rights, title and interests of each U.S. Grantor to any letter of credit, in each case regardless of whether characterized as a “letter-of-credit right” under the UCC.

“License” means any Copyright License, Patent License, Trademark License, Trade Secret License or other license or sublicense to which any Grantor is a party.

“Lien” means any lien, mortgage, charge, claim, security interest, encumbrance, or right of first refusal.

“Obligations” means (i) the due and punctual payment of (a) principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Convertible Notes, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, and (b) all other monetary obligations, including fees, commissions, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Grantors to the Secured Parties, or that are otherwise payable to any Investor, in each case under the Secured Transaction Documents, (ii) the due and punctual performance of all covenants, agreements, obligations and liabilities of the Grantors or any other party (other than an Investor) under or pursuant to the Secured Transaction Documents, and (iii) the Guaranteed Obligations.

“Other Receivables” means receivables described on Schedule 3.3 hereto.

“Patent License” means any written agreement, now or hereafter in effect, granting to any third party any right to make, use or sell any invention on which a Patent, now or hereafter owned or held by or on behalf of any Grantor or which any Grantor otherwise has the right to license, is in existence, or granting to any Grantor any right to make, use or sell any invention on which a Patent, now or hereafter owned by any third party, is in existence, and all rights of any Grantor under any such agreement, including each agreement described on Schedule 3.6.

“Patents” means all of the following: (i) all letters patent of the United States or any other country, all registrations and recordings thereof and all applications for letters patent of the United States or any other country, including registrations, recordings and pending applications in the United States Patent and Trademark Office or any similar offices in the United States or any other country, including those described on Schedule 3.6, and (ii) all reissues, continuations, divisions, continuations in part, renewals or extensions thereof, and the inventions disclosed or claimed therein, including the right to make, use and/or sell the inventions disclosed or claimed therein.

“Payment Intangibles” means all “payment intangibles” as defined in Article 9 of the UCC.

“Permitted Investments” means investments permitted to be made pursuant to the Convertible Notes.

“Person” means any individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, or joint stock company.

“Pledged Collateral” means, collectively, Pledged Debt and Pledged Equity Interests.

“Pledged Debt” means all indebtedness owed or owing to any U.S. Grantor, including all indebtedness described on Schedule 3.4, all Instruments other than checks received in the ordinary course of business, Chattel Paper or other documents, if any, representing or evidencing such debt, and all interest, cash, instruments and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such debt.

“Pledged Equity Interests” means all Equity Interests owned or held by or on behalf of any U.S. Grantor, including all such Equity Interests described on Schedule 3.4, and all certificates, instruments and other documents, if any, representing or evidencing such Equity Interests and all interests of such U.S. Grantor on the books and records of the issuers of such Equity Interests, all of such U.S. Grantor’s right, title and interest in, to and under any partnership, limited liability company, shareholder or similar agreements to which it is a party, and all dividends, distributions, cash, warrants, rights, options, instruments, securities and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such Equity Interests.

“Proceeds” means (i) all “proceeds” as defined in Article 9 of the UCC, (ii) payments or distributions made with respect to any Investment Property, (iii) any payment received from any insurer or other Person or entity as a result of the destruction, loss, theft, damage or other involuntary conversion of whatever nature of any asset or property that constitutes the Collateral, and (iv) whatever is receivable or received when any of the Collateral or proceeds are sold, exchanged, collected or otherwise disposed of, whether such disposition is voluntary or involuntary, including any claim of any Grantor against any third party for (and the right to sue and recover for and the rights to damages or profits due or accrued arising out of or in connection with) (a) past, present or future infringement of any Patent now or hereafter owned or held by or on behalf of any Grantor, or licensed under a Patent License, (b) past, present or future infringement or dilution of any Trademark now or hereafter owned or held by or on behalf of any Grantor, or licensed under a Trademark License, or injury to the goodwill associated with or symbolized by any Trademark now or hereafter owned or held by or on behalf of any Grantor, (c) past, present or future infringement of any Copyright now or hereafter owned or held by or on behalf of any Grantor, or licensed under a Copyright License, (d) past, present or future infringement of any Trade Secret now or hereafter owned or held by or on behalf of any Grantor, or licensed under a Trade Secret License, and (e) past, present or future breach of any License, in each case, regardless of whether characterized as “proceeds” under the UCC.

“Receivables” means all rights to payment, whether or not earned by performance, for goods or other property sold, leased, licensed, assigned or otherwise disposed of, or services rendered or to be rendered, including all such rights constituting or evidenced by any Account, Chattel Paper, Instrument or other document, General Intangible or Investment Property, together with all of the applicable U.S. Grantor’s rights, if any, in any goods or other property giving rise to such right to payment, and all Collateral Support and Supporting Obligations related thereto and all Receivables Records.

“Receivables Records” means (i) all originals of all documents, instruments or other writings or electronic records or other Records evidencing any Receivable, (ii) all books, correspondence, credit or other files, Records, ledger sheets or cards, invoices, and other papers relating to such Receivable, including all tapes, cards, computer tapes, computer discs, computer runs and record keeping systems, whether in the possession or under the control of the applicable U.S. Grantor or any computer bureau or agent from time to time acting for such U.S. Grantor or otherwise, (iii) all evidences of the filing of financing statements relating to such Receivable and the registration of other instruments in connection therewith, and amendments, supplements or other modifications thereto, notices to other creditors or secured parties, and certificates, acknowledgments, or other writings, including lien search reports, from filing or other registration officers and (iv) all credit information, reports and memoranda relating to such Receivable.

“Record” means a “record” as defined in Article 9 of the UCC.

“Registration Rights Agreement” means the Amended and Restated Registration Rights Agreement dated as of June 13, 2008 by and among the Company and the Investors.

“Related Party” means, with respect to any specified Person, such Person’s affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person’s affiliates.

“Secured Parties” means (i) the Collateral Agent, (ii) the Investors under the Convertible Notes, (iii) the beneficiaries of each indemnification obligation undertaken by or on behalf of any Grantor under any Secured Transaction Document, and (iv) the successors and assigns of each of the foregoing.

“Secured Transaction Documents” means the Convertible Notes, this Guaranty and Security Agreement, any Blocked Account Letter, any Control Account Letter, and all other instruments, documents, certificates and agreements related thereto (exclusive of the Equity Related Documents).

“Securities Accounts” means all “securities accounts” as defined in Article 8 of the UCC, including all such accounts described on Schedule 3.4.

“Securities Intermediary” has the meaning specified in Article 8 of the UCC.

“Securities Purchase Agreement” has the meaning assigned to such term in the preliminary statement of this Guaranty and Security Agreement.

“Security Interest” has the meaning assigned to such term in Section 1.4(b).

“Software” means all “software” as defined in Article 9 of the UCC.

“Subsidiary Guarantor” has the meaning assigned to such term in Section the preliminary statement of this Guaranty and Security Agreement.

“Subsidiary Guaranty” has the meaning assigned to such term in Section 1.3(a)(i).

“Subordinated Obligations” has the meaning assigned to such term in Section 1.3(e).

“Supplement” means a supplement hereto, substantially in the form of Exhibit A.

“Supporting Obligation” means (i) all “supporting obligations” as defined in Article 9 of the UCC and (ii) all Guaranties and other secondary obligations supporting any of the Collateral, in each case regardless of whether characterized as a “supporting obligation” under the UCC.

“Trade Secret Licenses” means any written agreement, now or hereafter in effect, granting to any third party any right to use any Trade Secrets now or hereafter owned or held by or on behalf of any Grantor or which such Grantor otherwise has the right to license, or granting to any Grantor any right to use any Trade Secrets now or hereafter owned by any third party, and all rights of any Grantor under any such agreement, including each agreement described on Schedule 3.6.

“Trade Secrets” means all trade secrets and all other confidential or proprietary information and know-how now or hereafter owned or used in, or contemplated at any time for use in, the business of any Grantor (all of the foregoing being collectively called a “Trade Secret”), whether or not such Trade Secret has been reduced to a writing or other tangible form, including all documents and things embodying, incorporating or referring in any way to such Trade Secret, the right to sue for any past, present and future infringement of any Trade Secret, and all proceeds of the foregoing, including licenses, royalties, income, payments, claims, damages and proceeds of suit.

“Trademark License” means any written agreement, now or hereafter in effect, granting to any third party any right to use any Trademark now or hereafter owned or held by or on behalf of any Grantor or which such Grantor otherwise has the right to license, or granting to any Grantor any right to use any Trademark now or hereafter owned by any third party, and all rights of any Grantor under any such agreement, including each agreement described on Schedule 3.6.

“Trademarks” means all of the following: (i) all trademarks, service marks, trade names, corporate names, company names, business names, fictitious business names, trade styles, trade dress, logos, other source or business identifiers, designs and general intangibles of like nature, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all registration and recording applications filed in connection therewith, including

registrations and registration applications in the United States Patent and Trademark Office or any similar offices in the United States or any other country, and all extensions or renewals thereof, including those described on Schedule 3.6, (ii) all goodwill associated therewith or symbolized by any of the foregoing and (iii) all other assets, rights and interests that uniquely reflect or embody such goodwill.

“UCC” means the Uniform Commercial Code as in effect from time to time in the State of New York or, when the context implies, the Uniform Commercial Code as in effect from time to time in any other applicable jurisdiction.

“U.S. Collateral” has the meaning assigned to such term in Section 1.4(a).

“U.S. Grantor” means the Company and each Subsidiary listed on Schedule I hereto under the heading “U.S Subsidiary” and each Additional Subsidiary Guarantor and Grantor from time to time as made a party hereto (excluding any Israeli Grantor).

“U.S. Security Interest” has the meaning assigned to such term in Section 1.4(a).

“U.S. Subsidiary Guarantor” means any U.S. Grantor other than the Company.

Section 1.2 Other Definitions; Interpretation

(a) Other Definitions. Capitalized terms used herein and not otherwise defined herein, and the term “subsidiary” shall have the meanings assigned to such terms in the Securities Purchase Agreement.

(b) Rules of Interpretation. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified, (ii) any definition of or reference to any law shall be construed as referring to such law as from time to time amended and any successor thereto and the rules and regulations promulgated from time to time thereunder, (iii) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (iv) the words “herein”, “hereof’ and “hereunder”, and words of similar import, shall be construed to refer to this Guaranty and Security Agreement in its entirety and not to any particular provision hereof, (v) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to and any Supplement thereto, this Guaranty and Security Agreement, and (vi) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. All references herein to provisions of the UCC shall include all successor provisions under any subsequent version or amendment to any Article of the UCC.

Section 1.3 Guaranty

(a) Subsidiary Guaranty; Limitation of Liability.

(i) Each Subsidiary Guarantor jointly and severally, hereby absolutely, unconditionally and irrevocably guarantees, as a primary obligor and not merely as surety, to the Collateral Agent for the ratable benefit of the Secured Parties the punctual payment when due (but subject to the expiration of any grace period granted by the Secured Parties in their sole discretion or the giving of any required notice provided for in any secured Transaction Document), whether at scheduled maturity or on any date of a required prepayment or by acceleration, demand or otherwise, of the Obligations of the Company and each other Grantor now or hereafter existing under or in respect of the Secured Transaction Documents (including, without limitation, any extensions, modifications, substitutions, amendments or renewals of any or all of the foregoing Obligations), whether direct or indirect, absolute or contingent, and whether for principal, interest, premiums, fees, indemnities, contract causes of action, costs, expenses or otherwise (such Obligations being the “Guaranteed Obligations”), and agrees to pay any and all reasonable expenses (including, without limitation, reasonable fees and out-of-pocket expenses of counsel) incurred by the Collateral Agent or any other Investor in enforcing any rights under this Subsidiary Guaranty (the “Subsidiary Guaranty”) or any other Secured Transaction Document. Without limiting the generality of the foregoing, each Subsidiary Guarantor’s liability shall extend to all amounts that constitute part of the Guaranteed Obligations and would be owed by any other Grantor to the Collateral Agent or any Investor under or in respect of the Secured Transaction Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving such other Grantor.

(ii) Each Subsidiary Guarantor, and by its acceptance of the Subsidiary Guaranty, the Collateral Agent and each other Investor, hereby confirms that it is the intention of all such Persons that the Subsidiary Guaranty and the Obligations of each Subsidiary Guarantor hereunder not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar foreign, federal or state law to the extent applicable to the Subsidiary Guaranty and the Obligations of each Subsidiary Guarantor hereunder. To effectuate the foregoing intention, the Collateral Agent, the other Investors and the Subsidiary Guarantors hereby irrevocably agree that the Guaranteed Obligations of each Subsidiary Guarantor under the Subsidiary Guaranty at any time shall be limited to the maximum amount as will result in the Guaranteed Obligations of such Subsidiary Guarantor under the Subsidiary Guaranty not constituting a fraudulent transfer or conveyance.

(iii) Each Subsidiary Guarantor hereby unconditionally and irrevocably agrees that in the event any payment shall be required to be made to the Collateral Agent or any Investor under the Subsidiary Guaranty or any other guaranty, such Subsidiary Guarantor will contribute, to the maximum extent permitted by law, such amounts to each other Subsidiary Guarantor and each other guarantor so as to maximize the aggregate amount paid to the Collateral Agent and Investors under or in respect of the Secured Transaction Documents.

(b) Subsidiary Guaranty Absolute. Each U.S. Subsidiary Guarantor guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of the Secured Transaction Documents, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Collateral Agent or any Investor with respect thereto. The Obligations of each Subsidiary Guarantor under or in respect of the Subsidiary Guaranty are independent of the Guaranteed Obligations or any other Obligations of any other Grantor under or in respect of the Secured Transaction Documents, and a separate action or actions may be brought and prosecuted against each Subsidiary Guarantor to enforce the Subsidiary Guaranty, irrespective of whether any action is brought against the Company or any other Grantor or whether the Company or any other Grantor is joined in any such action or actions. The liability of each Subsidiary Guarantor under the Subsidiary Guaranty shall be irrevocable, absolute and unconditional irrespective of, and each Subsidiary Guarantor hereby irrevocably waives any defenses it may now have or hereafter acquire in any way relating to, any or all of the following:

(i) any lack of validity or enforceability of any Secured Transaction Document or any agreement or instrument relating thereto;

(ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations or any other Obligations of any other Grantor under or in respect of the Secured Transaction Documents, or any other amendment or waiver of or any consent to departure from any Secured Transaction Document, including, without limitation, any increase in the Guaranteed Obligations resulting from the extension of additional credit to any Grantor or any of its Subsidiaries or otherwise;

(iii) any taking, release or amendment or waiver of, or consent to departure from, any other guaranty, for all or any of the Guaranteed Obligations it being understood that any such amendment, waiver or consent shall be applicable to the Guaranteed Obligations of the Subsidiary Guarantors;

(iv) any change, restructuring or termination of the corporate structure or existence of any Grantor or any of its Subsidiaries;

(v) any failure of any Investor to disclose to any Grantor any information relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of any other Grantor now or hereafter known to such Investor (each Subsidiary Guarantor waiving any duty on the part of the Investors to disclose such information);

(vi) the failure of any other Person to execute or deliver this Guaranty and Security Agreement, any Supplement or any other guaranty or agreement or the release or reduction of liability of any Subsidiary Guarantor or other guarantor or surety with respect to the Guaranteed Obligations; or

(vii) any other circumstance (including, without limitation, any statute of limitations) or any existence of or reliance on any representation by any Investor that might otherwise constitute a defense available to, or a discharge of, any Grantor or any other guarantor or surety, in each case other than payment in full of the Guaranteed Obligations (other than contingent indemnification obligations).

This Subsidiary Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by any Investor or any other Person upon the insolvency, bankruptcy or reorganization of the Company or any other Grantor or otherwise, all as though such payment had not been made.

(c) Waivers and Acknowledgments. Each Subsidiary Guarantor hereby unconditionally and irrevocably waives:

(i) promptness, diligence, notice of acceptance, presentment, demand for performance, notice of nonperformance, default, acceleration, protest or dishonor and any other notice with respect to any of the Guaranteed Obligations and this Subsidiary Guaranty and any requirement that any Investor protect, secure, perfect or insure any Lien or any property subject thereto or exhaust any right or take any action against any Grantor or any other Person;

(ii) any right to revoke this Subsidiary Guaranty and acknowledges that this Subsidiary Guaranty is continuing in nature and applies to all Guaranteed Obligations, whether existing now or in the future;

(iii) (A) any defense arising by reason of any claim or defense based upon an election of remedies by any Investor that in any manner impairs, reduces, releases or otherwise adversely affects the subrogation, reimbursement, exoneration, contribution or indemnification rights of such Subsidiary Guarantor or other rights of such Subsidiary Guarantor to proceed against any of the other Grantors, any other guarantor or any other Person, and (B) any defense based on any right of set-off or counterclaim against or in respect of the Obligations of such Subsidiary Guarantor hereunder;

(iv) any duty on the part of any Investor to disclose to such Subsidiary Guarantor any matter, fact or thing relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of any other Grantor or any of its Subsidiaries now or hereafter known by such Investor; and

(v) each Subsidiary Guarantor acknowledges that it will receive substantial direct and indirect benefits from the financing arrangements contemplated by the Secured Transaction Documents and that the waivers set forth in Section 1.3(b) and this Section 1.3(c) are knowingly made in contemplation of such benefits.

(d) Subrogation. Each Subsidiary Guarantor hereby unconditionally and irrevocably agrees not to exercise any rights that it may now have or hereafter acquire against the Company, any other Grantor or any other insider guarantor that arise from the existence, payment, performance or enforcement of such Subsidiary Guarantor’s obligations under or in respect of this Subsidiary Guaranty or any other Secured Transaction Document, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of any Investor against the Company, any other Grantor or any other insider guarantor, whether or not such claim, remedy

or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from the Company, any other Grantor or any other insider guarantor, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right, unless and until all of the Guaranteed Obligations (other than contingent indemnification obligations) and all other amounts payable under this Subsidiary Guaranty shall have been paid in full in cash. If any amount shall be paid to any Subsidiary Guarantor in violation of the immediately preceding sentence at any time prior to the latest of the payment in full in cash of the Guaranteed Obligations (other than contingent indemnification obligations) and all other amounts payable under this Subsidiary Guaranty, such amount shall be received and held in trust for the benefit of the Investors, shall be segregated from other property and funds of such Subsidiary Guarantor and shall forthwith be paid or delivered to the Collateral Agent in the same form as so received (with any necessary endorsement or assignment) to be credited and applied to the Guaranteed Obligations and all other amounts payable under this Subsidiary Guaranty, whether matured or unmatured, in accordance with the terms of the Secured Transaction Documents, or to be held as collateral for any Guaranteed Obligations or other amounts payable under this Subsidiary Guaranty thereafter arising. If (i) any Subsidiary Guarantor shall make payment to any Investor of all or any part of the Guaranteed Obligations and (ii) all of the Guaranteed Obligations (other than contingent indemnification obligations) and all other amounts payable under this Subsidiary Guaranty shall have been paid in full in cash, the Investors will, at such Subsidiary Guarantor’s request and expense, execute and deliver to such Subsidiary Guarantor appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer by subrogation to such Subsidiary Guarantor of an interest in the Guaranteed Obligations resulting from such payment made by such Subsidiary Guarantor pursuant to this Subsidiary Guaranty.

(e) Subordination. Each Subsidiary Guarantor hereby subordinates any and all debts, liabilities and other Obligations owed to such Subsidiary Guarantor by each other Grantor (the “Subordinated Obligations”) to the Guaranteed Obligations to the extent and in the manner hereinafter set forth in this Section 1.3:

(i) Prohibited Payments, Etc. Except during the continuance of an Event of Default, each Subsidiary Guarantor may receive payments from any other Grantor on account of the Subordinated Obligations. After the occurrence and during the continuance of any Event of Default, however, any Subsidiary Guarantor may demand, accept or take any action to collect any payment on account of the Subordinated Obligations.

(ii) Prior Payment of Guaranteed Obligations. In any proceeding under any Bankruptcy Law relating to any other Grantor, each Subsidiary Guarantor agrees that the Investors shall be entitled to receive payment in full in cash of all Guaranteed Obligations (including all interest and expenses accruing after the commencement of a proceeding under any Bankruptcy Law, whether or not constituting an allowed claim in such proceeding (“Post-Petition Interest”)) (other than contingent indemnification obligations) before such Subsidiary Guarantor receives payment of any Subordinated Obligations.

(iii) Turn-Over. After the occurrence and during the continuance of any Event of Default, each Subsidiary Guarantor shall, if the Collateral Agent so requests, collect, enforce and receive payments on account of the Subordinated Obligations as trustee for

the Investors and deliver such payments to the Collateral Agent on account of the Guaranteed Obligations (including all Post-Petition Interest), together with any necessary endorsements or other instruments of transfer, but without reducing or affecting in any manner the liability of such Subsidiary Guarantor under the other provisions of the Subsidiary Guaranty.

(iv) Collateral Agent Authorization. After the occurrence and during the continuance of any Event of Default, the Collateral Agent is authorized and empowered (but without any obligation to so do), in its reasonable discretion, (A) in the name of each Subsidiary Guarantor, to collect and enforce, and to submit claims in respect of, the Subordinated Obligations and to apply any amounts received thereon to the Guaranteed Obligations (including any and all Post-Petition Interest), and (B) to require each Subsidiary Guarantor (1) to collect and enforce, and to submit claims in respect of, the Subordinated Obligations and (2) to pay any amounts received on such obligations to the Collateral Agent for application to the Guaranteed Obligations (including any and all Post-Petition Interest).

(f) Continuing Subsidiary Guaranty; Assignments. The Subsidiary Guaranty is a continuing guaranty and shall (i) remain in full force and effect until the payment in full in cash of the Guaranteed Obligations and all other amounts payable under the Subsidiary Guaranty, (ii) be binding upon each Subsidiary Guarantor, its successors and assigns, and (iii) inure to the benefit of and be enforceable by the Investors and their successors, transferees and assigns.

Section 1.4 Grant of Security

(a) Grant by U.S. Grantors. As security for the payment or performance, as applicable, in full of the Obligations, each U.S. Grantor hereby pledges and grants to the Collateral Agent, for the ratable benefit of the Secured Parties, a lien on and security interest (the “U.S. Security Interest”) in and to all of the right, title and interest of such U.S. Grantor in, to and under the following property, wherever located, whether now existing or hereafter arising or acquired from time to time (all of which being hereinafter collectively referred to as the “U.S. Collateral”):

(i) all Accounts,

(ii) all Deposit Accounts and Securities Accounts, including all Cash Collateral Accounts and Blocked Accounts,

(iii) all Chattel Paper, Documents and Instruments,

(iv) all Commercial Tort Claims,

(v) all Equipment,

(vi) all General Intangibles,

(vii) all Goods,

(viii) all Insurance,

(ix) all Instruments,

(x) all Intellectual Property,

(xi) all Inventory,

(xii) all Investment Property, including all Pledged Collateral and all Control Accounts,

(xiii) all Proceeds of Authorizations,

(xiv) all Receivables and Receivables Records,

(xv) all other goods and personal property of such U.S. Grantor, whether tangible or intangible, wherever located, including letters of credit,

(xvi) to the extent not otherwise included in clauses (i) through (xv) of this Section, all Collateral Records, Collateral Support and Supporting Obligations in respect of any of the foregoing,

(xvii) to the extent not otherwise included in clauses (i) through (xvi) of this Section, all other property in which a security interest may be granted under the UCC or which may be delivered to and held by the Collateral Agent pursuant to the terms hereof (including the account referred to in Section 3.4(c)(ii) and all funds and other property from time to time therein or credited thereto), and

(xviii) to the extent not otherwise included in clauses (i) through (xvii) of this Section, all Proceeds, products, substitutions, accessions, rents and profits of or in respect of any of the foregoing.

(b) Grant by Israeli Grantors. As security for the payment or performance, as applicable, in full of the Obligations, each Israeli Grantor hereby pledges and grants to the Collateral Agent, for the ratable benefit of the Secured Parties, a lien on and security interest (the “Israeli Security Interest”, together with the U.S. Security Interest, the “Security Interest”) in and to all of the right, title and interest of such Israeli Grantor in, to and under the “Collateral” (as that term is defined in the Pledge Agreements each attached substantially in the form of Exhibits D and Exhibit E hereto, respectively, to be executed and delivered to the Collateral Agent concurrently with this Guaranty and Security Agreement), wherever located (all of which being hereinafter collectively referred to as the “Israeli Collateral” and together with the U.S. Collateral, the “Collateral”).

(c) Revisions to UCC. For the avoidance of doubt, it is expressly understood and agreed that, to the extent the UCC is revised after the date hereof such that the definition of any of the foregoing terms included in the description or definition of the Collateral is changed, the parties hereto desire that any property which is included in such changed definitions, but which would not otherwise be included in the Security Interest on the date hereof, nevertheless be included in the Security Interest upon the effective date of such revision. Notwithstanding the immediately preceding sentence, the Security Interest is intended to apply immediately on the date hereof to all of the Collateral to the fullest extent permitted by applicable law, regardless of whether any particular item of the Collateral was then subject to the UCC.

ARTICLE 2.

SECURITY FOR OBLIGATIONS; NO ASSUMPTION OF LIABILITY

Section 2.1 Security for Obligations

This Guaranty and Security Agreement secures, and the Collateral is collateral security for, the prompt and complete payment or performance in full when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including the payment of amounts that would become due but for the operation of the automatic stay under Section 362(a) of Title 11 of the United States Code, or any similar provision of any other bankruptcy, insolvency, receivership or other similar law), of all Obligations with respect to each Grantor.

Section 2.2 No Assumption of Liability

Notwithstanding anything to the contrary herein, the Security Interest is granted as security only and shall not subject the Collateral Agent or any other Secured Party to, or in any way alter or modify, any obligation or liability of any Grantor with respect to or arising out of the Collateral.

ARTICLE 3.

REPRESENTATIONS AND WARRANTIES AND COVENANT

Section 3.1 Generally

(a) Representations and Warranties. Each of the Grantors, jointly with the other Grantors and severally, represents and warrants to the Collateral Agent and the other Secured Parties that:

(i) As of the Applicable Date, (A) such Grantor’s chief executive office or its principal place of business is, and for the preceding four months has been, located at the office indicated on Schedule 3.1(a)(i), (B) such Grantor’s jurisdiction of organization is the jurisdiction indicated on Schedule 3.1(a)(i), and (C) such Grantor’s Federal Employer Identification Number and company organizational number is as set forth on Schedule 3.1(a)(i).

(ii) As of the Applicable Date, (A) such Grantor’s full legal name is as set forth on Schedule 3.1(a)(ii) and (B) such Grantor has not changed its legal name in the preceding five years, except as set forth on Schedule 3.1(a)(ii).

(iii) Except as set forth on Schedule 3.1(a)(iii), such Grantor has not within the five years preceding the Applicable Date become bound (whether as a result of merger or otherwise) as debtor under a security agreement entered into by another Person, which has not theretofore been terminated.

(iv) Except as set forth on Schedule 3.1(a)(iv), such Grantor has good and valid rights in, and title to, the Collateral with respect to which it has purported to grant the Security Interest, except for minor defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize such Collateral for its intended purposes, and except for Liens expressly permitted pursuant to the Secured Transaction Documents.

(v) All actions and consents, including all filings, notices, registrations and recordings, necessary or desirable to create, perfect or ensure the first priority (subject only to Liens expressly permitted by the Secured Transaction Documents) of the Security Interest in the Collateral owned or held by it or on its behalf or for the exercise by the Collateral Agent or any other Secured Party of any voting or other rights provided for in this Guaranty and Security Agreement or the exercise of any remedies in respect of any such Collateral have been made or obtained or will be made and obtained promptly following the Closing, (A) except for (1) the filing of UCC financing statements naming such Grantor as “debtor” and the Collateral Agent as “secured party”, or the making of other appropriate filings, registrations or recordings, containing a description of such Collateral in each applicable governmental, municipal or other office specified on Schedule 3.1(a)(v) and (2) the filing, registration or recordation of fully executed security agreements in the form hereof (or in such other form as shall be in all respects satisfactory to the Collateral Agent) and containing a description of all such Collateral consisting of Patents, Trademarks and Copyrights, together with all other necessary documents, in each applicable governmental registry or office, (B) except for any such Collateral as to which the representations and warranties in this Section 3.1(a)(v) would not be true solely by virtue of such Collateral having been used or disposed of in a manner expressly permitted hereunder or under any other Secured Transaction Document, and (C) except to the extent that such Security Interest may not be perfected by filing, registering, recording or taking any other action in the United States. The filing, in a timely manner, of the Securities Purchase Agreement and/or the Guaranty and Security Agreement and/or the Pledge Agreements with the following governmental bodies is required in order to perfect the security interests granted thereunder:

· The United States Patent and Trademark Office and the United States Copyright Office

· The Israeli Companies Registrar

· The Israeli Patents, Trademarks and Designs Office

· The Israeli Registrar of Pledges

· The Patents, Trademarks and Designs Office of any other jurisdiction.

Subsequent recording and filing with the United States or Israeli Patent and Trademark Office, and the United States Copyright Office and the Israeli Companies Register may be necessary to perfect a Lien on registered patents, trademarks, trademark applications and copyrights acquired by the Company or any of its Subsidiaries after the date hereof.

(vi) Except as set forth on Schedule 3.1(a)(vi), it has not filed or authorized the filing of (A) any financing statement or analogous document under the UCC or any other applicable laws covering any such Collateral, (B) any assignment in which it assigns any such Collateral or any security agreement or similar instrument covering any such Collateral with the United States Patent and Trademark Office or the United States Copyright Office, or (C) any assignment in which it assigns any such Collateral or any security agreement or similar instrument covering any such Collateral with any foreign governmental, municipal or other office, in each case, which financing statement, analogous document, assignment or other instrument, as applicable, is still in effect, except for Liens expressly permitted by the Secured Transaction Documents.

(vii) Following the filing of the Security Interest with the Israeli Companies Registrar, the Israeli Patents, Trademarks and Designs Office and the Israeli Registrar of Pledges, the Security Interest in the Collateral owned or held by it or on its behalf (A) is effective to vest in the Collateral Agent, on behalf of the Secured Parties, the rights of the Collateral Agent in such Collateral as set forth herein and (B) does not violate Regulation T, U or X as of the Applicable Date.

(viii) Immediately after the Applicable Date, (i) the fair value of the assets of the Company and the Subsidiary Guarantors, taken as a whole, at a fair valuation, will exceed their debts and liabilities, subordinated, contingent or otherwise, (ii) the present fair saleable value of the property of the Company and the Subsidiary Guarantors, taken as a whole, will be greater than the amount that will be required to pay the probable liability of their debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured, (iii) the Company and the Subsidiary Guarantors, taken as a whole, will be able to pay their debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured, and (iv) each of the Company and the Subsidiary Guarantors will not have unreasonably small capital with which to conduct the business following such date. The representation in this subsection (viii) is made without giving effect to any debts and obligations of the Company to the Investors (including Goldman Sachs Investment Partners Master Fund, L.P. or affiliated parties and Syntek Capital AG).

(b) Covenants and Agreements. Each Grantor hereby covenants and agrees as follows:

(i) It will promptly notify the Collateral Agent in writing of any change (A) in its legal name, (B) in the location of its chief executive office, principal place of business, any office in which it maintains books or records relating to any of the Collateral owned or held by it or on its behalf or, except to the extent permitted by Section 3.1(b)(vii) or Section 3.2, any office or facility at which any such Collateral is located (including the establishment of any such new office or facility), (C) in its identity or legal or organizational structure or its jurisdiction of formation, or (D) in its Federal Taxpayer Identification Number. It agrees not to effect or permit any change referred to in the preceding sentence unless all filings have been made under the Uniform Commercial Code or otherwise that are required in order for the Collateral Agent to continue at all times following such change to have a valid, legal and perfected security interest in all the Collateral with the priority required hereby.

(ii) It shall maintain, at its own cost and expense, such complete and accurate Records with respect to the Collateral owned or held by it or on its behalf as is consistent with its current practices and in accordance with such prudent and standard practices used in industries that are the same as or similar to those in which it is engaged, but in any event to include complete accounting Records indicating all payments and proceeds received with respect to any part of such Collateral.

(iii) It shall, at its own cost and expense, take any and all actions reasonably necessary to defend title to the Collateral owned or held by it or on its behalf against all Persons and to defend the Security Interest in such Collateral and the priority thereof against any Lien or other interest not expressly permitted by the Secured Transaction Documents, and in furtherance thereof, it shall not take, or permit to be taken, any action not otherwise expressly permitted by the Secured Transaction Documents that could impair the Security Interest or the priority thereof or any Secured Party’s rights in or to such Collateral.

(iv) The Collateral Agent and such Persons as the Collateral Agent may designate shall have the right, at the cost and expense of such Grantor, to inspect all of its Records (and to make extracts and copies from such Records), to discuss its affairs with its officers and (to the extent consented to by such independent accountants) independent accountants and to verify under reasonable procedures the validity, amount, quality, quantity, value, condition and status of, or any other matter relating to, the Collateral owned or held by or on behalf of such Grantor, including, in the case of Receivables, Pledged Debt, General Intangibles, Commercial Tort Claims or Collateral in the possession of any third person, by contacting Account Debtors, contract parties or other obligors thereon or any third person possessing such Collateral for the purpose of making such a verification. The Collateral Agent shall maintain the confidentiality of all such information and shall have the absolute right to share on a confidential basis any information it gains from such inspection or verification with any Secured Party.

(v) At its option, the Collateral Agent may discharge past due taxes, assessments, charges, fees, Liens, security interests or other encumbrances at any time levied or placed on the Collateral owned or held by or on behalf of such Grantor, and not permitted by the Secured Transaction Documents, and may pay for the maintenance and preservation of such Collateral to the extent such Grantor fails to do so as required by the Secured Transaction Documents, and such Grantor agrees, jointly with the other Grantors and severally, to reimburse the Collateral Agent on demand for any payment made or any expense incurred by the Collateral Agent pursuant to the foregoing authorization; provided, however, that nothing in this paragraph shall be interpreted as excusing any Grantor from the performance of, or imposing any obligation on the Collateral Agent or any other Secured Party to cure or perform, any covenants or other promises of any Grantor with respect to taxes, assessments, charges, fees, Liens, security interests or other encumbrances and maintenance as set forth herein or in the other Secured Transaction Documents.

(vi) It shall not be excused from liability as a result of granting of the security interest pursuant to this Guaranty and Security Agreement to observe and perform all the conditions and obligations to be observed and performed by it under each contract, agreement or instrument relating to the Collateral owned or held by it or on its behalf, all in accordance with

the terms and conditions thereof and it agrees, jointly with the other Grantors and severally, to indemnify and hold harmless the Collateral Agent and the other Secured Parties from and against any and all liability for such performance.

(vii) It shall not make, or permit to be made, an assignment, pledge or hypothecation of the Collateral owned or held by it or on its behalf, or grant any other Lien in respect of such Collateral, except as expressly permitted by the Secured Transaction Documents. Except as expressly permitted by the Secured Transaction Documents, it shall not make or permit to be made any transfer of such Collateral, and it shall remain at all times in possession of such Collateral and the direct owner, beneficially and of record, of the Pledged Equity Interests included in such Collateral, except that (A) Inventory may be sold in the ordinary course of business and (B) unless and until the Collateral Agent shall notify it that an Event of Default shall have occurred and be continuing and that, during the continuance thereof, it shall not sell, convey, lease, assign, transfer or otherwise dispose of any such Collateral (which notice may be given by telephone if promptly confirmed in writing), it may use and dispose of such Collateral in any lawful manner not inconsistent with the provisions of this Guaranty and Security Agreement or any other Secured Transaction Document.

Section 3.2 Equipment and Inventory

Each of the U.S. Grantors, jointly with the other U.S. Grantors and severally, represents and warrants to the Collateral Agent and the other Secured Parties that, except for such Equipment and Inventory that does not exceed a book value of $50,000 in the aggregate for all U.S. Grantors as of the Applicable Date, all of the Equipment and Inventory included in the Collateral owned or held by it or on its behalf (other than mobile goods and Inventory and Equipment in transit) is kept only at the locations specified on Schedule 3.2. In addition, each U.S. Grantor covenants and agrees that it shall not permit any Equipment or Inventory owned or held by it or on its behalf to be in the possession or control of any warehouseman, bailee, agent or processor for a period of greater than one hundred and eighty (180) consecutive days, except for such Equipment or Inventory that (i) was sent to customers for trial or evaluation in the ordinary course of the Company’s business, provided that the book value of such Equipment or Inventory does not exceed $2,000,000 in the aggregate for all U.S. Grantors, (ii) is identified on Schedule 3.2, and/or (iii) is within the possession of the Subsidiaries, unless such warehouseman, bailee, agent or processor shall have been notified of the Security Interest and shall have agreed in writing to hold such Equipment or Inventory subject to the Security Interest and the instructions of the Collateral Agent and to waive and release any Lien held by it with respect to such Equipment or Inventory, whether arising by operation of law or otherwise.

Section 3.3 Receivables

(a) Representations and Warranties. Each of the U.S. Grantors, jointly with the other U.S. Grantors and severally, represents and warrants to the Collateral Agent and the other Secured Parties that, except for Receivables valued at less than $10,000 individually and $50,000 in the aggregate for all U.S. Grantors, no Receivable is evidenced by an Instrument (other than checks received in the ordinary course of business) or Chattel Paper that has not been delivered to the Collateral Agent.

(b) Covenants and Agreements. Each U.S. Grantor hereby covenants and agrees that:

(i) At the reasonable request of the Collateral Agent, it shall mark conspicuously, in form and manner reasonably satisfactory to the Collateral Agent, all Chattel Paper, Instruments (other than checks received in the ordinary course of business) and other evidence of any Receivables owned or held by it or on its behalf (other than any delivered to the Collateral Agent as provided herein and other than purchase orders sent to customers), as well as the related Receivables Records, with an appropriate reference to the fact that the Collateral Agent has a security interest therein.

(ii) It will not, without the Collateral Agent’s prior written consent (which consent shall not be unreasonably withheld), grant any extension of the time of payment of any such Receivable, compromise, compound or settle the same for less than the full amount thereof, release, wholly or partly, any Supporting Obligation or Collateral Support relating thereto, or allow any credit or discount whatsoever thereon, other than extensions, credits, discounts, releases, compromises or settlements granted or made in the ordinary course of business and consistent with its then current practices and in accordance with such practices reasonably believed by such U.S. Grantor to be prudent.

(iii) Except as otherwise provided in this Section and unless otherwise determined by such Grantor in accordance with its good faith business judgment, it shall continue to collect all amounts due or to become due to it under all such Receivables (other than Other Receivables) and any Supporting Obligations or Collateral Support relating thereto, and diligently exercise each material right it may have thereunder, in each case at its own cost and expense, and in connection with such collections and exercise, it shall, upon the occurrence and during the continuance of an Event of Default, take such action as it or the Collateral Agent may reasonably deem necessary. Notwithstanding the foregoing, the Collateral Agent shall have the right at any time after the occurrence and during the continuance of an Event of Default to notify, or require such U.S. Grantor to notify, any Account Debtor with respect to any such Receivable, Supporting Obligation or Collateral Support of the Collateral Agent’s security interest therein, and in addition, at any time during the continuation of an Event of Default, the Collateral Agent may: (i) direct such Account Debtor to make payment of all amounts due or to become due to such U.S. Grantor thereunder directly to the Collateral Agent and (ii) enforce, at the cost and expense of such U.S. Grantor, collection thereof and to adjust, settle or compromise the amount or payment thereof, in the same manner and to the same extent as such U.S. Grantor would be able to have done. If the Collateral Agent notifies such U.S. Grantor that it has elected to collect any such Receivable, Supporting Obligation or Collateral Support in accordance with the preceding sentence, any payments thereof received by such U.S. Grantor shall not be commingled with any of its other funds or property but shall be held separate and apart therefrom, shall be held in trust for the benefit of the Collateral Agent hereunder and shall be forthwith delivered to the Collateral Agent in the same form as so received (with any necessary endorsement), and such U.S. Grantor shall not grant any extension of the time of payment thereof, compromise, compound or settle the same for less than the full amount thereof, release the same, wholly or partly, or allow any credit or discount whatsoever thereon.

(iv) It shall use its best efforts to keep in full force and effect any Supporting Obligation or Collateral Support relating to any Receivable.

(v) During the continuance of an Event of Default, at the request of the Collateral Agent, it shall direct each Account Debtor to make payment on each Receivable to a Blocked Account or the Concentration Account.

Section 3.4 Investment Property

(a) Representations and Warranties. Each of the U.S. Grantors, jointly with the other U.S. Grantors and severally, represents and warrants to the Collateral Agent and the other Secured Parties that:

(i) Schedule 3.4 sets forth, as of the Applicable Date, (i) all, of the Investment Property (other than (A) Receivables not evidenced by an Instrument or Chattel Paper and (B) Equity Interests with an immaterial value) owned or held by or on behalf of such U.S. Grantor to the extent not held in a Securities Account and (ii) each Securities Account or commodities account maintained by or on behalf of such U.S. Grantor.

(ii) All Pledged Equity Interests have been duly authorized and validly issued and are fully paid and nonassessable, and such U.S. Grantor is the direct owner, beneficially and of record, thereof, free and clear of all Liens (other than Liens expressly permitted by the Secured Transaction Documents).

(iii) All Pledged Debt other than Pledged Debt described on Schedule 3.4 hereto have been duly authorized, issued and delivered and, where necessary, authenticated, and constitutes the legal, valid and binding obligation of the obligor with respect thereto, enforceable in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally, and general equitable principles (whether considered in a proceeding in equity or at law).

(iv) All Investment Property consisting of certificated securities, Chattel Paper or Instruments other than checks received in the ordinary course of business has been delivered to the Collateral Agent.

(v) All Pledged Collateral held by a Securities Intermediary in a Securities Account or a commodities account is in a Control Account.

(vi) Other than the Pledged Equity Interests that constitute General Intangibles, there is no Investment Property other than that represented by certificated securities or Instruments in the possession of the Collateral Agent.

(vii) No Person other than the Collateral Agent or an Approved Securities Intermediary has “control” (within the meaning of Article 8 of the UCC) over any Investment Property of such U.S. Grantor.

(b) Registration in Nominee Name; Denominations. Each U.S. Grantor hereby agrees that (i) without limiting Article 5, the Collateral Agent, on behalf of the Secured Parties, shall have the right (in its sole and absolute discretion) to hold any Investment Property in its own name as pledgee, the name of its nominee (as pledgee or as sub agent) or the name of the applicable U.S. Grantor, endorsed or assigned, where applicable, in blank or in favor of the Collateral Agent, (ii) at the Collateral Agent’s request, such U.S. Grantor will promptly give to the Collateral Agent copies of any material notices or other communications received by it with respect to any Investment Property registered in its name, and (iii) the Collateral Agent shall at all times have the right to exchange any certificates, instruments or other documents representing or evidencing any Investment Property owned or held by or on behalf of such U.S. Grantor for certificates, instruments or other documents of smaller or larger denominations for any purpose consistent with this Guaranty and Security Agreement.

(c) Voting and Distributions.

(i) Unless and until an Event of Default shall have occurred and be continuing:

(A) Each U.S. Grantor shall be entitled to exercise any and all voting and/or other consensual rights and powers inuring to an owner of the Investment Property, or any part thereof, for any purpose consistent with the terms of this Guaranty and Security Agreement and the other Secured Transaction Documents; provided, however, that such U.S. Grantor will not be entitled to exercise any such right if the result thereof could materially and adversely affect the rights inuring to a holder of the Investment Property or the rights and remedies of the Collateral Agent under this Guaranty and Security Agreement or any other Secured Transaction Document or the ability of the Collateral Agent to exercise the same.

(B) The Collateral Agent shall execute and deliver to each U.S. Grantor, or cause to be executed and delivered to each U.S. Grantor, all such proxies, powers of attorney and other instruments as such U.S. Grantor may reasonably request for the purpose of enabling it to exercise the voting and/or consensual rights and powers it is entitled to exercise pursuant to subsection (c)(i)(A) and to receive the cash payments it is entitled to receive pursuant to subsection (c)(i)(C).

(C) Each U.S. Grantor shall be entitled to receive, retain and use any and all cash dividends, interest and principal paid on the Investment Property owned or held by it or on its behalf to the extent and only to the extent that such cash dividends, interest and principal are not prohibited by, and otherwise paid in accordance with, the terms and conditions of the Securities Purchase Agreement, the other Secured Transaction Documents and applicable laws. All non-cash dividends, interest and principal, and all dividends, interest and principal paid or payable in cash or otherwise in connection with a partial or total liquidation or dissolution, return of capital, capital surplus or paid in surplus, and all other distributions (other than distributions referred to in the preceding sentence) made on or in respect of the Investment Property, whether paid or payable in cash or otherwise, whether resulting from a subdivision, combination or reclassification of the outstanding Pledged Equity Interests in any issuer of any

Investment Property or received in exchange for any Investment Property, or any part thereof, or in redemption thereof, or as a result of any merger, consolidation, acquisition or other exchange of assets to which such issuer may be a party or otherwise, shall be and become part of the Collateral, and, if received by such U.S. Grantor, shall not be commingled with any of its other funds or property but shall be held separate and apart therefrom, shall be held in trust for the benefit of the Collateral Agent hereunder and shall be forthwith delivered to the Collateral Agent in the same form as so received (with any necessary endorsement).

(ii) Without limiting the generality of the foregoing, upon the occurrence and during the continuance of an Event of Default:

(A) Upon the direction of the Collateral Agent, all rights of each U.S. Grantor to dividends, interest or principal that it is authorized to receive pursuant to subsection (c)(i)(C) shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and exclusive right and authority to receive and retain such dividends, interest or principal, as applicable. All dividends, interest and principal received by or on behalf of any U.S. Grantor contrary to the provisions of this Section shall be held in trust for the benefit of the Collateral Agent, shall be segregated from other property or funds of such U.S. Grantor and shall be forthwith delivered to the Collateral Agent upon demand in the same form as so received (with any necessary endorsement). Any and all money and other property paid over to or received by the Collateral Agent pursuant to the provisions of this subsection (c)(ii)(A) shall be retained by the Collateral Agent in an account to be established in the name of the Collateral Agent, for the ratable benefit of the Secured Parties, upon receipt of such money or other property and shall be applied in accordance with the provisions of Section 6.2. Subject to the provisions of this subsection (c)(ii)(A), such account shall at all times be under the sole dominion and control of the Collateral Agent, and the Collateral Agent shall at all times have the sole right to make withdrawals therefrom and to exercise all rights with respect to the funds and other property from time to time deposited therein or credited thereto as set forth in the Secured Transaction Documents. After all Events of Default have been cured or waived, the Collateral Agent shall, within five (5) Business Days after all such Events of Default have been cured or waived, repay to the applicable U.S. Grantor all cash dividends, interest and principal (without interest) that such U.S. Grantor would otherwise be permitted to retain pursuant to the terms of subsection (c)(i)(C) and which remain in such account.

(B) Upon the direction of the Collateral Agent, all rights of each U.S. Grantor to exercise the voting and consensual rights and powers it is entitled to exercise pursuant to subsection (c)(i)(A), and the obligations of the Collateral Agent under subsection (c)(i)(B), shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and exclusive right and authority to exercise such voting and consensual rights and powers, provided that, unless otherwise directed by the Required Investors, the Collateral Agent shall have the right from time to time following and during the continuance of an Event of Default to permit such U.S. Grantor to exercise such rights. After all Events of Default have been cured or waived, the applicable U.S. Grantor will have the right to exercise the voting and consensual rights and powers that it would otherwise be entitled to exercise pursuant to the terms of subsection (c)(i)(A).

(d) Covenants and Agreements. Each U.S. Grantor hereby covenants and agrees as follows:

(i) Each U.S. Grantor agrees that it will not establish or maintain, or permit any other U.S. Grantor to establish or maintain, any Securities Account or commodities account that is not a Control Account.

(ii) In the event (A) any U.S. Grantor or any Approved Securities Intermediary shall, after the date hereof, terminate an agreement with respect to the maintenance of a Control Account for any reason, (B) the Collateral Agent shall demand the termination of an agreement with respect to the maintenance of a Control Account as a result of the failure of an Approved Securities Intermediary to comply with the terms of the applicable Control Account Letter, or (C) the Collateral Agent determines in its sole discretion that the financial condition of an Approved Securities Intermediary has materially deteriorated, such U.S. Grantor agrees to promptly transfer the assets held in such Control Account to another Control Account reasonably acceptable to the Collateral Agent.

Section 3.5 Letter of Credit Rights

Each of the U.S. Grantors, jointly with the other U.S. Grantors and severally, represents and warrants to the Collateral Agent and the other Secured Parties that Schedule 3.5 sets forth, as of the Applicable Date, each letter of credit giving rise to a Letter of Credit Right included in the Collateral owned or held by or on behalf of such U.S. Grantor.

Section 3.6 Intellectual Property Collateral

(a) Representations and Warranties. Each of the Grantors, jointly with the other Grantors and severally, represents and warrants to the Collateral Agent and the other Secured Parties that Schedule 3.6 sets forth, as of the Applicable Date, all of the Patents, Patent Licenses, Trademarks, Trademark Licenses, Copyrights, Copyright Licenses, Trade Secret Licenses and Domain Names included in the Collateral owned or held by or on behalf of such Grantor.

(b) Covenants and Agreements. Each Grantor hereby covenants and agrees as follows:

(i) It will not, nor will it permit any of its licensees (or sublicensees) to, do any act, or omit to do any act, whereby any Patent that is related to the conduct of its business may become invalidated or dedicated to the public, and it shall continue to mark any products covered by a Patent with the relevant patent number as necessary and sufficient to establish and preserve its maximum rights under applicable patent laws.

(ii) It will (either directly or through its licensees or its sublicensees), for each Trademark that is necessary for the conduct of its business, (A) maintain such Trademark in full force free from any claim of abandonment or invalidity for non use,

(B) maintain the quality of products and services offered under such Trademark, (C) display such Trademark with notice of Federal or other analogous registration to the extent necessary and sufficient to establish and preserve its rights under applicable law, and (D) not knowingly use or knowingly permit the use of such Trademark in violation of any third party’s valid and legal rights.

(iii) It will (either directly or through its licensees or its sublicensees), for each work covered by a Copyright that is related to the conduct of its business, continue to publish, reproduce, display, adopt and distribute the work with appropriate copyright notice as necessary and sufficient to establish and preserve its maximum rights under applicable copyright laws.

(iv) It will promptly notify the Collateral Agent in writing if it knows or has reason to know that any Intellectual Property material to the conduct of its business may become abandoned, lost or dedicated to the public, or of any adverse determination or development (including the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office or the United States Copyright Office, or any similar offices or tribunals in the United States or any other country) regarding such Grantor’s ownership of any such Intellectual Property, its right to register the same, or to keep and maintain the same.

(v) In no event shall it, either directly or through any agent, employee, licensee or designee, file an application for any Intellectual Property with the United States Patent and Trademark Office, the United States Copyright Office or any similar offices in the United States or any other country, unless it promptly notifies the Collateral Agent in writing thereof and, upon request of the Collateral Agent, executes and delivers any and all agreements, instruments, documents and papers as the Collateral Agent may request to evidence the Collateral Agent’s security interest in such Intellectual Property, and such Grantor hereby appoints the Collateral Agent as its attorney in fact to execute and file such writings for the foregoing purposes, all acts of such attorney being hereby ratified and confirmed; such power, being coupled with an interest, is irrevocable.

(vi) It will take all necessary steps that are consistent with the practice in any proceeding before the United States Patent and Trademark Office, the United States Copyright Office or any similar offices or tribunals in the United States, Israel and the European Union, and except as otherwise determined in its good faith business judgment, any other country, to maintain and pursue each material application relating to the Intellectual Property owned or held by it or on its behalf (and to obtain the relevant grant or registration) and to maintain each issued Patent and each registered Trademark and Copyright that is material to the conduct of its business, including timely filings of applications for renewal, affidavits of use, affidavits of incontestability and payment of maintenance fees, and, if consistent, in good faith, with good business judgment, to initiate opposition, interference and cancellation proceedings against third parties. In the event that it has reason to believe that any Intellectual Property material to the conduct of its business has been or is about to be infringed, misappropriated or diluted by a third party, it promptly shall notify the Collateral Agent in writing and shall, if consistent with good business judgment, promptly sue for infringement, misappropriation or dilution and to recover any and all damages for such infringement, misappropriation or dilution, and take such other actions as are appropriate under the circumstances to protect such Intellectual Property.

(vii) During the continuance of an Event of Default, it shall use its best efforts to obtain all requisite consents or approvals by the licenser of each License to effect the assignment (as collateral security) of all of its right, title and interest thereunder to the Collateral Agent or its designee.

(viii) It shall take all steps reasonably necessary to protect the secrecy of all Trade Secrets relating to the products and services sold or delivered under or in connection with the Intellectual Property owned or held by or on its behalf, including entering into confidentiality agreements with employees and labeling and restricting access to secret information and documents.

(ix) It shall in accordance with its past practices continue to collect all amounts due or to become due to such Grantor under all Intellectual Property, and diligently exercise each material right it may have thereunder, in each case at its own cost and expense, and in connection with such collections and exercise, it shall, upon the occurrence and during the continuance of an Event of Default, take such action as it or the Collateral Agent may reasonably deem necessary. Notwithstanding the foregoing, the Collateral Agent shall have the right at any time after the occurrence and during the continuance of an Event of Default to notify, or require such Grantor to notify, any relevant obligors with respect to such amounts of the Collateral Agent’s security interest therein.

Section 3.7 Commercial Tort Claims

(a) Representations and Warranties. Each of the U.S. Grantors, jointly with the other U.S. Grantors and severally, represents and warrants to the Collateral Agent and the other Secured Parties that Schedule 3.7 sets forth, as of the Applicable Date, all Commercial Tort Claims made by it or on its behalf or to which it otherwise has any right, title or interest.

(b) Covenants and Agreements. Each U.S. Grantor hereby covenants and agrees that promptly after the same shall have been commenced, it shall provide to the Collateral Agent written notice of any Commercial Tort Claim and any judgment, settlement or other disposition thereof.

Section 3.8 Deposit Accounts; Control Accounts

(a) Representations and Warranties. The only Deposit Accounts maintained by any U.S. Grantor on the Applicable Date are those listed on Schedule 3.8 which sets forth such information separately for each U.S. Grantor.

(b) Covenants and Agreements. Each U.S. Grantor hereby covenants and agrees as follows:

Upon the direction of the Collateral Agent following the occurrence or during the continuance of an Event of Default, each U.S. Grantor shall cause the financial institution where any Deposit Account is maintained to enter in to a Blocked Account Letter with

respect to such Deposit Account, other than any Deposit Account where (1) the amount of cash on deposit in any such account shall not exceed $50,000 (exclusive of the amounts in accounts for unpaid payroll, payroll taxes and withholding taxes), and (2) the aggregate amount of cash on deposit in all accounts other than the Concentration Account or a Blocked Account shall not exceed $100,000 (exclusive of the amounts in accounts for unpaid payroll, payroll taxes and withholding taxes).

ARTICLE 4.

FURTHER ASSURANCES

Each Grantor hereby covenants and agrees, at its own cost and expense, to execute, acknowledge, deliver and/or cause to be duly filed all such further agreements, instruments and other documents (including favorable legal opinions in connection with any Transaction) that may be reasonably requested by the Collateral Agent, and take all such further actions, that the Collateral Agent may from time to time reasonably request to preserve, protect and perfect the Security Interest granted by it and the rights and remedies created hereby, including the payment of any fees and taxes required in connection with its execution and delivery of this Guaranty and Security Agreement, the granting by it of the Security Interest and the filing of any financing statements or other documents in connection herewith or therewith. In addition, to the extent permitted by applicable law, each Grantor hereby irrevocably authorizes the Collateral Agent to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral owned or held by it or on its behalf without the signature of such Grantor and additionally agrees that a photographic or other reproduction of this Guaranty and Security Agreement may be filed with the United States Patent and Trademark Office and/or the United States Copyright Office, as applicable. Each Grantor hereby further irrevocably authorizes the Collateral Agent to file a Record or Records, including financing statements, in all jurisdictions and with all filing offices that the Collateral Agent may determine, in its sole and absolute discretion, are necessary, advisable or prudent to perfect the Security Interest granted by it and agrees that such financing statements may describe the Collateral owned or held by it or on its behalf in the same manner as described herein or may contain an indication or description of collateral that describes such property in any other manner that the Collateral Agent may determine, in its sole and absolute discretion, is necessary, advisable or prudent to perfect the Security Interest granted by such Grantor, including describing such property as “all assets” or “all personal property.”

ARTICLE 5.

COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT

Each Grantor hereby appoints the Collateral Agent and any officer or agent thereof, as its true and lawful agent and attorney in fact for the purpose of carrying out the provisions of this Guaranty and Security Agreement and taking any action and executing any instrument that the Collateral Agent may deem necessary or advisable to accomplish the purposes hereof, which appointment is irrevocable and coupled with an interest, and without limiting the generality of the foregoing, the Collateral Agent shall have the right, with power of substitution for such Grantor and in such Grantor’s name or otherwise, for the use and benefit of

the Collateral Agent and the other Secured Parties, upon the occurrence and during the continuance of an Event of Default and at such other time or times permitted by the Secured Transaction Documents, (i) to receive, endorse, assign and/or deliver any and all notes, acceptances, checks, drafts, money orders or other evidences of payment relating to the Collateral owned or held by it or on its behalf or any part thereof; (ii) to demand, collect, receive payment of, give receipt for, and give discharges and releases of, any of such Collateral; (iii) to sign the name of such U.S. Grantor on any invoice or bill of lading relating to any of such Collateral; (iv) to send verifications of Receivables owned or held by it or on its behalf to any Account Debtor; (v) to commence and prosecute any and all suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect or otherwise realize on any of the Collateral owned or held by it or on its behalf or to enforce any rights in respect of any of such Collateral; (vi) to settle, compromise, compound, adjust or defend any actions, suits or proceedings relating to any of such Collateral; (vii) to notify, or to require such U.S. Grantor to notify, Account Debtors and other obligors to make payment directly to the Collateral Agent, and (viii) to use, sell, assign, transfer, pledge, make any agreement with respect to or otherwise deal with any of such Collateral, and to do all other acts and things necessary to carry out the purposes of this Guaranty and Security Agreement, as fully and completely as though the Collateral Agent were the absolute owner of such Collateral for all purposes; provided, however, that nothing herein contained shall be construed as requiring or obligating the Collateral Agent or any other Secured Party to make any commitment or to make any inquiry as to the nature or sufficiency of any payment received by the Collateral Agent or any other Secured Party, or to present or file any claim or notice, or to take any action with respect to any of the Collateral or the moneys due or to become due in respect thereof or any property covered thereby, and no action taken or omitted to be taken by the Collateral Agent or any other Secured Party with respect to any of the Collateral shall give rise to any defense, counterclaim or offset in favor of such Grantor or to any claim or action against the Collateral Agent or any other Secured Party. The provisions of this Article shall in no event relieve any Grantor of any of its obligations hereunder or under the other Secured Transaction Documents with respect to any of the Collateral or impose any obligation on the Collateral Agent or any other Secured Party to proceed in any particular manner with respect to any of the Collateral, or in any way limit the exercise by the Collateral Agent or any other Secured Party of any other or further right that it may have on the date of this Guaranty and Security Agreement or hereafter, whether hereunder, under any other Secured Transaction Document, by law or otherwise. Any sale pursuant to the provisions of this paragraph shall be deemed to conform to the commercially reasonable standards as provided in Part 6 of Article 9 of the UCC.

ARTICLE 6.

REMEDIES UPON DEFAULT

Section 6.1 Remedies Generally

(a) General Rights. Upon the occurrence and during the continuance of an Event of Default, each Grantor agrees to deliver each item of Collateral owned or held by it or on its behalf to the Collateral Agent on demand, and it is agreed that the Collateral Agent shall have the right to take any of or all the following actions at the same or different times to the extent permitted by law: (i) with respect to any Collateral consisting of Intellectual Property or

Commercial Tort Claims, on demand, to cause the Security Interest to become an assignment, transfer and conveyance of any such Collateral by the applicable Grantors to the Collateral Agent, or, in the case of Intellectual Property, to license or sublicense, whether general, special or otherwise, and whether on an exclusive or non-exclusive basis, any such Collateral throughout the world on such terms and conditions and in such manner as the Collateral Agent shall determine (other than in violation of any then-existing licensing arrangements to the extent that waivers cannot be obtained), and (ii) with or without legal process and with or without prior notice or demand for performance, to take possession of the Collateral owned or held by it or on its behalf and without liability for trespass to enter any premises where such Collateral may be located for the purpose of taking possession of or removing such Collateral and, generally, to exercise any and all rights afforded to a secured party under the UCC or other applicable law. Without limiting the generality of the foregoing, each Grantor agrees that the Collateral Agent shall have the right, subject to the mandatory requirements of applicable law, to sell or otherwise dispose of any of the Collateral owned or held by or on behalf of such Grantor, at public or private sale or at any broker’s board or on any securities exchange, for cash, upon credit or for future delivery as the Collateral Agent shall deem appropriate. The Collateral Agent shall be irrevocably authorized at any such sale of such Collateral constituting securities (if it deems it advisable to do so) to restrict the prospective bidders or purchasers to Persons who will represent and agree that they are purchasing such Collateral for their own account for investment and not with a view to the distribution or sale thereof, and upon consummation of any such sale, the Collateral Agent shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold. Each such purchaser at any such sale shall hold the property sold absolutely, free from any claim or right on the part of the applicable Grantor, and such Grantor hereby waives (to the extent permitted by law) all rights of redemption, stay, valuation and appraisal which such Grantor now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted.

(b) Sale of Collateral. The Collateral Agent shall give each Grantor ten (10) days’ written notice (which such Grantor agrees is reasonable notice within the meaning of Part 6 of Article 9 of the UCC) of the Collateral Agent’s intention to make any sale of any of the Collateral owned or held by or on behalf of such Grantor. Such notice, in the case of a public sale, shall state the time and place for such sale and, in the case of a sale at a broker’s board or on a securities exchange, shall state the board or exchange at which such sale is to be made and the day on which such Collateral will first be offered for sale at such board or exchange. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Collateral Agent may fix and state in the notice (if any) of such sale. At any such sale, the Collateral to be sold may be sold in one lot as an entirety or in separate parcels, as the Collateral Agent may (in its sole and absolute discretion) determine. The Collateral Agent shall not be obligated to make any sale of any Collateral if it shall determine not to do so, regardless of the fact that notice of sale of such Collateral shall have been given. The Collateral Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In case any sale of any of the Collateral is made on credit or for future delivery, the Collateral so sold may be retained by the Collateral Agent until the sale price is paid by the purchaser or purchasers thereof, but the Collateral Agent shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for the Collateral so sold and, in case of any

such failure, such Collateral may be sold again upon like notice. At any public (or, to the extent permitted by applicable law, private) sale made pursuant to this Section, any Secured Party may bid for or purchase, free (to the extent permitted by applicable law) from any right of redemption, stay, valuation or appraisal on the part of such Grantor (all said rights being also hereby waived and released to the extent permitted by law), any of the Collateral offered for sale and may make payment on account thereof by using any claim then due and payable to such Secured Party from such Grantor as a credit against the purchase price, and such Secured Party may, upon compliance with the terms of sale, hold, retain and dispose of such property without further accountability to such Grantor therefor. For purposes hereof, (i) a written agreement to purchase any of the Collateral shall be treated as a sale thereof, (ii) the Collateral Agent shall be free to carry out such sale pursuant to such agreement, and (iii) no Grantor shall be entitled to the return of any of the Collateral subject thereto, notwithstanding the fact that after the Collateral Agent shall have entered into such an agreement all Events of Default shall have been remedied and the Obligations paid in full. As an alternative to exercising the power of sale herein conferred upon it, the Collateral Agent may proceed by a suit or suits at law or in equity to foreclose upon any of the Collateral and to sell any of the Collateral pursuant to a judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceeding by a court-appointed receiver. Without limiting the generality of the foregoing, each Grantor agrees as follows: (A) if the proceeds of any sale of the Collateral owned or held by it or on its behalf pursuant to this Article are insufficient to pay all the Obligations, it shall be liable for the resulting deficiency and the fees, charges and disbursements of any counsel employed by the Collateral Agent or any other Secured Party to collect such deficiency, (B) it hereby waives any claims against the Collateral Agent arising by reason of the fact that the price at which any such Collateral may have been sold at any private sale pursuant to this Article was less than the price that might have been obtained at a public sale, even if the Collateral Agent accepts the first offer received and does not offer such Collateral to more than one offeree, (C) there is no adequate remedy at law for failure by it to comply with the provisions of this Section and that such failure would not be adequately compensible in damages, and therefore agrees that its agreements in this Section may be specifically enforced, (D) the Collateral Agent may sell any such Collateral without giving any warranties as to such Collateral, and the Collateral Agent may specifically disclaim any warranties of title or the like, and (E) the Collateral Agent shall have no obligation to marshall any such Collateral.

Section 6.2 Application of Proceeds of Sale

The Collateral Agent shall apply the proceeds of any collection or sale of the Collateral, as well as any Collateral consisting of cash, as follows:

FIRST, to the payment of all reasonable costs and expenses incurred by the Collateral Agent in connection with such collection or sale or otherwise in connection with this Guaranty and Security Agreement, any other Secured Transaction Document or any of the Obligations, including all out of pocket court costs and the reasonable fees and expenses of its agents and legal counsel, the repayment of all advances made by the Collateral Agent hereunder or under any other Secured Transaction Document on behalf of any Grantor and any other reasonable out-of-pocket costs or expenses incurred in connection with the exercise of any right or remedy hereunder or under any other Secured Transaction Document;

SECOND, to the payment of the portion up to $4,500,000 of the Obligations (the amounts so applied to be distributed among Goldman Sachs Investment Partners GP, LLC and Syntek Capital AG pro rata in the ratio of 1:1/2);

THIRD, to the payment in full of the remaining amount of the Obligations (the amounts so applied to be distributed among the Secured Parties pro rata in accordance with the amounts of the Obligations owed to them on the date of any such distribution);

FOURTH, to the applicable Grantor, its successors or assigns, or as a court of competent jurisdiction may otherwise direct.

The Collateral Agent shall have sole and absolute discretion as to the time of application of any such proceeds, moneys or balances in accordance with this Guaranty and Security Agreement. Upon any sale of the Collateral by the Collateral Agent (including pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of the purchase money by the Collateral Agent or of the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Collateral Agent or such officer or be answerable in any way for the misapplication thereof.

Section 6.3 Investment Property

In view of the position of each Grantor in relation to the Investment Property, or because of other current or future circumstances, a question may arise under the Securities Act of 1933, as now or hereafter in effect, or any similar statute hereafter enacted analogous in purpose or effect (such Act and any such similar statute as from time to time in effect being called the “Federal securities laws”) with respect to any disposition of the Investment Property permitted hereunder. Each U.S. Grantor understands that compliance with the Federal securities laws might very strictly limit the course of conduct of the Collateral Agent if the Collateral Agent were to attempt to dispose of all or any part of the Investment Property, and might also limit the extent to which or the manner in which any subsequent transferee of any Investment Property could dispose of the same. Similarly, there may be other legal restrictions or limitations affecting the Collateral Agent in any attempt to dispose of all or part of the Investment Property under applicable Blue Sky or other state securities laws or similar laws analogous in purpose or effect. Each U.S. Grantor recognizes that in light of such restrictions and limitations the Collateral Agent may, with respect to any sale of the Investment Property, limit the purchasers to those who will agree, among other things, to acquire such Investment Property for their own account, for investment, and not with a view to the distribution or resale thereof. Each U.S. Grantor acknowledges and agrees that in light of such restrictions and limitations, the Collateral Agent, in its sole and absolute discretion, (i) may proceed to make such a sale whether or not a registration statement for the purpose of registering such Investment Property, or any part thereof, shall have been filed under the Federal securities laws and (ii) may approach and negotiate with a single potential purchaser to effect such sale. Each U.S. Grantor acknowledges and agrees that any such sale might result in prices and other terms less favorable to the seller than if such sale were a public sale without such restrictions. In the event of any such sale, the Collateral Agent shall incur no responsibility or liability for selling all or any part of the

Investment Property at a price that the Collateral Agent, in its discretion, may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might have been realized if the sale were deferred until after registration as aforesaid or if more than a single purchaser were approached. The provisions of this Section will apply notwithstanding the existence of a public or private market upon which the quotations or sales prices may exceed substantially the price at which the Collateral Agent sells any such Investment Property.

Section 6.4 Grant of License to Use Intellectual Property

For the purpose of enabling the Collateral Agent to exercise rights and remedies under this Article, at such time as the Collateral Agent shall be lawfully entitled to exercise such rights and remedies, each Grantor hereby grants to the Collateral Agent an irrevocable, non exclusive license (exercisable without payment of royalty or other compensation to such Grantor) to use, license or sub license any of the Collateral consisting of Intellectual Property now owned or held or hereafter acquired or held by or on behalf of such Grantor, and wherever the same may be located, and including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof. The use of such license by the Collateral Agent shall be exercised, at the option of the Collateral Agent, upon the occurrence and during the continuation of an Event of Default; provided that any license, sub license or other transaction entered into by the Collateral Agent in accordance herewith shall be binding upon such Grantor notwithstanding any subsequent cure of an Event of Default. Any royalties and other payments received by the Collateral Agent shall be applied in accordance with Section 6.2.

ARTICLE 7.

REIMBURSEMENT OF COLLATERAL AGENT

Each Grantor agrees, jointly with the other Grantors and severally, to pay to the Collateral Agent the amount of any and all reasonable out-of-pocket expenses, including the fees, other charges and disbursements of counsel and of any experts or agents, that the Collateral Agent may incur in connection with (i) the administration of this Guaranty and Security Agreement relating to such Grantor or any of its property, (ii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Collateral owned or held by or on behalf of such Grantor, (iii) the exercise, enforcement or protection of any of the rights of the Collateral Agent hereunder relating to such Grantor or any of its property, or (iv) the failure by such Grantor to perform or observe any of the provisions hereof. Without limitation of its indemnification obligations under the other Secured Transaction Documents, each of the Grantors agrees, jointly with the other Grantors and severally, to indemnify the Collateral Agent and each Related Party thereof (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related out-of-pocket expenses, including reasonable counsel fees, other charges and disbursements, incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of (a) the execution or delivery by such Grantor of this Guaranty and Security Agreement or any other Secured Transaction Document or any agreement or instrument contemplated hereby or thereby, or the performance by such Grantor of its obligations under the Secured

Transaction Documents and the other transactions contemplated thereby or (b) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto, provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee. Any amounts payable as provided hereunder shall be additional Obligations secured hereby and by the other Secured Transaction Documents. The provisions of this Section shall remain operative and in full force and effect regardless of the termination of this Guaranty and Security Agreement or any other Secured Transaction Document, the consummation of the transactions contemplated hereby or thereby, the repayment of any of the Obligations, the invalidity or unenforceability of any term or provision of this Guaranty and Security Agreement or any other Secured Transaction Document or any investigation made by or on behalf of the Collateral Agent or any other Secured Party. All amounts due under this Section shall be payable within ten (10) days of written demand therefor and shall bear interest at the rate of 9.50% per annum.

ARTICLE 8.

WAIVERS; AMENDMENTS

No failure or delay of the Collateral Agent in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Collateral Agent and the other Secured Parties hereunder and under the other Secured Transaction Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Guaranty and Security Agreement or any other Secured Transaction Document or consent to any departure by any Grantor therefrom shall in any event be effective unless the same shall be permitted by this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on any Grantor in any case shall entitle such Grantor to any other or further notice or demand in similar or other circumstances. Neither this Guaranty and Security Agreement nor any provision hereof may be waived, amended, supplemented or otherwise modified, or any departure therefrom consented to, except with the affirmative vote or consent of each of the Company and each Investor; provided, however, that following repayment of $1,500,000 of the principal amount (plus all accrued and unpaid Interest thereon) under the Convertible Note issued to Syntek Capital AG (“Syntek”), such amendment of or waiver under the Agreement shall no longer require the written consent of Syntek; provided, further, that no such amendment or waiver may materially and adversely affect the economic interest of Syntek in the Company without the prior written consent of Syntek; provided, further, that no such agreement shall waive, amend, supplement or otherwise modify, or consent to a departure to, the rights or duties of the Collateral Agent hereunder without the prior written consent of the Collateral Agent.

ARTICLE 9.

SECURITY INTEREST ABSOLUTE

All rights of the Collateral Agent hereunder, the Security Interest and all obligations of each Grantor hereunder shall be absolute and unconditional irrespective of (i) any lack of validity or enforceability of the Securities Purchase Agreement, any other Secured Transaction Document, any agreement with respect to any of the Obligations, or any other agreement or instrument relating to any of the foregoing, (ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other waiver, amendment, supplement or other modification of, or any consent to any departure from, the Securities Purchase Agreement, any other Secured Transaction Document or any other agreement or instrument relating to any of the foregoing, (iii) any exchange, release or non-perfection of any Lien on any other collateral, or any release or waiver, amendment, supplement or other modification of, or consent under, or departure from, any guaranty, securing or guaranteeing all or any of the Obligations, or (iv) any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Grantor in respect of the Obligations or in respect of this Guaranty and Security Agreement or any other Secured Transaction Document.

ARTICLE 10.

TERMINATION; RELEASE

This Guaranty and Security Agreement and the Security Interest shall terminate when the Obligations shall have been finally and indefeasibly paid in full. Upon (i) any sale, transfer or other disposition permitted by the Secured Transaction Documents (other than any sale, transfer or other disposition of any Collateral that would, immediately after giving effect thereto, continue to be Collateral but for the release of the Security Interest therein pursuant to this clause) or (ii) the effectiveness of any written consent to the release of the Security Interest in any Collateral pursuant to Article 8, the Security Interest in such Collateral shall be automatically released. In addition, if any of the Pledged Equity Interests in any Subsidiary are sold, transferred or otherwise disposed of pursuant to a transaction permitted by the Secured Transaction Documents and, immediately after giving effect thereto, such Subsidiary or subsidiary, as applicable, would no longer be a Subsidiary or a subsidiary, as applicable, then the obligations of such Subsidiary or subsidiary, as applicable, under this Guaranty and Security Agreement and the Security Interest in the Collateral owned or held by or on behalf of such Subsidiary or such subsidiary, as applicable, shall be automatically released. In connection with any termination or release pursuant to this Section, the Collateral Agent shall execute and deliver to the applicable Grantor, and hereby authorizes the filing of, at such Grantor’s cost and expense, all Uniform Commercial Code termination statements and similar documents that such Grantor may reasonably request to evidence such termination or release. Any execution and delivery of documents pursuant to this Article shall be without recourse to or warranty by the Collateral Agent or any other Secured Party.

ARTICLE 11.

ADDITIONAL SUBSIDIARY GUARANTORS AND GRANTORS

Upon execution and delivery after the date hereof by the Collateral Agent and a Subsidiary of a Supplement, such Subsidiary shall become a Subsidiary Guarantor and an Israeli Grantor or U.S. Grantor, as applicable, hereunder with the same force and effect as of the date of such execution as if originally named as a Subsidiary Guarantor and a U.S. Grantor or Israeli Grantor, as applicable, herein (each an “Additional Subsidiary Guarantor and Grantor”). The execution and delivery of any Supplement shall not require the consent of any other Grantor hereunder. The rights and obligations of each Grantor hereunder and each Grantor and other party (other than an Investor) under the Secured Transaction Documents shall remain in full force and effect notwithstanding the addition of any Additional Subsidiary Guarantor and Grantor as a party to this Guaranty and Security Agreement.

ARTICLE 12.

COLLATERAL AGENT

Each Investor hereby irrevocably appoints the Collateral Agent as its agent and authorizes the Collateral Agent to take such actions on its behalf and to exercise such powers as are delegated to the Collateral Agent by the terms hereof, together with such actions and powers as are reasonably incidental thereto.

The Person serving as the Collateral Agent hereunder shall have the same rights and powers in its capacity as an Investor as any other investor and may exercise the same as though it were not the Collateral Agent, and such Person and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Company or any Subsidiary or other Affiliate thereof as if it were not the Collateral Agent hereunder.

The Collateral Agent shall not have any duties or obligations except those expressly set forth herein. Without limiting the generality of the foregoing, (i) the Collateral Agent shall not be subject to any fiduciary or other implied duties, regardless of whether an Event of Default has occurred and is continuing, (ii) the Collateral Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated by this Agreement, and (iii) except as expressly set forth herein, the Collateral Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Company or any of the Subsidiaries that is communicated to or obtained by the Person serving as Collateral Agent or any of its Affiliates in any capacity. The Collateral Agent shall not be liable for any action taken or not taken by it in the absence of its own gross negligence or willful misconduct. The Collateral Agent shall be deemed not to have knowledge of any Event of Default unless and until written notice thereof is given to the Collateral Agent by the Company or an Investor (and, promptly after its receipt of any such notice, it shall give each Investor and the Company notice thereof), and the Collateral Agent shall not be responsible for or have any duty to ascertain or inquire into (a) any statement, warranty or representation made in or in connection with any Secured Transaction Document, (b) the contents of any certificate, report or other document delivered thereunder or in connection

therewith, (c) the performance or observance of any of the covenants, agreements or other terms or conditions set forth therein, (d) the validity, enforceability, effectiveness or genuineness thereof or any other agreement, instrument or other document or (e) the satisfaction of any condition set forth in herein, other than to confirm receipt of items expressly required to be delivered to the Collateral Agent.

The Collateral Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Collateral Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The Collateral Agent may consult with legal counsel (who may be counsel for the Grantors), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

The Collateral Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub agents appointed by the Collateral Agent, provided that no such delegation shall serve as a release of the Collateral Agent or waiver by the Company of any rights hereunder. The Collateral Agent and any such sub agent may perform any and all its duties and exercise its rights and powers through their respective affiliates. The exculpatory provisions of the preceding paragraphs shall apply to any such sub agent and to the affiliates of the Collateral Agent and any such sub agent, and shall apply to their respective activities acting for the Collateral Agent.

Subject to the appointment and acceptance of a successor Collateral Agent as provided in this paragraph, the Collateral Agent may resign at any time by notifying the Investors and the Company. Upon any such resignation, the Investors shall have the right to appoint a successor. If no successor shall have been so appointed by the Investors and shall have accepted such appointment within 30 days after the retiring Collateral Agent gives notice of its resignation, then the retiring Collateral Agent may, on behalf of the Investors, appoint a successor Collateral Agent which shall be a bank with an office in New York, New York, or an affiliate of any such bank. Upon the acceptance of its appointment as Collateral Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Collateral Agent, and the retiring Collateral Agent shall be discharged from its duties and obligations hereunder. After the Collateral Agent’s resignation hereunder, the provisions of this Article shall continue in effect for the benefit of such retiring Collateral Agent, its sub agents and their respective affiliates in respect of any actions taken or omitted to be taken by any of them while it was acting as Collateral Agent.

Each Investor acknowledges that it has, independently and without reliance upon the Collateral Agent or any other Investor and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into the Secured Transaction Documents. Each Investor also acknowledges that it will, independently and without reliance upon the Collateral Agent or any other Investor and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon any Secured Transaction Document, any related agreement or any document furnished thereunder

ARTICLE 13.

NOTICES

All notices, requests, demands and other communications to any party hereunder shall be in writing (including facsimile or similar writing) and shall be given to such party at its address or facsimile number set forth below or such other address or facsimile number as such party may hereafter specify by notice to the other parties listed below:

(a) If to the Company:

Vyyo Inc.

6625 The Corners Parkway, Suite 100
Norcross, GA 30092

Telephone: (678) 282-8011

Facsimile: (770) 446-1110

Attention: Tashia L. Rivard, General Counsel

with a copy to:

Warner Norcross & Judd LLP

900 Fifth Third Center

111 Lyon Street, NW

Grand Rapids, MI 49503

Telephone: (616) 752-2137

Facsimile: (616) 222-2137

Attention: Stephen C. Waterbury

(b) If to a Subsidiary Guarantor: At its address for notices set forth on Schedule I.

Goldman Sachs Investment Partners Master Fund, L.P.

One New York Plaza

New York, NY 10004

Telephone: (212) 902-4934

Facsimile: (212) 346-3124

Attention: Nick Advani

with a copy to:

Goldman, Sachs & Co.

One New York Plaza

New York, NY 10004

Facsimile:

Telephone:

Attention: Rashid S. Alvi

and

Proskauer Rose LLP

1585 Broadway

New York, NY 10036

Facsimile: (212) 969-2900

Telephone: (212) 969-3470

Attention: Stuart Bressman, Esq.

Each such notice, request or other communication shall be effective (i) upon receipt (provided, however, that notices received on a Saturday, Sunday or legal holiday or after 6:30 p.m. (New York City time) on any other day will be deemed to have been received on the next Business Day), if given by facsimile transmission, (ii) the Business Day following the date of delivery with a nationally recognized overnight courier service or (iii) if given by any other means, when delivered at the address specified in this Article 13.

ARTICLE 14.

BINDING EFFECT; SEVERAL AGREEMENT; ASSIGNMENTS

Whenever in this Guaranty and Security Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party, and all covenants, promises and agreements by or on behalf of any Grantor that are contained in this Guaranty and Security Agreement shall bind and inure to the benefit of each party hereto and its successors and assigns. This Guaranty and Security Agreement shall become effective as to any Grantor when a counterpart hereof executed on behalf of such Grantor shall have been delivered to the Collateral Agent and a counterpart hereof shall have been executed on behalf of the Collateral Agent, and thereafter shall be binding upon such Grantor and the Collateral Agent and their respective successors and assigns, and shall inure to the benefit of such Grantor, the Collateral Agent and the other Secured Parties, and their respective successors and assigns, except that no Grantor shall have the right to assign its rights or obligations hereunder or any interest herein or in any of the Collateral (and any such attempted assignment shall be void), except as expressly contemplated by this Guaranty and Security Agreement or the other Secured Transaction Documents. This Guaranty and Security Agreement shall be construed as a separate agreement with respect to each of the Grantors and may be amended, supplemented, waived or otherwise modified or released with respect to any Grantor without the approval of any other Grantor and without affecting the obligations of any other Grantor hereunder.

ARTICLE 15.

SURVIVAL OF AGREEMENT; SEVERABILITY

All covenants, agreements, representations and warranties made by the Grantors herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Guaranty and Security Agreement or any other Secured Transaction Document shall be considered to have been relied upon by the Collateral Agent and the other Secured Parties and shall survive the execution and delivery of any Secured Transaction Document and the making of any Loan, regardless of any investigation made by the Secured Parties or on their behalf, and shall continue in full force and effect until this Guaranty and Security Agreement shall terminate. In the event any one or more of the provisions contained in this Guaranty and Security Agreement or in any other Secured Transaction Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein or therein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties shall endeavor in good faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

ARTICLE 16.

GOVERNING LAW

THIS GUARANTY AND SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

ARTICLE 17.

COUNTERPARTS

This Guaranty and Security Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which, when taken together, shall constitute but one contract (subject to Article 14), and shall become effective as provided in Article 14. Delivery of an executed counterpart of this Guaranty and Security Agreement by facsimile transmission shall be as effective as delivery of a manually executed counterpart of this Guaranty and Security Agreement.

ARTICLE 18.

HEADINGS

Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Guaranty and Security Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Guaranty and Security Agreement.

ARTICLE 19.

JURISDICTION; VENUE; CONSENT TO SERVICE OF PROCESS

(a) EACH OF THE GRANTORS HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE SUPREME COURT OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES’ DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER COLLATERAL DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT THE SECURED PARTIES MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AGAINST THE COMPANY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

(b) EACH OF THE GRANTORS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY AND SECURITY AGREEMENT OR ANY OTHER SECURED TRANSACTION DOCUMENT IN ANY COURT REFERRED TO IN THE PRECEDING PARAGRAPH (b) OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

(c) EACH PARTY TO THIS AGREEMENT IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN ARTICLE 13. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

ARTICLE 20.

WAIVER OF JURY TRIAL

EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS GUARANTY AND SECURITY AGREEMENT OR ANY OTHER SECURED TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS GUARANTY AND SECURITY AGREEMENT AND THE OTHER SECURED TRANSACTION DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

[Signature Pages Follow]

VYYO INC.

GUARANTY AND SECURITY AGREEMENT

IN WITNESS WHEREOF, the parties hereto have duly executed this Guaranty and Security Agreement as of the day and year first above written.

VYYO INC.


By:	/s/ Wayne H. Davis
Name:		Wayne H. Davis
Title:		Chief Executive Officer


FOREIGN SUBSIDIARIES

VYYO LTD.


By:	/s/ Wayne H. Davis
Name:		Wayne H. Davis
Title:		Chief Executive Officer of Vyyo Inc.,
		parent of Vyyo Ltd.


XTEND NETWORKS LTD.


By:	/s/ Wayne H. Davis
Name:		Wayne H. Davis
Title:		Chief Executive Officer of Vyyo Inc.,
		parent of Xtend Networks Ltd.


DOMESTIC SUBSIDIARY

XTEND NETWORKS INC.


By:	/s/ Wayne H. Davis
Name:		Wayne H. Davis
Title:		Chief Executive Officer of Vyyo Inc.,
		parent of Xtend Networks Inc.

VYYO INC.

GUARANTY AND SECURITY AGREEMENT

GOLDMAN SACHS INVESTMENT PARTNERS MASTER FUND, L.P.,
as Collateral Agent

By: Goldman Sachs Investment Partners GP, LLC, its General Partner


By:	/s/ Nick Advani
Name: Nick Advani
Title: Managing Director


GOLDMAN SACHS INVESTMENT PARTNERS MASTER FUND, L.P.,
as an Investor

By: Goldman Sachs Investment Partners GP, LLC, its General Partner


By:	/s/ Nick Advani
Name: Nick Advani
Title: Managing Director


SYNTEK CAPITAL AG,
as an Investor


By:	/s/ Franco Franca
Name: Franco Franca
Title: CEO


By:	/s/ Paolo Giacometti
Name: Paolo Giacometti
Title: CFO

EX-21.1 12 a2186625zex-21_1.htm EXHIBIT 21.1
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EXHIBIT 21.1

Subsidiaries of Registrant

Name		Jurisdiction of Incorporation
Vyyo Ltd.		Israel
Vyyo Brasil Ltda.		Brazil (inactive)
Xtend Networks Ltd.		Israel
Xtend Networks Inc.		Delaware
SHDIP Ltd.		Israel (inactive)

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Subsidiaries of Registrant
EX-31.1 13 a2186625zex-31_1.htm EXHIBIT 31.1
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EXHIBIT 31.1

CERTIFICATE OF CHIEF EXECUTIVE OFFICER
OF
VYYO INC.

I, Wayne H. Davis, Chief Executive Officer of Vyyo Inc., certify that:

1.

I have reviewed this annual report on Form 10-K of Vyyo Inc. (the "registrant");

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a): Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b): Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c): Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a): All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b): Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: June 30, 2008

/s/ WAYNE H. DAVIS

Wayne H. Davis, Chief Executive Officer

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CERTIFICATE OF CHIEF EXECUTIVE OFFICER OF VYYO INC.
EX-31.2 14 a2186625zex-31_2.htm EXHIBIT 31.2
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EXHIBIT 31.2

CERTIFICATE OF CHIEF FINANCIAL OFFICER
OF
VYYO INC.

I, Robert K. Mills, Chief Financial Officer of Vyyo Inc., certify that:

1.

I have reviewed this annual report on Form 10-K of Vyyo Inc. (the "registrant");

2.

3.

4.

(a): Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b): Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c): Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

(a): All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b): Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: June 30, 2008

/s/ ROBERT K. MILLS

Robert K. Mills, Chief Financial Officer

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CERTIFICATE OF CHIEF FINANCIAL OFFICER OF VYYO INC.
EX-32.1 15 a2186625zex-32_1.htm EXHIBIT 32.1
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EXHIBIT 32.1

CERTIFICATE OF CHIEF EXECUTIVE OFFICER
AND CHIEF FINANCIAL OFFICER
OF
VYYO INC.

In connection with the Annual Report of Vyyo Inc. (the "Company") on Form 10-K for the year ending March 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Wayne H. Davis, as Chief Executive Officer of the Company, and Robert K. Mills, as Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, to the best of his knowledge, that:

(1): The Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934; and
(2): The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ WAYNE H. DAVIS Wayne H. Davis Chief Executive Officer June 30, 2008
/s/ ROBERT K. MILLS Robert K. Mills Chief Financial Officer June 30, 2008

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CERTIFICATE OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER OF VYYO INC.
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RECITALS

AGREEMENT

ARTICLE I DEFINITIONS

1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, the following terms have the meanings indicated:

ARTICLE II PURCHASE AND SALE

2.1 Closing.

ARTICLE III REPRESENTATIONS AND WARRANTIES

(u) Disclosure. Neither this Agreement, nor any of the Transaction Documents, certificates or other documents made or delivered at the Closing, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements herein or therein not misleading.

3.2 Representations and Warranties of the Investors. Each Investor hereby, as to itself only and for no other Investor, represents and warrants to the Company as follows:

(c) Investor Status. At the time such Investor was offered the Securities, it was, and at the date hereof it is, an “accredited investor” as defined in Rule 501(a) under the Securities Act.

ARTICLE IV OTHER AGREEMENTS OF THE PARTIES

4.1 Transfer Restrictions.

ARTICLE V CONDITIONS

5.1 Conditions Precedent to each Investor’s Obligation to Purchase. The obligation of each Investor to purchase the Securities at the Closing is subject to the satisfaction or waiver by such Investor, at or before the Closing, of each of the following conditions:

(a) The Company and each Subsidiary, as applicable, shall have duly executed and delivered to each Investor:

(i) a Convertible Note in favor of such Investor in the aggregate principal amount as is set forth opposite such Investor’s name on the Schedule of Investors;

(ii) the Guaranty and Security Agreement signed on behalf of the Company, and each Subsidiary party thereto, together with the following (subject to the provisions of the Guaranty and Security Agreement allowing delivery of certain items post-Closing):

(iii) the Registration Rights Agreement.

(b) Such Investor shall have received the opinion from the Company’s General Counsel, dated as of the Closing Date, in substantially the form of Exhibit F attached hereto.

(e) The Company shall have obtained all governmental, regulatory or third party consents and approvals, if any, necessary for the sale of the Securities, except for those consents and approvals set forth in Sections 3.1(d), 3.1(g) and 3.1(j) to the Schedule of Exceptions.

(f) The Investors shall have received all fees and other amounts due and payable on or prior to the Closing Date pursuant to Section 6.2 hereof.

(g) The Company shall have delivered to such Investor such other documents relating to the transactions contemplated by this Agreement as such Investor or its counsel may reasonably request.

5.2 Conditions Precedent to the Obligations of the Company. The Company’s obligation to sell and issue the Securities at the Closing is, at the option of the Company, subject to the fulfillment or waiver of the following conditions:

(a) The Investors shall have delivered payment of the purchase price to the Company for the Securities.

(d) All covenants, agreements and conditions contained in this Agreement to be performed, satisfied or complied with by the Investors on or prior to the Closing Date shall have been performed, satisfied or complied with in all material respects.

ARTICLE I
DEFINITIONS

ARTICLE II
PURCHASE AND SALE

ARTICLE III
REPRESENTATIONS AND WARRANTIES

ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES

ARTICLE V
CONDITIONS