F-3





Exhibit 10.1  














AUDIOCODES LTD. 




(an Israeli company) 




2.00% Senior
Convertible Notes due 2024 




PURCHASE AGREEMENT 




Dated: November 3, 2004 















AUDIOCODES LTD. 

(an Israeli company) 




$100,000,000 

2.00% Senior Convertible
Notes due 2024 




PURCHASE AGREEMENT 




November 3, 2004 



Merrill Lynch & Co.

Merrill Lynch, Pierce, Fenner & Smith

        Incorporated

Lehman Brothers Inc.

        as Representatives of the several Initial Purchasers



c/o   Merrill Lynch & Co.

        Merrill Lynch, Pierce, Fenner & Smith

                Incorporated

4 World Financial Center

New York, New York 10080 






Ladies and Gentlemen: 



        AudioCodes
Ltd., an Israeli company (the “Company”), confirms its agreement with Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated
(“Merrill Lynch”) and Lehman Brothers Inc. (“Lehman Brothers”) and
each of the other Initial Purchasers named in Schedule A hereto (collectively, the
“Initial Purchasers”, which term shall also include any initial purchaser
substituted as hereinafter provided in Section 11 hereof), for whom Merrill Lynch and
Lehman Brothers are acting as representatives (in such capacity, the
“Representatives”), with respect to (i) the issue and sale by the Company and
the purchase by the Initial Purchasers, acting severally and not jointly, of the
respective principal amounts set forth in said Schedule A of $100,000,000 aggregate
principal amount of the Company’s Senior Convertible Notes due 2024 (the
“Notes”) and (ii) the grant by the Company to the Initial Purchasers, acting
severally and not jointly, of the option described in Section 2(b) hereof to purchase all
or any part of an additional $25,000,000 aggregate principal amount of Notes to cover
over-allotments, if any. The aforesaid $100,000,000 aggregate principal amount of Notes
(the “Initial Securities”) to be purchased by the Initial Purchasers and all or
any part of the $25,000,000 aggregate principal amount at maturity of Notes subject to the
option described in Section 2(b) hereof (the “Option Securities”) are
hereinafter called, collectively, the “Securities.” The Securities are to be
issued pursuant to an indenture dated as of November 9, 2004 (the “Indenture”)
between the Company and U.S. Bank National Association, as trustee (the
“Trustee”). Securities issued in book-entry form will be issued to
Cede & Co. as nominee of The Depository Trust Company (“DTC”) pursuant
to a letter agreement, to be dated as of Closing Time (as defined in Section 2(b))
(the “DTC Agreement”), among the Company, the Trustee and DTC. 



        The
Securities are convertible into ordinary shares, par value 0.01 New Israeli Shekels per
share (the “Ordinary Shares”), of the Company in accordance with the terms of
the Securities and the Indenture. 














        The
Company understands that the Initial Purchasers propose to make an offering of the
Securities on the terms and in the manner set forth herein and agrees that the Initial
Purchasers may resell, subject to the conditions set forth herein, all or a portion of the
Securities to purchasers (“Subsequent Purchasers”) at any time after this
Agreement has been executed and delivered. The Securities are to be offered and sold
through the Initial Purchasers without being registered under the Securities Act of 1933,
as amended (the “1933 Act”), in reliance upon exemptions therefrom.
Pursuant to the terms of the Securities and the Indenture, investors that acquire
Securities may only resell or otherwise transfer such Securities if such Securities are
hereafter registered under the 1933 Act or if an exemption from the registration
requirements of the 1933 Act is available (including the exemption afforded by
Rule 144A (“Rule 144A”) of the rules and regulations promulgated under
the 1933 Act by the Securities and Exchange Commission (the “Commission”)). 



        The
Company has prepared and delivered to each Initial Purchaser copies of a preliminary
offering memorandum dated November 3, 2004 (the “Preliminary Offering
Memorandum”) and has prepared and will deliver to each Initial Purchaser, on the date
hereof or the next succeeding day, copies of a final offering memorandum dated November 3,
2004 (the “Final Offering Memorandum”), each for use by such Initial Purchaser
in connection with its solicitation of purchases of, or offering of, the Securities.
“Offering Memorandum” means, with respect to any date or time referred to in
this Agreement, the most recent offering memorandum (whether the Preliminary Offering
Memorandum or the Final Offering Memorandum, or any amendment or supplement to either such
document), including exhibits thereto and any documents incorporated therein by reference,
which has been prepared and delivered by the Company to the Initial Purchasers in
connection with their solicitation of purchases of, or offering of, the Securities. 



        It
is also understood and acknowledged that holders (including subsequent transferees) of the
Securities and the Ordinary Shares issuable upon the conversion thereof will have the
registration rights set forth in the registration rights agreement (the “Registration
Rights Agreement”), to be dated as of Closing Time (as defined in Section 2(c)
hereof), in a form to be agreed upon by the parties hereto. Pursuant to the Registration
Rights Agreement, the Company will agree (i) to file with the Securities and Exchange
Commission (the “Commission”), a registration statement on the appropriate form
under the 1933 Act relating to the resale of the Securities and the Ordinary Shares
issuable upon the conversion thereof by certain holders thereof from time to time in
accordance with the methods of distribution set forth in such registration statement and
Rule 415 under the Act (the “Shelf Registration Statement”) and (ii) to use its
best efforts to cause any such Shelf Registration Statement to be declared effective. 



        All
references in this Agreement to financial statements and schedules and other information
which is “contained,” “included” or “stated” in the Offering
Memorandum (or other references of like import) shall be deemed to mean and include all
such financial statements and schedules and other information which are incorporated by
reference in the Offering Memorandum; and all references in this Agreement to amendments
or supplements to the Offering Memorandum shall be deemed to mean and include the filing
of any document under the Securities Exchange Act of 1934, as amended (the
“1934 Act”) which is incorporated by reference in the Offering Memorandum. 



        SECTION 1.     Representations
and Warranties by the Company.  



             (a)
          Representations and Warranties. The Company represents and warrants to
          each Initial Purchaser as of the date hereof, as of the Closing Time referred to
          in Section 2(c) hereof, and as of each Date of Delivery (if any) referred
          to in Section 2(b) hereof, and agrees with each Initial Purchaser, as follows: 



		    (i)        Offering
Memorandum. The Offering Memorandum does not, and at the Closing           Time (and,
if any Option Securities are purchased, at the Date of Delivery) will           not,
include an untrue statement of a material fact or omit to state a material           fact
necessary in order to make the statements therein, in the light of the
          circumstances under which they were made, not misleading; provided that this
          representation, warranty and agreement shall not apply to statements in or
          omissions from the Offering Memorandum made in reliance upon and in conformity
          with written information furnished to the Company by any Initial Purchaser
          through Merrill Lynch expressly for use in the Offering Memorandum.  







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		    (ii)        Incorporated
Documents. The Offering Memorandum as delivered from time to           time shall
incorporate by reference the most recent Annual Report of the Company           on Form 20-F
filed with the Commission and may incorporate one or more           Current Reports of
the Company on Form 6-K filed with the Commission since the           end of the fiscal
year to which such Annual Report relates. The documents           incorporated or deemed
to be incorporated by reference in the Offering           Memorandum at the time they
were or hereafter are filed with the Commission           complied and will comply in all
material respects with the requirements of the           1934 Act and the rules and
regulations of the Commission thereunder (the           “1934 Act Regulations”),
and, when read together with the other           information in the Offering Memorandum,
at the time the Offering Memorandum was           issued and at the Closing Time (and, if
any Option Securities are purchased, at           Date of Delivery), did not and will not
include an untrue statement of a           material fact or omit to state a material fact
required to be stated therein or           necessary to make the statements therein not
misleading.  







		    (iii)        Independent
Accountants. The accountants who certified the financial           statements and
supporting schedules included in the Offering Memorandum are           independent public
accountants with respect to the Company and its subsidiaries           within the meaning
of Regulation S-X under the 1933 Act.  







		    (iv)        Financial
Statements. The financial statements, together with the related           schedules
and notes, included in the Offering Memorandum present fairly the           financial
position of the Company and its consolidated subsidiaries at the dates
          indicated and the statement of operations, stockholders’ equity and cash
          flows of the Company and its consolidated subsidiaries for the periods
          specified; said financial statements have been prepared in conformity with
          United States generally accepted accounting principles (“GAAP”)
          applied on a consistent basis throughout the periods involved. The supporting
          schedules, if any, included in the Offering Memorandum present fairly in
          accordance with GAAP the information required to be stated therein. The
selected           financial data and the summary financial information included in the
Offering           Memorandum present fairly the information shown therein and have been
compiled           on a basis consistent with that of the audited financial statements
included in           the Offering Memorandum.  







		    (v)        No
Material Adverse Change in Business. Since the respective dates as of           which
information is given in the Offering Memorandum, except as otherwise           stated
therein, (A) there has been no material adverse change in the           condition,
financial or otherwise, or in the earnings, business affairs or           business
prospects of the Company and its subsidiaries considered as one           enterprise,
whether or not arising in the ordinary course of business (a           “Material
Adverse Effect”), (B) there have been no transactions           entered into by
the Company or any of its subsidiaries, other than those in the           ordinary course
of business, which are material with respect to the Company and           its
subsidiaries considered as one enterprise, and (C) there has been no           dividend
or distribution of any kind declared, paid or made by the Company on           any class
of its share capital.  







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		    (vi)        Good
Standing of the Company. The Company has been duly organized and is           validly
existing under the laws of the State of Israel and has corporate power           and
authority to own, lease and operate its properties and to conduct its           business
as described in the Offering Memorandum and to enter into and perform           its
obligations under this Agreement; and the Company is duly qualified as a
          foreign corporation to transact business and is in good standing in each other
          jurisdiction in which such qualification is required, whether by reason of the
          ownership or leasing of property or the conduct of business, except where the
          failure so to qualify or to be in good standing would not result in a Material
          Adverse Effect.  







		    (vii)        Good
Standing of Designated Subsidiaries. Each “significant           subsidiary” of
the Company (as such term is defined in Rule 1-02 of           Regulation S-X)
and each subsidiary listed on Schedule C hereto (each           a “Designated
Subsidiary” and, collectively, the “Designated           Subsidiaries”)
has been duly organized and is validly existing as a           corporation in good
standing under the laws of the jurisdiction of its           incorporation, has corporate
power and authority to own, lease and operate its           properties and to conduct its
business as described in the Offering Memorandum           and is duly qualified as a
foreign corporation to transact business and is in           good standing in each
jurisdiction in which such qualification is required,           whether by reason of the
ownership or leasing of property or the conduct of           business, except where the
failure so to qualify or to be in good standing would           not result in a Material
Adverse Effect; except as otherwise disclosed in the           Offering Memorandum, all
of the issued and outstanding capital stock of each           Designated Subsidiary has
been duly authorized and validly issued, is fully paid           and non-assessable and
is owned by the Company, directly or through           subsidiaries, free and clear of
any security interest, mortgage, pledge, lien,           encumbrance, claim or equity;
none of the outstanding shares of capital stock of           the Designated Subsidiaries
was issued in violation of any preemptive or similar           rights of any
securityholder of such Designated Subsidiary. The other           subsidiaries of the
Company other than Designated Subsidiaries, considered in           the aggregate as a
single subsidiary, do not constitute a “significant           subsidiary” as
defined in Rule 1-02 of Regulation S-X.  







		    (viii)        Capitalization.
The authorized, issued and outstanding share capital of           the Company is as set
forth in the Offering Memorandum in the column entitled           “Actual” under
the caption “Capitalization” (except for           subsequent issuances, if
any, pursuant to this Agreement, pursuant to           reservations, agreements, employee
benefit plans referred to in the Offering           Memorandum or pursuant to the
exercise of convertible securities or options           referred to in the Offering
Memorandum). All issued and outstanding shares of           the Company have been duly
authorized and validly issued and are fully paid and           non-assessable; none of
the outstanding shares of the Company was issued in           violation of the preemptive
or other similar rights of any security holder of           the Company. The issued and
outstanding share capital of the Company has been           issued in compliance, in all
material respects, with all Israeli and U.S.           federal and state securities laws.
Except as set forth in the Offering           Memorandum, no options, warrants or other
rights to purchase, agreements or           other obligations to issue, or rights to
convert any obligations into or           exchange any securities for, shares of share
capital of, or ownership interests           in, the Company.  







		    (ix)        Authorization
of Purchase Agreement. This Agreement has been duly           authorized, executed
and delivered by the Company. All corporate action required           by the laws of the
State of Israel, the Memorandum of Association and Articles           of Association of
the Company to be taken by the Company for the due and proper           authorization,
issuance, offering, sale and delivery of the Securities has been           validly and
sufficiently taken.  







		    (x)        Authorization
of the Registration Rights Agreement. The Registration           Rights Agreement has
been duly authorized by the Company and, when executed and           delivered by the
Company and the Initial Purchasers, will constitute a valid and           binding
agreement of the Company, enforceable against the Company in accordance           with
its terms, except as the enforcement thereof may be limited by bankruptcy,
          insolvency (including, without limitation, all laws relating to fraudulent
          transfers), reorganization, moratorium or similar laws affecting enforcement of
          creditors’ rights generally, except as enforcement thereof is subject to
          general principles of equity (regardless of whether enforcement is considered
in           a proceeding in equity or at law) and except with respect to provisions
thereof           relating to indemnity and contribution.  







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		    (xi)        Authorization
of the Indenture. The Indenture has been duly authorized by           the Company
and, when executed and delivered by the Company and the Trustee,           will
constitute a valid and binding agreement of the Company, enforceable           against
the Company in accordance with its terms, except as the enforcement           thereof may
be limited by bankruptcy, insolvency (including, without limitation,           all laws
relating to fraudulent transfers), reorganization, moratorium or           similar laws
affecting enforcement of creditors’ rights generally and           except as
enforcement thereof is subject to general principles of equity           (regardless of
whether enforcement is considered in a proceeding in equity or at           law).  







		    (xii)        Authorization
of the Securities. The Securities have been duly authorized           and, at Closing
Time, will have been duly executed by the Company and, when           authenticated,
issued and delivered in the manner provided for in the Indenture           and delivered
against payment of the purchase price therefor as provided in this           Agreement,
will constitute valid and binding obligations of the Company,           enforceable
against the Company in accordance with their terms, except as the           enforcement
thereof may be limited by bankruptcy, insolvency (including, without
          limitation, all laws relating to fraudulent transfers) reorganization,
          moratorium or similar laws affecting enforcement of creditors’ rights
          generally and except as enforcement thereof is subject to general principles of
          equity (regardless of whether enforcement is considered in a proceeding in
          equity or at law), and will be in the form contemplated by, and entitled to the
          benefits of, the Indenture.  







		    (xiii)        Description
of the Securities, the Indenture, the Registration Rights           Agreement and the
Share Capital. The terms and conditions of the Securities,           the Indenture
and the Registration Rights Agreement and the rights, preferences           and
privileges of the share capital of the Company, including the Ordinary           Shares
issuable upon the conversion of the Securities, will conform in all           material
respects to the respective statements relating thereto contained in the
          Offering Memorandum. The Securities, the Indenture and the Registration Rights
          Agreement will be in substantially the respective forms last delivered to the
          Initial Purchasers prior to the date of this Agreement.  







		    (xiv)        Authorization
and Description of Ordinary Shares. The Ordinary Shares           conform in all
material respects to all statements relating thereto contained or           incorporated
by reference in the Offering Memorandum and such description           conforms to the
rights set forth in the instruments defining the same. Upon           issuance and
delivery of the Securities in accordance with this Agreement and           the Indenture,
the Securities will be convertible at the option of the holder           thereof for
Ordinary Shares in accordance with the terms of the Securities and           the
Indenture; the Ordinary Shares issuable upon conversion of the Securities           have
been duly authorized and reserved for issuance upon such conversion by all
          necessary corporate action and such shares, when issued upon such conversion
          according to the terms of the Securities and Indenture, will be validly issued
          and will be fully paid and non-assessable; no holder of such shares will be
          subject to personal liability solely by reason of being such a holder; and the
          issuance of such Ordinary Shares upon such conversion will not be subject to
the           preemptive or other similar rights of any security holder of the Company,
or any           restriction upon the voting or transfer thereof pursuant to applicable
law           (other than applicable securities laws) or the Company’s Memorandum or
          Articles of Association or any agreement to which the Company or any of its
          subsidiaries is a party or by which any of them may be bound. All corporate
          action required to be taken by the Company for the issuance and delivery of the
          Ordinary Shares issuable upon conversion of the Securities has been duly and
          validly taken by the Company. The Company has authorized and has reserved and
          covenants to continue to reserve free of any preemptive rights or similar
          rights, a sufficient number of authorized but reserved Ordinary Shares to
          satisfy the conversion rights of the Securities. The Ordinary Shares issuable
          upon conversion of the Securities are, or will be at the Closing Time, duly
          listed, admitted and authorized for trading, subject to official notice of
          issuance, on the Nasdaq National Market and The Tel Aviv Stock Exchange.  







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		    (xv)        Absence
of Defaults and Conflicts. Neither the Company nor any of its           subsidiaries
is in violation of its Memorandum or Articles of Association,           charter, by-laws
or other governing document, as applicable, or in default in           the performance or
observance of any obligation, agreement, covenant or           condition contained in any
contract, indenture, mortgage, deed of trust, loan or           credit agreement, note,
lease or other agreement or instrument to which the           Company or any of its
subsidiaries is a party or by which it or any of them may           be bound, or to which
any of the property or assets of the Company or any of its           subsidiaries is
subject (collectively, “Agreements and Instruments”)           except for such
defaults that would not result in a Material Adverse Effect; and           the execution,
delivery and performance of this Agreement, the Registration           Rights Agreement,,
the Indenture and the Securities and any other agreement or           instrument entered
into or issued or to be entered into or issued by the Company           in connection
with the transactions contemplated hereby or thereby or in the           Offering
Memorandum and the consummation of the transactions contemplated herein           and in
the Offering Memorandum (including the issuance and sale of the           Securities and
the use of the proceeds from the sale of the Securities as           described in the
Offering Memorandum under the caption “Use of           Proceeds” and the
issuance of the Ordinary Shares issuable upon conversion           of the Securities) and
compliance by the Company with its obligations hereunder           and under the
Registration Rights Agreement, the Indenture and the Securities           have been duly
authorized by all necessary corporate action and do not and will           not, whether
with or without the giving of notice or passage of time or both,           conflict with
or constitute a breach of, or default or Repayment Event (as           defined below)
under, or result in the creation or imposition of any lien,           charge or
encumbrance upon any property or assets of the Company or any of its
          subsidiaries pursuant to, the Agreements and Instruments except for such
          conflicts, breaches or defaults or Repayment Events or liens, charges or
          encumbrances that, singly or in the aggregate, would not result in a Material
          Adverse Effect, nor will such action result in any violation of the provisions
          of the Memorandum of Association, Articles of Association, charter, by-laws or
          other governing document, as applicable, of the Company or any of its
          subsidiaries or any applicable law, statute, rule, regulation, judgment, order,
          writ or decree of any government, government instrumentality or court, domestic
          or foreign, having jurisdiction over the Company or any of its subsidiaries or
          any of their assets, properties or operations. As used herein, a “Repayment
          Event” means any event or condition which gives the holder of any note,
          debenture or other evidence of indebtedness (or any person acting on such
          holder’s behalf) the right to require the repurchase, redemption or
          repayment of all or a portion of such indebtedness by the Company or any of its
          subsidiaries.  







		    (xvi)        Absence
of Labor Dispute. The Company is in compliance, in all material           respects,
with the labor and employment laws and collective bargaining           agreements
applicable to its employees in Israel. No labor dispute with the           employees of
the Company or any of its subsidiaries exists or, to the knowledge           of the
Company, is imminent, and the Company is not aware of any existing or           imminent
labor disturbance by the employees of any of its or any of its           subsidiaries’ principal
suppliers, manufacturers, customers or contractors,           which, in either case,
would result in a Material Adverse Effect.  







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		    (xvii)        Compliance
with ERISA: The Company and its subsidiaries are in compliance           with all
presently applicable provisions of the Employee Retirement Income           Security Act
of 1974, as amended, including the regulations and published           interpretations
thereunder (“ERISA”), except for any           failure to so
comply that would not reasonably be expected to have a Material           Adverse Effect;
no “accumulated funding deficiency” (as defined in           Section 302 of
ERISA) or other event of the kind described in Section 4043(c) of           ERISA (other
than events with respect to which the 30-day notice requirement           under Section
4043 of ERISA has been waived) has occurred with respect to any           “pension
plan” (as defined in ERISA) for which the Company or its           subsidiaries
would have any liability which would reasonably be expected to have           a Material
Adverse Effect; the Company and its subsidiaries have not incurred           and do not
reasonably expect to incur liability under Title IV of ERISA with           respect to
termination of, or withdrawal from, any “pension plan”; and           each
“pension plan” maintained by the Company and its subsidiaries           that
are intended to be qualified under Section 401(a) of the Internal Revenue           Code
of 1986, as amended, including the regulations and published           interpretations
thereunder, have received a favorable determination letter or           opinion letter
from the Internal Revenue Service (or have submitted, or is           within the remedial
amendment period for submitting, an application for a           determination letter and
is awaiting a response from the Internal Revenue           Service), and, to the
knowledge of the Company and its subsidiaries, no event           has occurred and no
condition exists that would result in the revocation or           failure to issue any
such determination letter or opinion letter.  







		    (xviii)        Absence
of Proceedings. There is no action, suit, proceeding, inquiry or
          investigation before or brought by any court or governmental agency or body,
          domestic or foreign, now pending, or, to the knowledge of the Company,
          threatened, against or affecting the Company or any of its subsidiaries which
          would reasonably be expected to result in a Material Adverse Effect, would
          reasonable be expected to materially and adversely affect the properties or
          assets of the Company or any of its subsidiaries or the consummation of the
          transactions contemplated by this Agreement or the performance by the Company
of           its obligations hereunder or under the Registration Rights Agreement, the
          Indenture and the Securities. The aggregate of all pending legal or
governmental           proceedings to which the Company or any of its subsidiaries is a
party or of           which any of their respective property or assets is the subject
which are not           described in the Offering Memorandum, including ordinary routine
litigation           incidental to the business, could not reasonably be expected to
result in a           Material Adverse Effect.  







		    (xix)        Possession
of Intellectual Property. The Company and its subsidiaries own           or possess,
or can acquire on reasonable terms, adequate patents, patent rights,           licenses,
inventions, copyrights, know-how (including trade secrets and other           unpatented
and/or unpatentable proprietary or confidential information, systems           or
procedures), trademarks, service marks, trade names or other intellectual
          property (collectively, “Intellectual Property”) necessary to carry
on           the business now operated by them, and neither the Company nor any of its
          subsidiaries has received any notice or is otherwise aware of any infringement
          of or conflict with asserted rights of others with respect to any Intellectual
          Property or of any facts or circumstances which would render any Intellectual
          Property invalid or inadequate to protect the interest of the Company or any of
          its subsidiaries therein, and which infringement or conflict (if the subject of
          any unfavorable decision, ruling or finding) or invalidity or inadequacy,
singly           or in the aggregate, would result in a Material Adverse Effect.  







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		    (xx)        Absence
of Further Requirements. No filing with, or authorization,           approval,
consent, license, order, registration, qualification or decree of, any           court or
governmental authority or agency is necessary or required for the           performance
by the Company of its obligations hereunder (except for the filing           of the Form
T-1 by the Trustee and the Shelf Registration Statement required           under the
Registration Rights Agreement) or under the Registration Rights           Agreement, the
Indenture or the Securities, in connection with the offering,           issuance or sale
of the Securities hereunder, the issuance of Ordinary Shares           upon conversion of
the Securities or the consummation of the transactions           contemplated by this
Agreement, the Registration Rights Agreement, the Indenture           or the Securities
(including the use of the proceeds of the sale of the           Securities as described
in the Offering Memorandum under “Use of           Proceeds”) or for the due
execution, delivery or performance of this           Agreement, the Registration Rights
Agreement, the Indenture and the Securities           by the Company, except such as have
been already obtained or, in the case of any           approval required from the Office
of the Chief Scientist of the Israeli Ministry           of Industry, Trade and Labor and
the Israeli Investment Center, shall have been           obtained by the Closing Time or
promptly thereafter.  







		    (xxi)        Possession
of Licenses and Permits. The Company and its subsidiaries           possess such
permits, licenses, approvals, consents and other authorizations           (collectively,
“Governmental Licenses”) issued by the appropriate           federal, state,
local or foreign regulatory agencies or bodies necessary to           conduct the
business now operated by them, except where the failure so to           possess would
not, singly or in the aggregate, result in a Material Adverse           Effect; the
Company and its subsidiaries are in compliance with the terms and           conditions of
all such Governmental Licenses, except where the failure so to           comply would
not, singly or in the aggregate, result in a Material Adverse           Effect; all of
the Governmental Licenses are valid and in full force and effect,           except where
the invalidity of such Governmental Licenses or the failure of such
          Governmental Licenses to be in full force and effect would not, singly or in
the           aggregate, result in a Material Adverse Effect; and neither the Company nor
any           of its subsidiaries has received any notice of proceedings relating to the
          revocation or modification of any such Governmental Licenses which, singly or
in           the aggregate, if the subject of an unfavorable decision, ruling or finding,
          would result in a Material Adverse Effect.  







		    (xxii)        Title
to Property. The Company and its subsidiaries have good and           marketable
title to all real property owned by the Company and its subsidiaries           and good
title to all other properties owned by them, in each case, free and           clear of
all mortgages, pledges, liens, security interests, claims, restrictions           or
encumbrances of any kind except such as (a) are described in the           Offering
Memorandum or (b) do not, singly or in the aggregate, materially           affect
the value of such property and do not interfere with the use made and           proposed
to be made of such property by the Company or any of its subsidiaries;           and all
of the leases and subleases material to the business of the Company and           its
subsidiaries, considered as one enterprise, and under which the Company or           any
of its subsidiaries holds properties described in the Offering Memorandum,           are
in full force and effect, and neither the Company nor any of its           subsidiaries
has any notice of any material claim of any sort that has been           asserted by
anyone adverse to the rights of the Company or any of its           subsidiaries under
any of the leases or subleases mentioned above, or affecting           or questioning the
rights of the Company or any subsidiary thereof to the           continued possession of
the leased or subleased premises under any such lease or           sublease.  







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		    (xxiii)        Environmental
Laws. Except as described in the Offering Memorandum and           except such
matters as would not, singly or in the aggregate, result in a           Material Adverse
Effect, (A) neither the Company nor any of its           subsidiaries is in
violation of any federal, state, local or foreign statute,           law, rule,
regulation, ordinance, code, policy or rule of common law or any           judicial or
administrative interpretation thereof, including any judicial or           administrative
order, consent, decree or judgment, relating to pollution or           protection of
human health, the environment (including, without limitation,           ambient air,
surface water, groundwater, land surface or subsurface strata) or           wildlife,
including, without limitation, laws and regulations relating to the           release or
threatened release of chemicals, pollutants, contaminants, wastes,           toxic
substances, hazardous substances, petroleum or petroleum products,
          asbestos-containing materials or mold (collectively, “Hazardous
          Materials”) or to the manufacture, processing, distribution, use,
          treatment, storage, disposal, transport or handling of Hazardous Materials
          (collectively, “Environmental Laws”), (B) the Company and its
          subsidiaries have all permits, authorizations and approvals required under any
          applicable Environmental Laws and are each in compliance with their
          requirements, (C) there are no pending or threatened administrative,
          regulatory or judicial actions, suits, demands, demand letters, claims, liens,
          notices of noncompliance or violation, investigation or proceedings relating to
          any Environmental Law against the Company or any of its subsidiaries and
          (D) there are no events or circumstances that would reasonably be expected
          to form the basis of an order for clean-up or remediation, or an action, suit
or           proceeding by any private party or governmental body or agency, against or
          affecting the Company or any of its subsidiaries relating to Hazardous
Materials           or Environmental Laws.  







		    (xxiv)        Investment
Company Act. The Company is not required, and upon the           issuance and sale of
the offered Securities as herein contemplated and the           application of the net
proceeds therefrom as described in the Offering           Memorandum will not be an “investment
company” under the Investment           Company Act of 1940, as amended (the “1940
Act”).  







		    (xxv)        Registration
Rights. There are no persons with registration rights or           other similar
rights to have any securities (1) registered pursuant to the shelf           registration
statement to be filed in accordance with the Registration Rights           Agreement or
(2) otherwise registered by the Company under the 1933 Act (except           as described
in the Offering Memorandum).  







		    (xxvi)        Stabilization
or Manipulation. Neither the Company nor any of its           officers, directors or
controlling persons has taken, directly or indirectly,           any action designed to
cause or to result in, or that has constituted or which           might reasonably be
expected to constitute, the stabilization or manipulation of           the price of any
security of the Company to facilitate the sale of the           Securities.  







		    (xxvii)        No
Taxation. Assuming the Initial Purchasers are not otherwise subject to
          Israeli taxation by the conduct of their business activities, (A) the sale and
          delivery to the Initial Purchasers of the Securities as contemplated in this
          Agreement and the sale and delivery of the Securities by the Initial Purchasers
          to subsequent purchasers as contemplated in this Agreement, are not subject to
          any tax imposed by Israel or any political subdivision or taxing authority
          thereof or therein any or stamp or other issuance or transfer tax, duty,
capital           gain tax or withholding tax imposed by federal law, the laws of any
state, or           any political subdivision thereof, or any taxing authority in any
jurisdiction,           except for the Israeli stamp taxes applicable to the issuance of
the Securities           to be sold by the Company under this Agreement (which will be
paid by the           Company at the Closing Time, or promptly and on a timely basis
after the Closing           Time, to the extent required by, and in accordance with,
Israeli law) and (B)           except as disclosed in the Offering Memorandum, (1)
payments under the           Securities will not be subject to withholding tax imposed
under the laws of           Israel or any political subdivision or taxing authority
thereof or therein and           (2) the proceeds from any sale or other disposition of
securities will not be           subject to any capital gains, withholding or other taxes
imposed by Israel or           any political subdivision or taxing authority thereof or
therein.  







		    (xviii)        Accounting
Controls. The Company and its subsidiaries maintain a system           of internal
accounting controls sufficient to provide reasonable assurances that           (A)
transactions are executed in accordance with management’s general or
          specific authorization; (B) transactions are recorded as necessary to permit
          preparation of financial statements in conformity with United States GAAP and
to           maintain accountability for assets; (C) access to assets is permitted only
in           accordance with management’s general or specific authorization; and (D)
the           recorded accountability for assets is compared with the existing assets at
          reasonable intervals and appropriate action is taken with respect to any
          differences.  







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		    (xix)        Related
Party Transactions. No relationship, direct or indirect, exists           between or
among any of the Company or any affiliate of the Company, on the one           hand, and
any director, officer, shareholder, customer or supplier of the           Company or any
affiliate of the Company, on the other hand, which is required by           the 1933 Act,
the 1934 Act or the rules and regulations promulgated thereunder           to be
described in the Offering Memorandum or the documents incorporated by           reference
in the Offering Memorandum which is not so described and described as           required.
There are no outstanding loans, advances (except normal advances for           business
expenses in the ordinary course of business) or guarantees of           indebtedness by
the Company to or for the benefit of any of the officers or           directors of the
Company or any of their respective family members, except as           disclosed in the
Offering Memorandum or the documents incorporated by reference           in the Offering
Memorandum.  







		    (xxx)        Sarbanes-Oxley;
Nasdaq Marketplace Rules. There is and has been no           failure on the part of
the Company and any of the Company’s directors or           officers, in their
capacities as such, to comply in all material respects with           any provision in
effect as of the date hereof applicable to the Company of (i)           the
Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in
          connection therewith, and (ii) the Nasdaq Marketplace Rules.  







		    (xxxi)        Similar
Offerings. Neither the Company nor any of its affiliates, as such           term is
defined in Rule 501(b) under the 1933 Act (each, an           “Affiliate”),
has, directly or indirectly, solicited any offer to buy,           sold or offered to
sell or otherwise negotiated in respect of, or will solicit           any offer to buy,
sell or offer to sell or otherwise negotiate in respect of, in           the United
States or to any United States citizen or resident, any security           which is or
would be integrated with the sale of the Securities in a manner that           would
require the offered Securities to be registered under the 1933 Act.  







		    (xxxii)        Rule
144A Eligibility. The Securities are eligible for resale pursuant to           Rule 144A
and will not be, at Closing Time, of the same class as securities           listed on a
national securities exchange registered under Section 6 of the           1934 Act,
or quoted in a U.S. automated interdealer quotation system.  







		    (xxxiii)        No
General Solicitation. None of the Company, its Affiliates or any           person
acting on its or any of their behalf (other than the Initial Purchasers,           as to
whom the Company makes no representation) has engaged or will engage, in
          connection with the offering of the offered Securities, in any form of general
          solicitation or general advertising within the meaning of Rule 502(c)
under           the 1933 Act  







		    (xxxiv)        No
Registration Required. Subject to compliance by the Initial Purchasers           with
the representations and warranties set forth in Section 2 and the
          procedures set forth in Section 6 hereof, it is not necessary in
connection           with the offer, sale and delivery of the offered Securities to the
Initial           Purchasers and to each Subsequent Purchaser in the manner contemplated
by this           Agreement and the Offering Memorandum to register the Securities under
the           1933 Act or to qualify the Indenture under the Trust Indenture Act of
1939,           as amended (the “1939 Act”).  







		    (xxxv)        Reporting
Company. The Company is subject to the reporting requirements           of Section 13
or Section 15(d) of the 1934 Act.  







- 10 -










		    (xxxvi)        Listing
of Ordinary Shares. The Ordinary Shares are registered pursuant           to Section
12(g) of the 1934 Act and are listed on the Nasdaq National Market           and The Tel
Aviv Stock Exchange and the Company has taken no action designed to,           or likely
to have the effect of, terminating the registration of the Ordinary           Shares
under the 1934 Act or delisting the Ordinary Shares from the Nasdaq           National
Market or The Tel Aviv Stock Exchange, nor has the Company received any
          notification that the Commission, the Nasdaq National Market or The Tel Aviv
          Stock Exchange is contemplating terminating such registration or listing  







		    (xxxvii)        Ordinary
Share Certificates. The certificates for the Ordinary Shares           (including the
Ordinary Shares issuable upon conversion of the Securities)           conform to any
applicable requirements of The Tel Aviv Stock Exchange, Israeli           corporate laws
and the Memorandum of Association and Articles of Association of           the Company.  







		    (xxxviii)        Foreign
Corrupt Practices Act Compliance. Neither the Company nor any of           its
subsidiaries nor, to the knowledge of the Company, any director, officer,           agent
or employee of the Company or any of its subsidiaries is aware of any           action
taken or has taken any action, directly or indirectly for or on behalf of           the
Company or any Subsidiary, that would result in a violation by such persons           of
the Foreign Corrupt Practices Act of 1977, as amended, and the rules and
          regulations thereunder (“FCPA”), including, without limitation,
making           use of the mails or any means or instrumentality of interstate commerce
          corruptly in furtherance of an offer, payment, promise to pay or authorization
          of the payment of any money, or other property, gift, promise to give, or
          authorization of the giving of anything of value to any “foreign
          official” (as such term is defined in the FCPA) or any foreign political
          party or official thereof or any candidate for foreign political office, in
          contravention of the FCPA and the Company and its subsidiaries have conducted
          their businesses in compliance with the FCPA and have instituted and maintain
          policies and procedures designed to ensure, and which are reasonably expected
to           continue to ensure, continued compliance therewith.  







		    (xxxix)        Currency
and Foreign Transactions Reporting Act Compliance. The           operations of the
Company and its subsidiaries are and have been conducted at           all times in
compliance in all material respects with applicable financial           recordkeeping and
reporting requirements of the Currency and Foreign           Transactions Reporting Act
of 1970, as amended, the money laundering statutes of           all jurisdictions, the
rules and regulations thereunder and any related or           similar rules, regulations
or guidelines, issued, administered or enforced by           any governmental agency
(collectively, the “Money Laundering Laws”)           and no action, suit or
proceeding by or before any court or governmental agency,           authority or body or
any arbitrator involving the Company or any of its           subsidiaries with respect to
the Money Laundering Laws is pending or, to the           best knowledge of the Company,
threatened that could have a Material Adverse           Effect.  







		    (xl)        Foreign
Assets Control Compliance. Neither the Company nor any of its           subsidiaries
nor, to the knowledge of the Company, any director, officer, agent           or employee
of the Company or any of its subsidiaries is currently subject to           any U.S.
sanctions administered by the Office of Foreign Assets Control of the           U.S.
Treasury Department (“OFAC”) in connection with his or her           actions
for or on behalf of the Company; and the Company will not directly or
          indirectly use the proceeds of the offering, or lend, contribute or otherwise
          make available such proceeds to any subsidiary, joint venture partner or other
          person or entity, for the purpose of financing the activities of any person
          currently subject to any U.S. sanctions administered by OFAC.  







- 11 -










		    (xli)        U.S.
Tax Status. The Company is not, and does not believe that, upon the
          consummation of the sale of the Notes, it would become, a “foreign
personal           holding company,” as defined in section 552 of the Code, or (B) a
          “controlled foreign corporation,” as defined in section 957 of the
          Code. Based upon the composition of its gross income and the composition and
          value of its gross assets during the period commencing January 1, 2004 and
          ending on the date hereof, taking into account management’s expectations
          regarding the composition of the Company’s gross income and assets for the
          balance of 2004 and in subsequent years, and applying the rules regarding the
          definition of a “passive foreign investment company”          (“PFIC”)
as of the date hereof, the Company does not believe that it           would be deemed a
PFIC for the 2004 tax year and does not currently anticipate           that it would
become a PFIC in subsequent years, although there can be no           assurance that a
substantial decline in the current public market value of the           Company’s
stock or a significant change in the composition of the           Company’s gross
income or assets would not alter either of the foregoing           conclusions.  







		    (xlii)        Tax
Compliance. The Company and its subsidiaries have filed all income           tax and
all other material tax returns required to have been filed by them or
          appropriate extensions for such filings have been obtained as required by
          applicable Israeli and other laws and regulations, and have timely paid all
          material taxes due and payable by any of them with respect to the income,
          properties or operations of the Company or any of its subsidiaries and all
          material assessments and other governmental charges or levies made against
them,           except such taxes, assessments, governmental charges or levies as are
being           contested in good faith and adequately disclosed on the Company’s
financial           statements in accordance with GAAP.  







		    (xliii)        Approved
Enterprise Status. Except as described in the Offering           Memorandum, the
Company is in compliance with all conditions and requirements           stipulated by the
instruments of approval entitling it or any of its operations           to the status of
“Approved Enterprise” under Israeli law and by           Israeli laws and
regulations relating to such Approved Enterprise status, except           such
noncompliance as would not have a Material Adverse Effect. All information
          supplied by the Company with respect to such applications was true, correct and
          complete in all material respects when supplied to the appropriate authorities.  







		    (xliv)        Absence
of Legal Process Immunity. Neither the Company nor any of its           subsidiaries
nor any of its or their properties or assets has any immunity from           the
jurisdiction of any court or from any legal process (whether through service           or
notice, attachment prior to judgment, attachment in aid of execution or
          otherwise) under the laws of the State of Israel.  







		    (xlv)        Office
of Chief Scientist. The Company has satisfied and will continue to           satisfy
all conditions and requirements of the instruments of approval granted           to it by
the Office of Chief Scientist of the Israeli Ministry of Industry,           Trade and
Labor (the “Office of the Chief Scientist”) and any           applicable laws
and regulations, including the Law for the Encouragement of           Industrial Research
and Development, 1984, with respect to any research and           development grants
given to it by such office, and is in full compliance with           the repayment of all
royalties, interest and penalties due under such laws and           regulations. All
information supplied by the Company with respect to such           applications was true,
correct and complete in all material respects when           supplied to the appropriate
authorities.  







		    (xlvi)        Industrial
Company Status. The Company believes that it qualified for           2003 as an “Industrial
Company” within the definition of the Law for           the Encouragement of
Industry (Taxes), 1969; and absent a change in such law,           the Company intends to
continue to so qualify for 2004.  







- 12 -










		    (xlvii)        Agent
for Service of Process. The Company has validly and irrevocably           appointed
AudioCodes, Inc. as its authorized agent for service of process           pursuant to
this Agreement.  







		    (xlviii)        Enforceability
of Judgments. A final and conclusive judgment against the           Company for a
definitive sum of money entered by a court in the United States           would be
enforced by Israeli courts according to the rules and subject to the
          limitations relating to Enforceability of Civil Liabilities, as described in
the           Offering Memorandum.  







		    (xlix)        Israeli
Securities Law Compliance. For a period of twelve months prior to           and
including the Closing Date, the Company has not offered or sold any of its
          securities in Israel, except for (i) options issued to its employees and
          directors in Israel and ordinary shares issued to its employees and directors
          pursuant to its employee stock purchase plan and (ii) any of the Securities
that           may be offered in Israel, in each case which issuance of options or
offering of           Securities was made in compliance with the requirements set forth
in the Israeli           Securities Law 5728-1968 and the regulations promulgated
thereunder.  







        (b)
Officer’s Certificates. Any certificate signed by any officer of the
          Company or any of its subsidiaries delivered to the Representatives or to
          counsel for the Initial Purchasers shall be deemed a representation and
warranty           by the Company to each Initial Purchaser as to the matters covered
thereby.  




        SECTION 2.     Sale
and Delivery to Initial Purchasers; Closing.  



        (a)
Initial Securities. On the basis of the representations and warranties
          herein contained and subject to the terms and conditions herein set forth, the
          Company agrees to sell to each Initial Purchaser, severally and not jointly,
and           each Initial Purchaser, severally and not jointly, agrees to purchase from
the           Company, at the price set forth in Schedule B, the aggregate principal
          amount of Initial Securities set forth in Schedule A opposite the name of
          such Initial Purchaser, plus any additional principal amount of Initial
          Securities which such Initial Purchaser may become obligated to purchase
          pursuant to the provisions of Section 11 hereof.  




        (b)
Option Securities. In addition, on the basis of the representations and
          warranties herein contained and subject to the terms and conditions herein set
          forth, the Company hereby grants an option to the Initial Purchasers, severally
          and not jointly, to purchase up to an additional $25,000,000 principal amount
of           Securities at the same price set forth in Schedule B for the Initial
Securities,           plus accrued interest, if any, from Closing Time to Date of
Delivery (as defined           below). The option hereby granted will expire 30 days
after the date hereof and           may be exercised in whole or in part from time to
time on one or more occasions           only for the purpose of covering over allotments
which may be made in connection           with the offering and distribution of the
Initial Securities upon notice by           Merrill Lynch to the Company setting forth
the number of Option Securities as to           which the several Initial Purchasers are
then exercising the option and the time           and date of payment and delivery for
such Option Securities. Any such time and           date of delivery (a “Date of
Delivery”) shall be determined by Merrill           Lynch, but shall not be later
than seven full business days after the exercise           of said option, nor in any
event prior to the Closing Time, as hereinafter           defined. If the option is
exercised as to all or any portion of the Option           Securities, each of the
Initial Purchasers, acting severally and not jointly,           will purchase that
proportion of the aggregate principal amount of Option           Securities then being
purchased which the principal amount of Initial Securities           set forth in
Schedule A opposite the name of such Initial Purchaser bears to the           aggregate
principal amount at maturity of Initial Securities.  



- 13 -










        (c)
Payment. Payment of the purchase price for, and delivery of certificates
          for, the Initial Securities shall be made at the offices of White & Case
          LLP, 1155 Avenue of the Americas, New York, NY 10036, or at such other place as
          shall be agreed upon by the Representatives and the Company, at 9:00 A.M.
          (Eastern time) on the fourth business day after the date hereof (unless
          postponed in accordance with the provisions of Section 11), or such other
          time not later than ten business days after such date as shall be agreed upon
by           the Representatives and the Company (such time and date of payment and
delivery           being herein called “Closing Time”).  




        In
addition, in the event that any or all of the Option Securities are purchased by the
Initial Purchasers, payment of the purchase price for, and delivery of certificates for,
such Option Securities shall be made at the above-mentioned offices, or at such other
place as shall be agreed upon by the Representatives and the Company, on each Date of
Delivery as specified in the notice from the Representatives to the Company. 



        Payment
shall be made to the Company by wire transfer of immediately available funds to a bank
account designated by the Company, against delivery to the Representatives for the
respective accounts of the Initial Purchasers of certificates for the Initial Securities
or the Option Securities, if any, to be purchased by them. It is understood that each
Initial Purchaser has authorized the Representatives, for its account, to accept delivery
of, receipt for, and make payment of the purchase price for, the Initial Securities or the
Option Securities, if any, which it has agreed to purchase. Merrill Lynch, individually
and not as representative of the Initial Purchasers, may (but shall not be obligated to)
make payment of the purchase price for the Initial Securities or the Option Securities, if
any, to be purchased by any Initial Purchaser whose funds have not been received by the
Closing Time or the relevant Date of Delivery, as the case may be, but such payment shall
not relieve such Initial Purchaser from its obligations hereunder. 



        (d)
Qualified Institutional Buyer. Each Initial Purchaser represents and
          warrants to, and agrees with, the Company that it is a “qualified
          institutional buyer” within the meaning of Rule 144A under the 1933 Act (a
          “Qualified Institutional Buyer”) and an “accredited
          investor” within the meaning of Rule 501(a) under the 1933 Act (an
          “Accredited Investor”).  




        (e)
Denominations; Registration. Certificates for the Initial Securities or
          the Option Securities, if any, shall be in such denominations ($1,000 or
          integral multiples of $1,000 in excess thereof) and registered in such names as
          the Representatives may request in writing at least one full business day
before           the Closing Time or the relevant Date of Delivery, as the case may be.
The           certificates representing the Initial Securities and the Option Securities,
if           any, shall be made available for examination and packaging by the Initial
          Purchasers in The City of New York not later than 10:00 A.M. on the last
          business day prior to Closing Time or the relevant Date of Delivery, as the
case           may be.  




        SECTION 3.     Covenants
of the Company. The Company covenants with each Initial Purchaser as follows:  



        (a)
Offering Memorandum. The Company, as promptly as possible, will furnish
          to each Initial Purchaser, without charge, such number of copies of the
Offering           Memorandum and any amendments and supplements thereto and documents
incorporated           by reference therein as such Initial Purchaser may reasonably
request.  



- 14 -










        (b)
Notice and Effect of Material Events. The Company will immediately notify
          each Initial Purchaser, and confirm such notice in writing, of (x) any
          filing made by the Company of information relating to the offering of the
          Securities with any securities exchange or any other regulatory body in the
          United States or any other jurisdiction, and (y) prior to the completion
of           the placement of the offered Securities by the Initial Purchasers as
evidenced           by a notice in writing from the Initial Purchasers to the Company,
any material           changes in or affecting the condition, financial or otherwise, or
the earnings,           business affairs or business prospects of the Company and its
subsidiaries           considered as one enterprise which (i) make any statement in
the Offering           Memorandum false or misleading or (ii) are not disclosed in
the Offering           Memorandum. In such event or if during such time any event shall
occur as a           result of which it is necessary, in the reasonable opinion of any of
the           Company, its counsel, the Initial Purchasers or counsel for the Initial
          Purchasers, to amend or supplement the Offering Memorandum in order that the
          Offering Memorandum not include any untrue statement of a material fact or omit
          to state a material fact necessary in order to make the statements therein not
          misleading in the light of the circumstances then existing, the Company will
          forthwith amend or supplement the Offering Memorandum by preparing and
          furnishing to each Initial Purchaser an amendment or amendments of, or a
          supplement or supplements to, the Offering Memorandum (in form and substance
          satisfactory in the reasonable opinion of counsel for the Initial Purchasers)
so           that, as so amended or supplemented, the Offering Memorandum will not
include an           untrue statement of a material fact or omit to state a material fact
necessary           in order to make the statements therein, in the light of the
circumstances           existing at the time it is delivered to a Subsequent Purchaser,
not misleading.  




        (c)
Amendment to Offering Memorandum and Supplements. The Company will advise
          each Initial Purchaser promptly of any proposal to amend or supplement the
          Offering Memorandum and will not effect such amendment or supplement without
the           consent of the Initial Purchasers. Neither the consent of the Initial
          Purchasers, nor the Initial Purchaser’s delivery of any such amendment or
          supplement, shall constitute a waiver of any of the conditions set forth in
          Section 5 hereof.  




        (d)
Qualification of Securities for Offer and Sale. The Company will use its
          best efforts, in cooperation with the Initial Purchasers, to qualify the
offered           Securities and the Ordinary Shares issuable upon conversion of the
Securities           for offering and sale under the applicable securities laws of such
states and           other jurisdictions (domestic or foreign) as the Representatives may
designate           and to maintain such qualifications in effect as long as required for
the sale           of the Securities; provided, however, that the Company shall not be
obligated to           file any general consent to service of process or to qualify as a
foreign           corporation or as a dealer in securities in any jurisdiction in which
it is not           so qualified or to subject itself to taxation in respect of doing
business in           any jurisdiction in which it is not otherwise so subject.  




        (e)
DTC. The Company will cooperate with the Initial Purchasers and use its
          best efforts to permit the offered Securities to be eligible for clearance and
          settlement through the facilities of DTC.  




        (f)
Use of Proceeds. The Company will use the net proceeds received by it
          from the sale of the Securities in the manner specified in the Offering
          Memorandum under “Use of Proceeds”.  




        (g)
Restriction on Sale of Debt Securities. During a period of 90 days from
          the date of the Offering Memorandum, the Company will not, without the prior
          written consent of Merrill Lynch and Lehman Brothers, directly or indirectly,
          issue, sell, offer or agree to sell, grant any option for the sale of, or
          otherwise dispose of, any other debt securities of the Company or securities of
          the Company that are convertible into, or exchangeable for, the offered
          Securities or such other debt securities.  



- 15 -










        (h)
Restriction on Sale of Ordinary Shares. During a period of 90 days from
          the date of the Offering Memorandum, the Company will not, without the prior
          written consent of Merrill Lynch and Lehman Brothers, (i) directly or
          indirectly, offer, pledge, sell, contract to sell, sell any option or contract
          to purchase, purchase any option or contract to sell, grant any option, right
or           warrant to purchase or otherwise transfer or dispose of any share of
Ordinary           Shares or any securities convertible into or exercisable or
exchangeable for           Ordinary Shares or other securities of the Company or file any
registration           statement under the 1933 Act with respect to any of the foregoing
or (ii) enter           into any swap or any other agreement or any transaction that
transfers, in whole           or in part, directly or indirectly, the economic
consequence of ownership of the           Ordinary Shares or any other securities of the
Company whether any such swap or           transaction described in clause (i) or (ii)
above is to be settled by delivery           of Common Stock or such other securities, in
cash or otherwise. The foregoing           sentence shall not apply to (A) the Securities
to be sold hereunder or any           Ordinary Shares issuable upon conversion of the
Securities, (B) any Ordinary           Shares issued by the Company upon the exercise of
an option or warrant or the           conversion of a security outstanding on the date
hereof and referred to in the           Offering Memorandum (or in a document
incorporated therein by reference), (C)           any Ordinary Shares issued or options
to purchase Ordinary Shares or granted           pursuant to existing employee benefit
plans of the Company referred to in the           Offering Memorandum (or in a document
incorporated therein by reference in the           Offering Memorandum), (D) any Ordinary
Shares issued as consideration for the           purchase of Ai-Logix, Inc. in accordance
with the stock purchase agreement           entered into by the Company in connection
with such purchase, or (E) any           Ordinary shares issued as consideration for the
acquisition of another entity,           or substantially all of the stock or assets of
another entity, by the Company,           provided, however, that the holder of any
Ordinary Shares issued pursuant to           such acquisition shall enter into a lock-up
agreement for the balance of the 90           day lock-up period.  




        (i)
Stabilization and Manipulation. The Company will not take,
          directly or indirectly, any action designed to or that might reasonably be
          expected to cause or result in stabilization or manipulation of the price of
the           Securities to facilitate the sale or resale of the Securities. Except as
          permitted by the 1933 Act, the Company will not distribute any final offering
          memorandum other than the Final Offering Memorandum, any preliminary offering
          memorandum other than the Preliminary Offering Memorandum, or any other
offering           material in connection with the offer and sale of the Securities.  




        (j)
PORTAL Designation. The Company will use its best efforts to
          permit the Securities to be designated PORTAL securities in accordance with the
          rules and regulations adopted by the National Association of Securities
Dealers,           Inc. (“NASD”) relating to trading in the PORTAL Market.  




        (k)
Reporting Requirements. Until the offering of the
          Securities is complete, the Company will file all documents required to be
filed           with the Commission pursuant to the 1934 Act within the time periods
required by           the 1934 Act and the 1934 Act Regulations.  




        (l)
Registration Rights Agreement. The Company agrees to enter
          into and comply with all the terms and conditions of the Registration Rights
          Agreement.  




        (m)
Qualification Under the Trust Indenture Act. The Company
          agrees that simultaneously with any registration of the Securities pursuant to
          the Registration Rights Agreement, or at such earlier time as may be required,
          the Indenture shall be qualified under the 1939 Act and any necessary
          supplemental indentures will be entered into in connection therewith.  




        (n)
Reservation of Ordinary Shares. The Company will, at all
          times, reserve and keep available, free of preemptive rights, enough Ordinary
          Shares for the purpose of enabling the Company to satisfy any obligations to
          issue Ordinary Shares upon conversion of the Securities.  




        (o)
Office of the Chief Scientist Approval.  The Company shall apply for and
obtain any consent of the Office of the Chief Scientist, Trade and Industry of
the State of Israel that may be required in connection with the issuance of
Ordinary Shares by the Company upon conversion of the Securities.  



- 16 -











        SEXTION 4.     Payment of
Expenses.  



        (a)
Expenses. The Company will pay all expenses incident to the performance
          of its obligations under this Agreement, including (i) the preparation,
          printing, delivery to the Initial Purchasers of the Offering Memorandum
          (including financial statements and any schedules or exhibits and any document
          incorporated therein by reference) and of each amendment or supplement thereto,
          (ii) the preparation, printing and delivery to the Initial Purchasers of
          this Agreement, the Indenture and such other documents as may be required in
          connection with the offering, purchase, sale, issuance or delivery of the
          Securities or the issuance or delivery of the Ordinary Shares issuable upon
          conversion thereof, (iii) the preparation, issuance and delivery of the
          certificates for the Securities to the Initial Purchasers and the certificates
          for the Ordinary Shares issuable upon conversion thereof, including any stock
or           other transfer taxes, any stamp or other duties payable upon the sale,
issuance           and delivery of the Securities or the issuance or delivery of the
Ordinary           Shares issuable upon conversion thereof, to the Initial Purchasers and
any           charges of DTC in connection therewith, (iv) the fees and
disbursements of           the Company’s counsel, accountants and other advisors,
(v) the           qualification of the Securities and the Ordinary Shares issuable upon
Conversion           thereof under securities laws in accordance with the provisions of
Section 3(d)           hereof, including filing fees and the reasonable fees and
disbursements of           counsel for the Initial Purchasers in connection therewith and
in connection           with the preparation of any blue sky survey, any supplement
thereto, (vi) the           preparation, printing and delivery to the Initial Purchasers
of copies of the           blue sky survey and any supplement thereto, (vii) the fees and
expenses of the           Trustee, including the fees and disbursements of counsel for
the Trustee in           connection with the Indenture and the Securities, (viii) the
costs and expenses           of the Company relating to investor presentations on any
“road show”          undertaken in connection with the marketing of the
Securities including, without           limitation, expenses associated with the
production of road show slides and           graphics, fees and expenses of any
consultants engaged in connection with the           road show presentations, travel and
lodging expenses of the representatives and           officers of the Company and any
such consultants, and the cost of aircraft and           other transportation chartered
in connection with the road show (ix) any fees           payable in connection with the
rating of the Securities, (x) any fees and           expenses payable in connection with
the initial and continued designation of the           Securities as PORTAL securities
under the PORTAL Market Rules pursuant to NASD           Rule 5322, (xi) the fees
and expenses of any transfer agent or registrar           for the Ordinary Shares
issuable upon conversion of the Securities, and           (xii) any fees and
expenses payable in connection with the listing of the           Ordinary Shares issuable
upon conversion of the Securities on the Nasdaq           National Market or the Tel Aviv
Stock Exchange.  




        (b)
Termination of Agreement. If this Agreement is terminated by the
          Representatives in accordance with the provisions of Section 5 or
          Section 10(a)(i) hereof, the Company shall reimburse the Initial
Purchasers           for all of their out-of-pocket expenses, including the reasonable
fees and           disbursements of counsel for the Initial Purchasers.  




        (c)
Additional Amounts: All payments to be made by the Company to the Initial
          Purchasers under this Agreement shall be made without withholding or deduction
          for or on account of any present or future taxes, assessments, imposts, duties
          or other governmental charges whatsoever (“Taxes”) unless the Company
          is compelled by law to deduct or withhold such taxes, assessments, imposts,
          duties or charges. To the extent any such Taxes are so required to be deducted
          or withheld, the Company shall pay to the Initial Purchasers such additional
          amounts (“Additional Amounts”) as may be necessary in order that the
          net amounts received by such Initial Purchaser after such withholding or
          deduction (including any withholding or deduction in respect of such Additional
          Amounts) shall equal the amounts that would have been received if no
withholding           or deduction had been made.  




        SECTION
5.     Conditions of Initial Purchasers’ Obligations. The obligations of the
several Initial Purchasers hereunder are subject to the accuracy in all material respects
of the representations and warranties of the Company contained in Section 1 hereof
or in certificates of any officer of the Company or any of its subsidiaries delivered
pursuant to the provisions hereof, to the performance by the Company of its covenants and
other obligations hereunder in all material respects, and to the following further
conditions:  



- 17 -










        (a)
Opinion of Israeli Counsel for Company. At Closing Time,
          the Representatives shall have received the favorable opinion, dated as of
          Closing Time, of Naschitz, Brandes & Co., Israeli counsel for the Company,
          substantially in the form attached hereto as Exhibit A, together with signed or
          reproduced copies of such letter for each of the other Initial Purchasers.  




        (b)
Opinion of Israeli Tax Counsel for Company. At Closing
          Time, the Representatives shall have received the favorable opinion, dated as
of           Closing Time, of Eyal Shenhav & Co., Israeli counsel for the Company,
          substantially in the form attached hereto as Exhibit B, together with signed or
          reproduced copies of such letter for each of the other Initial Purchasers.  




        (c)
Opinion of Israeli General Counsel for Company. At Closing
          Time, the Representatives shall have received the favorable opinion, dated as
of           Closing Time, of Itamar Rosen, Adv., general counsel for the Company,
          substantially in the form attached hereto as Exhibit C, together with signed or
          reproduced copies of such letter for each of the other Initial Purchasers.  




        (d)
Opinion of United States Counsel for Company. At Closing
          Time, the Representatives shall have received the favorable opinion, dated as
of           Closing Time, of Fulbright & Jaworski L.L.P., United States counsel for
the           Company, substantially in the form attached hereto as Exhibit D, together
with           signed or reproduced copies of such letter for each of the other Initial
          Purchasers.  




        (e)
Opinion of Israeli Counsel for Initial Purchasers. At
          Closing Time, the Representatives shall have received the favorable opinion,
          with respect to the issuance and sales of the Securities and other related
          matters as the Initial Purchasers shall reasonably require, dated as of Closing
          Time, of Meitar, Liquornik, Geva & Leshem Brandwein, Israeli counsel for
the           Initial Purchasers, together with signed or reproduced copies of such
letter for           each of the other Initial Purchasers.  




        (f)
Opinion of United States Counsel for Initial Purchasers. At
          Closing Time, the Representatives shall have received the favorable opinion,
          with respect to the issuance and sales of the Securities and other related
          matters as the Initial Purchasers shall reasonably require, dated as of Closing
          Time, of White & Case LLP, United States counsel for the Initial
Purchasers,           together with signed or reproduced copies of such letter for each
of the other           Initial Purchasers  




        (g)
Officers’ Certificate. At Closing Time, there shall
          not have been, since the date hereof or since the respective dates as of which
          information is given in the Final Offering Memorandum (exclusive of any
          amendments or supplements thereto subsequent to the date of this Agreement),
any           material adverse change in the condition, financial or otherwise, or in the
          earnings, business affairs or business prospects of the Company and its
          subsidiaries considered as one enterprise, whether or not arising in the
          ordinary course of business, and the Representatives shall have received a
          certificate of the President or a Vice President of the Company and of the
chief           financial or chief accounting officer of the Company, dated as of Closing
Time,           to the effect that (i) there has been no such material adverse
change,           (ii) the representations and warranties in Section 1 hereof
(x) if           qualified as to materiality or Material Adverse Effect, are true and
correct,           and (y) in all other cases are true and correct in all material
respects, with           the same force and effect as though expressly made at and as of
Closing Time,           and (iii) the Company has complied with all agreements and
satisfied all           conditions on its part to be performed or satisfied at or prior
to Closing Time.  




        (h)
Accountants’ Comfort Letter. At the time of the
          execution of this Agreement, the Representatives shall have received from Ernst
          & Young LLP a letter dated such date, in form and substance satisfactory to
          the Representatives, together with signed or reproduced copies of such letter
          for each of the other Initial Purchasers containing statements and information
          of the type ordinarily included in accountants’ “comfort letters”          to
Initial Purchasers with respect to the financial statements and certain
          financial information contained in the Offering Memorandum.  



- 18 -










        (i)
Bring-down Comfort Letter. At Closing Time, the
          Representatives shall have received from Ernst & Young LLP a letter, dated
          as of Closing Time, to the effect that they reaffirm the statements made in the
          letter furnished pursuant to subsection (h) of this Section, except that
          the specified date referred to shall be a date not more than three business
days           prior to Closing Time.  




        (j)
PORTAL. At Closing Time, the Securities shall have been
          designated for trading on PORTAL.  




        (k)
Approval of Listing. At Closing Time, the ordinary shares issuable
          upon conversion of the Securities shall have been approved for inclusion on the
          Nasdaq National Market and listing on The Tel Aviv Stock Exchange, subject only
          to official notice of issuance.  




        (l)
Registration Rights Agreement and Indenture. At Closing
          Time, the Company shall have entered into the Registration Rights Agreement and
          the Indenture in form and substance satisfactory to the Initial Purchasers.  




        (m)
Lock-up Agreements. At Closing Time, the Representative shall have
          received an agreement substantially in the form of Exhibit E hereto signed by
          the persons listed on Schedule D hereto.  




        (n)
Conditions to Purchase of Option Securities. In the event
          that the Initial Purchasers exercise their option provided in Section 2(b)
          hereof to purchase all or any portion of the Option Securities, the
          representations and warranties of the Company contained herein and the
          statements in any certificates furnished by the Company or any subsidiary of
the           Company hereunder shall be true and correct as of each Date of Delivery
and, at           the relevant Date of Delivery, the Representative shall have received:  




          		    (i)       
               Officers’ Certificate. A certificate, dated such Date of Delivery,
               of the Chief Executive Officer of the Company and of the Chief Administrative
               Officer and Chief Financial Officer of the Company confirming that the
               certificate delivered at the Closing Time pursuant to Section 5(g) hereof
               remains true and correct as of such Date of Delivery. 



               





          		    (ii)       
               Opinion of Counsels for Company. The opinion of Naschitz, Brandes &
               Co., Eyal Shenhav & Co., Itamar Rosen, Adv. and Fulbright & Jaworski
               L.L.P., in form and substance satisfactory to the Initial Purchasers, dated such
               Date of Delivery, relating to the Option Securities to be purchased on such Date
               of Delivery and otherwise to the same effect as the opinion required by Sections
               5(a), (b), (c) and (d) hereof. 



               



          		    (iii)       
               Opinion of Israeli Counsel for Initial Purchasers. The opinion of Meitar,
               Liquornit, Geva & Co. and White & Case LLP, in form and substance
               satisfactory to the Initial Purchasers, dated such Date of Delivery, relating to
               the Option Securities to be purchased on such Date of Delivery and otherwise to
               the same effect as the opinion required by Sections 5(e) and (f) hereof. 



               



          		    (iv)       
               Bring-Down Comfort Letter. A letter from Ernst & Young, in form and
               substance satisfactory to the Representative and dated such Date of Delivery,
               substantially in the same form and substance as the letter furnished to the
               Representative pursuant to Section 5(i) hereof, except that the “specified
               date” in the letter furnished pursuant to this paragraph shall be a date
               not more than three days prior to such Date of Delivery. 



               



- 19 -










        (o)
Additional Documents. At Closing Time, counsel for the
          Initial Purchasers shall have been furnished with such documents and opinions
as           they may require for the purpose of enabling them to pass upon the issuance
and           sale of the Securities as herein contemplated, or in order to evidence the
          accuracy of any of the representations or warranties, or the fulfillment of any
          of the conditions, herein contained; and all proceedings taken by the Company
in           connection with the issuance and sale of the Securities as herein
contemplated           shall be satisfactory in form and substance to the Representatives
and counsel           for the Initial Purchasers.  




        (p)
Termination of Agreement. If any condition specified in
          this Section shall not have been fulfilled when and as required to be
fulfilled,           this Agreement or, in the case of any condition to the purchase of
Option           Securities, on a Date of Delivery which is after Closing Time, the
obligations           of the several Initial Purchasers to purchase the relevant Option
Securities,           may be terminated by the Representatives by notice to the Company
at any time at           or prior to Closing Time or such Date of Delivery, as the case
may be, and such           termination shall be without liability of any party to any
other party except as           provided in Section 4 and except that Sections 1,
7, 8 and 9 shall           survive any such termination and remain in full force and
effect.  




        SECTION
6.     Subsequent Offers and Resales of the Securities.  




        (a)
Offer and Sale Procedures. Each of the Initial Purchasers and the Company
          hereby establish and agree to observe the following procedures in connection
          with the offer and sale of the Securities:  




		    (i)        Offers
and Sales. Offers and sales of the Securities shall be made only           to persons
whom the offeror or seller reasonably believes to be Qualified           Institutional
Buyers. Each Initial Purchaser severally agrees that it will not           offer, sell or
deliver any of the Securities in any jurisdiction outside the           United States
except under circumstances that will result in compliance with the           applicable
laws thereof, and that it will take at its own expense whatever           action is
required to permit its purchase and resale of the Securities in such
          jurisdictions.  







		    (ii)        No
General Solicitation. No general solicitation or general advertising
          (within the meaning of Rule 502(c) under the 1933 Act) will be used
in           the United States in connection with the offering or sale of the Securities.  







		    (iii)        Purchases
by Non-Bank Fiduciaries. In the case of a non-bank Subsequent           Purchaser of
a Security acting as a fiduciary for one or more third parties,           each third
party shall, in the judgment of the applicable Initial Purchaser, be           an
Institutional Accredited Investor or a “qualified institutional           buyer” within
the meaning of Rule 144A under the 1933 Act or a           non-U.S. person
outside the United States.  







		    (iv)        Subsequent
Purchaser Notification. Each Initial Purchaser will take           reasonable steps
to inform, and cause each of its U.S. Affiliates to take           reasonable steps to
inform, persons acquiring Securities from such Initial           Purchaser or affiliate,
as the case may be, in the United States that the           Securities (A) have not
been and will not be registered under the           1933 Act, (B) are being
sold to them without registration under the           1933 Act in reliance on Rule 144A
or in accordance with another           exemption from registration under the 1933 Act,
as the case may be, and           (C) may not be offered, sold or otherwise
transferred except (1) to           the Company, (2) in accordance with Rule
144A to a person whom the seller           reasonably believes is a Qualified
Institutional Buyer that is purchasing such           Securities for its own account or
for the account of a Qualified Institutional           Buyer to whom notice is given that
the offer, sale or transfer is being made in           reliance on Rule 144A or (3) pursuant
to another available exemption           from registration under the 1933 Act.  







- 20 -










		    (v)        Minimum
Principal Amount. No sale of the Securities to any one Subsequent           Purchaser
will be for less than U.S. $1,000 principal amount and no Security           will be
issued in a smaller principal amount. If the Subsequent Purchaser is a           non-bank
fiduciary acting on behalf of others, each person for whom it is acting           must
purchase at least U.S. $1,000 principal amount of the Securities.  







		    (vi)        Restrictions
on Transfer. The transfer restrictions and other provisions           set forth in
the Offering Memorandum under the heading “Notice to           Investors”,
including the legend required thereby, shall apply to the           Securities except as
otherwise agreed by the Company and the Initial Purchasers.  







        (b)
Covenants of the Company. The Company covenants with each Initial
          Purchaser as follows:  




		    (i)        Integration.
The Company agrees that it will not and will cause its           Affiliates not to,
directly or indirectly, solicit any offer to buy, sell or           make any offer or
sale of, or otherwise negotiate in respect of, securities of           the Company of any
class if, as a result of the doctrine of           “integration” referred to in
Rule 502 under the 1933 Act,           such offer or sale would render invalid
(for the purpose of (i) the sale of           the offered Securities by the Company
to the Initial Purchasers, (ii) the           resale of the offered Securities by
the Initial Purchasers to Subsequent           Purchasers or (iii) the resale of the
offered Securities by such Subsequent           Purchasers to others) the exemption from
the registration requirements of the           1933 Act provided by Section 4(2)
thereof or by Rule 144A           thereunder or otherwise.  







		    (ii)        Rule
144A Information. The Company agrees that, in order to render the           offered
Securities eligible for resale pursuant to Rule 144A under the           1933 Act,
while any of the offered Securities (or Ordinary Shares issuable           upon
conversion thereof) remain outstanding, it will make available, upon           request,
to any holder of offered Securities or prospective purchasers of           Securities the
information specified in Rule 144A(d)(4), unless the Company           furnishes
information to the Commission pursuant to Section 13 or 15(d) of           the 1934 Act.  







		    (iii)        Restriction
on Repurchases. Until the expiration of two years after the           original
issuance of the offered Securities or the Delivery Date, if later, the           Company
will not, and will cause its Affiliates not to, resell any offered           Securities
or the Ordinary Shares issuable upon the conversion thereof which are           “restricted
securities” (as such term is defined under           Rule 144(a)(3) under the
1933 Act), whether as beneficial owner or           otherwise (except as agent
acting as a securities broker on behalf of and for           the account of customers in
the ordinary course of business in unsolicited           broker’s transactions).  







	    (c)        Qualified
Institutional Buyer. Each Initial Purchaser severally and not           jointly
represents and warrants to, and agrees with, the Company that it is a           Qualified
Institutional Buyer and Accredited Investor.  








        SECTION
7.     Indemnification.  




        (a)
Indemnification of Initial Purchasers. The Company agrees to indemnify
          and hold harmless each Initial Purchaser, its affiliates, as such term is
          defined in Rule 501(b) under the 1933 Act (each, an “Affiliate”), its
          selling agents and each person, if any, who controls any Initial Purchaser
          within the meaning of Section 15 of the 1933 Act or Section 20
of           the 1934 Act as follows:  



- 21 -










		    (i)        against
any and all loss, liability, claim, damage and expense whatsoever, as           incurred,
arising out of any untrue statement or alleged untrue statement of a           material
fact contained in any Preliminary Offering Memorandum or the Final           Offering
Memorandum (or any amendment or supplement thereto), or the omission or           alleged
omission therefrom of a material fact necessary in order to make the           statements
therein, in the light of the circumstances under which they were           made, not
misleading;  







		    (ii)        against
any and all loss, liability, claim, damage and expense whatsoever, as           incurred,
to the extent of the aggregate amount paid in settlement of any           litigation, or
any investigation or proceeding by any governmental agency or           body, commenced
or threatened, or of any claim whatsoever based upon any such           untrue statement
or omission, or any such alleged untrue statement or omission;           provided that
(subject to Section 7(d) below) any such settlement is           effected with the
written consent of the Company; and  







		    (iii)        against
any and all expense whatsoever, as incurred (including the fees and
          disbursements of counsel chosen by Merrill Lynch), reasonably incurred in
          investigating, preparing or defending against any litigation, or any
          investigation or proceeding by any governmental agency or body, commenced or
          threatened, or any claim whatsoever based upon any such untrue statement or
          omission, or any such alleged untrue statement or omission, to the extent that
          any such expense is not paid under (i) or (ii) above;  







        provided,
however, that this indemnity agreement shall not apply to any loss, liability,
claim, damage or expense to the extent arising out of any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity with written
information furnished to the Company by any Initial Purchaser through Merrill Lynch
expressly for use in the Offering Memorandum (or any amendment thereto). 



        (b)
Indemnification of Company. Each Initial Purchaser severally agrees to
          indemnify and hold harmless the Company and each person, if any, who controls
          the Company within the meaning of Section 15 of the 1933 Act or
          Section 20 of the 1934 Act against any and all loss, liability,
claim,           damage and expense described in the indemnity contained in subsection (a)
          of this Section, as incurred, but only with respect to untrue statements or
          omissions, or alleged untrue statements or omissions, made in the Offering
          Memorandum in reliance upon and in conformity with written information
furnished           to the Company by such Initial Purchaser through Merrill Lynch
expressly for use           in the Offering Memorandum. The Company acknowledges that (i)
the statements set           forth in the last paragraph of the cover pageregarding
delivery of the           Securities and (ii), the last paragraph under the heading “Plan
of           Distribution”, regarding price stabilization and short positions in the
          Preliminary Memorandum and the Final Memorandum, constitute the only
information           furnished in writing by or on behalf of the Initial Purchasers for
inclusion in           the Preliminary Offering Memorandum, the Final Offering Memorandum
or in any           amendment or supplement thereto.  



- 22 -











        (c)
Actions against Parties; Notification. Each indemnified party shall give
          notice as promptly as reasonably practicable to each indemnifying party of any
          action commenced against it in respect of which indemnity may be sought
          hereunder, but failure to so notify an indemnifying party shall not relieve
such           indemnifying party from any liability hereunder to the extent it is not
          materially prejudiced as a result thereof and in any event shall not relieve it
          from any liability which it may have otherwise than on account of this
indemnity           agreement. In the case of parties indemnified pursuant to Section 7(a)
          above, counsel to the indemnified parties shall be selected by Merrill Lynch,
          and, in the case of parties indemnified pursuant to Section 7(b) above,
          counsel to the indemnified parties shall be selected by the Company. An
          indemnifying party may participate at its own expense in the defense of any
such           action; provided, however, that counsel to the indemnifying
party           shall not (except with the consent of the indemnified party) also be
counsel to           the indemnified party. In no event shall the indemnifying parties be
liable for           fees and expenses of more than one counsel (in addition to any local
counsel)           separate from their own counsel for all indemnified parties in
connection with           any one action or separate but similar or related actions in
the same           jurisdiction arising out of the same general allegations or
circumstances. No           indemnifying party shall, without the prior written consent
of the indemnified           parties, settle or compromise or consent to the entry of any
judgment with           respect to any litigation, or any investigation or proceeding by
any           governmental agency or body, commenced or threatened, or any claim
whatsoever in           respect of which indemnification or contribution could be sought
under this           Section or Section 8 hereof (whether or not the indemnified
parties are           actual or potential parties thereto), unless such settlement,
compromise or           consent (i) includes an unconditional release of each
indemnified party           from all liability arising out of such litigation,
investigation, proceeding or           claim and (ii) does not include a statement
as to or an admission of fault,           culpability or a failure to act by or on behalf
of any indemnified party.  




        (d)
Settlement without Consent if Failure to Reimburse. If at any time an
          indemnified party shall have requested an indemnifying party to reimburse the
          indemnified party for fees and expenses of counsel, such indemnifying party
          agrees that it shall be liable for any settlement of the nature contemplated by
          Section 7(a)(ii) effected without its written consent if (i) such
          settlement is entered into more than 45 days after receipt by such indemnifying
          party of the aforesaid request, (ii) such indemnifying party shall have
          received notice of the terms of such settlement at least 30 days prior to such
          settlement being entered into and (iii) such indemnifying party shall not
          have reimbursed such indemnified party in accordance with such request prior to
          the date of such settlement.  




        SECTION
8.     Contribution. If the indemnification provided for in Section 7 hereof is
for any reason unavailable to or insufficient to hold harmless an indemnified party in
respect of any losses, liabilities, claims, damages or expenses referred to therein, then
each indemnifying party shall contribute to the aggregate amount of such losses,
liabilities, claims, damages and expenses incurred by such indemnified party, as
incurred, (i) in such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and the Initial Purchasers on the other hand from
the offering of the Securities pursuant to this Agreement or (ii) if the allocation
provided by clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company on the one hand and of the Initial
Purchasers on the other hand in connection with the statements or omissions which
resulted in such losses, liabilities, claims, damages or expenses, as well as any other
relevant equitable considerations.  




        The
relative benefits received by the Company on the one hand and the Initial Purchasers on
the other hand in connection with the offering of the Securities pursuant to this
Agreement shall be deemed to be in the same respective proportions as the total net
proceeds from the offering of the Securities pursuant to this Agreement (before deducting
expenses) received by the Company and the total underwriting discount received by the
Initial Purchasers, bear to the aggregate initial offering price of the Securities. 



        The
relative fault of the Company on the one hand and the Initial Purchasers on the other hand
shall be determined by reference to, among other things, whether any such untrue or
alleged untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Company or by the Initial Purchasers
and the parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. 



        The
Company and the Initial Purchasers agree that it would not be just and equitable if
contribution pursuant to this Section were determined by pro rata allocation (even if the
Initial Purchasers were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred to above
in this Section. The aggregate amount of losses, liabilities, claims, damages and expenses
incurred by an indemnified party and referred to above in this Section shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified party in
investigating, preparing or defending against any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue or alleged untrue statement or omission or alleged
omission. 



- 23 -










        Notwithstanding
the provisions of this Section, no Initial Purchaser shall be required to contribute any
amount in excess of the amount by which the total price at which the Securities purchased
and sold by it hereunder exceeds the amount of any damages which such Initial Purchaser
has otherwise been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. 



        No
person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the 1933 Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. 



        For
purposes of this Section, each person, if any, who controls an Initial Purchaser within
the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act and each Initial Purchaser’s Affiliates and selling agents shall have
the same rights to contribution as such Initial Purchaser, and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act shall have the same rights to contribution as the
Company. The Initial Purchasers’ respective obligations to contribute pursuant to
this Section are several in proportion to the principal amount of Initial Securities set
forth opposite their respective names in Schedule A hereto and not joint. 



        SECTION
9.     Representations, Warranties and Agreements to Survive. All representations,
warranties and agreements contained in this Agreement or in certificates of officers of
the Company or any of its subsidiaries submitted pursuant hereto shall remain operative
and in full force and effect, regardless of (i) any investigation made by or on behalf of
any Initial Purchaser or its Affiliates or selling agents, any person controlling any
Initial Purchaser, its officers or directors or any person controlling the Company and
(ii) delivery of and payment for the Securities.  




        SECTION10.    Termination
of Agreement.  




        (a)
Termination; General. The Representatives may terminate this Agreement,
          by notice to the Company, at any time at or prior to Closing Time (i) if
          there has been, since the time of execution of this Agreement or since the
          respective dates as of which information is given in the Final Offering
          Memorandum (exclusive of any amendments or supplements thereto subsequent to
the           date of this Agreement), any material adverse change in the condition,
financial           or otherwise, or in the earnings, business affairs or business
prospects of the           Company and its subsidiaries considered as one enterprise,
whether or not           arising in the ordinary course of business, or (ii) if
there has occurred           any material adverse change in the financial markets in the
United States or the           international financial markets, any outbreak of
hostilities or escalation           thereof or other calamity or crisis or any change or
development involving a           prospective change in national or international
political, financial or economic           conditions, in each case the effect of which
is such as to make it, in the           judgment of the Representatives, impracticable or
inadvisable to market the           Securities or to enforce contracts for the sale of
the Securities, or           (iii) if trading in any securities of the Company has
been suspended or           materially limited by the Commission or The Tel Aviv Stock
Exchange or the           Nasdaq National Market, or if trading generally on the American
Stock Exchange,           the New York Stock Exchange or the Nasdaq National Market has
been suspended or           materially limited, or minimum or maximum prices for trading
have been fixed, or           maximum ranges for prices have been required, by any of
said exchanges or by           such system or by order of the Commission, the National
Association of           Securities Dealers, Inc. or any other governmental authority, or
(iv) a material           disruption has occurred in commercial banking or securities
settlement or           clearance services in the United States, or (v) if a banking
moratorium has           been declared by either Federal, New York or Israeli
authorities.  




- 24 -










        (b)
Liabilities. If this Agreement is terminated pursuant to this Section,
          such termination shall be without liability of any party to any other party
          except as provided in Section 4 hereof, and provided further that
          Sections 1, 7, 8 and 9 shall survive such termination and remain in full
          force and effect.  




        SECTION
11.     Default by One or More of the Initial Purchasers. If one or more of the
Initial Purchasers shall fail at Closing Time or a Date of Delivery to purchase the
Securities which it or they are obligated to purchase under this Agreement (the “Defaulted
Securities”), the Representatives shall have the right, within 24 hours
thereafter, to make arrangements for one or more of the non-defaulting Initial
Purchasers, or any other initial purchasers, to purchase all, but not less than all, of
the Defaulted Securities in such amounts as may be agreed upon and upon the terms herein
set forth; if, however, the Representatives shall not have completed such arrangements
within such 24-hour period, then:  




		    (a)        if
the number of Defaulted Securities does not exceed 10% of the aggregate
          principal amount of the Securities to be purchased hereunder, each of the
          non-defaulting Initial Purchasers shall be obligated, severally and not
jointly,           to purchase the full amount thereof in the proportions that their
respective           obligations hereunder bear to the obligations of all non-defaulting
Initial           Purchasers, or  







		    (b)        if
the number of Defaulted Securities exceeds 10% of the aggregate principal
          amount of the Securities to be purchased hereunder, this Agreement or, with
          respect to any Date of Delivery which occurs after the Closing Time, the
          obligation of the Initial Purchasers to purchase and of the Company to sell the
          Option Securities to be purchased and sold on such Date of Delivery shall
          terminate without liability on the part of any non-defaulting Initial
Purchaser.  







        No
action taken pursuant to this Section shall relieve any defaulting Initial Purchaser from
liability in respect of its default. 



        In
the event of any such default which does not result in a termination of this Agreement or,
in the case of a Date of Delivery which is after the Closing Time, which does not result
in a termination of the obligation of the Initial Purchasers to purchase and the Company
to sell the relevant Option Securities, as the case may be, either (i) the Representatives
or (ii) the Company shall have the right to postpone Closing Time or the relevant Date of
Delivery, as the case may be for a period not exceeding seven days in order to effect any
required changes in the Offering Memorandum or in any other documents or arrangements. As
used herein, the term “Initial Purchasers” includes any person substituted for
an Initial Purchaser under this Section. 



        SECTION
12.    Default by the Company. If the Company shall fail at Closing Time or at the
Date of Delivery to sell the aggregate principal amount at maturity of Securities that it
is obligated to sell hereunder, then this Agreement shall terminate without any liability
on the part of any nondefaulting party; provided, however, that the provisions of
Sections 1, 4, 7, 8 and 9 shall remain in full force and effect. No action taken pursuant
to this Section shall relieve the Company from liability, if any, in respect of such
default.  



Global Headquarters, World Financial Center,  North Tower,  250 Vesey Street, New York, NY 10281




        SECTION
13.     Notices.  All notices and other communications hereunder shall be in writing
and shall be deemed to have been duly given if mailed or transmitted by any standard
form of telecommunication. Notices to the Initial Purchasers shall be directed to
the Representatives at Merrill Lynch & Co., World Financial Center, North Tower,
250 Vesey Street, New York, NY 10281, attention of Graham Clark (fax: +1 (212)
738-2267) and at Lehman Brothers Inc., 27th Floor, 745 7th Avenue, New York, NY
10019, attention of Leonard Rosen (fax: +1 (646) 758-4181); notices to the Company
shall be directed to it at AudioCodes Ltd., 1 Hayarden Street, Airport City, PO Box 255,
Ben Gurion Airport, 70100, Israel, attention of Itamar Rosen (fax: +972 (3) 976 4040).  



- 25 -










        SECTION
14.     Parties. This Agreement shall inure to the benefit of and be binding upon the
Initial Purchasers and the Company and their respective successors. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any person, firm or
corporation, other than the Initial Purchasers and the Company and their respective
successors and the controlling persons and officers and directors referred to in Sections 7
and 8 and their heirs and legal representatives, any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provision herein contained. This
Agreement and all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the Initial Purchasers and the Company and their respective
successors, and said controlling persons and officers and directors and their heirs and
legal representatives, and for the benefit of no other person, firm or corporation. No
purchaser of Securities from any Initial Purchaser shall be deemed to be a successor by
reason merely of such purchase.  




        SECTION
15.     GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO CONFLICT OF LAWS
PROVISIONS THEREOF).  




	        SECTION
16.     TIME.  TIME SHALL BE OF THE ESSENCE OF THIS AGREEMENT. EXCEPT AS OTHERWISE SET
FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME. 







        SECTION
17.     Consent to Jurisdiction.  Each party irrevocably agrees that any legal suit,
action or proceeding arising out of or based upon this Agreement or the transactions
contemplated hereby (“Related Proceedings”) may be instituted in the federal
courts of the United States of America located in the City of New York or the courts of
the State of New York in each case located in the Borough of Manhattan in the City of New
York (collectively, the “Specified Courts”), and irrevocably submits to the
exclusive jurisdiction (except for proceedings instituted in regard to the enforcement of
a judgment of any such court (a “Related Judgment”), as to which such
jurisdiction is non-exclusive) of such courts in any such suit, action or proceeding. The
parties further agree that service of process, summons, notice or document by mail to
such party’s address set forth below shall be effective service of process for any
lawsuit, action or other proceeding brought in any such court. The parties hereby
irrevocably and unconditionally waive any objection to the laying of venue of any
lawsuit, action or other proceeding in the Specified Courts, and hereby further
irrevocably and unconditionally waive and agree not to plead or claim in any such court
that any such lawsuit, action or proceeding brought in any such court has been brought in
an inconvenient forum. The Company hereby irrevocably appoints AudioCodes, Inc., which
currently maintains an office at 2890 Zanker Road, Suite 200, San Jose, California 95134,
United States of America, as its agent to receive service of process or other legal
summons for purposes of any such action or proceeding that may be instituted in any state
or federal court in the City and State of New York.  




        SECTION
18.     Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but all such counterparts shall together
constitute one and the same Agreement.  




        SECTION
19.     Effect of Headings. The Section headings herein are for convenience only and
shall not affect the construction hereof.  




[Remainder
of the page intentionally left blank.] 



- 26 -










        If
the foregoing is in accordance with your understanding of our agreement, please sign and
return to the Company a counterpart hereof, whereupon this instrument, along with all
counterparts, will become a binding agreement between the Initial Purchasers and the
Company in accordance with its terms. 




			Very truly yours,

AUDIOCODES LTD.



BY: /S/ NACHUM FALEK
——————————————

Name: Nachum Falek
Title: Chief Financial Officer





CONFIRMED AND ACCEPTED,

  as of the date first above written:



MERRILL LYNCH & CO.

MERRILL LYNCH, PIERCE, FENNER & SMITH

    INCORPORATED

LEHMAN BROTHERS INC.

CIBC WORLD MARKETS CORP.



By: MERRILL LYNCH, PIERCE, FENNER & SMITH

              INCORPORATED 




	



BY: /S/ GRAHAM CLARK
——————————————

Name: Graham Clark
Title: Managing Director








BY: LEHMAN BROTHERS INC. 





	



BY: /S/ LEONARD ROSEN
——————————————

Name: Leonard Rosen
Title: Managing Director








        For
themselves and as Representatives of the other Initial Purchasers named in Schedule A
hereto. 



- 27 -











SCHEDULE A 







	Name of Initial Purchaser
	Principal

Amount of

Securities

		
		
		
		
	Merrill Lynch Pierce, Fenner & Smith Incorporated	 	 	$	  37,500,000	 
	Lehman Brothers Inc.	 	 	 	37,500,000	 
	CIBC World Markets Corp.	 	 	 	25,000,000	 
		
	
	Total	 	 	$	 100,000,000	 
		
	






Sch A-1
















SCHEDULE B


AUDIOCODES LTD.

$100,000,000 Convertible Notes





             1.        The
initial  offering  price of the  Securities  shall be 100% of the principal  amount
 thereof, plus accrued interest, if any, from the date of issuance. 



             2.        The
purchase  price to be paid by the Initial  Purchasers  for the  Securities  shall be
96.5% of the principal amount thereof. 



             3.        The
interest rate on the Securities shall be 2.00% per annum. 



             4.        Subject
to the terms and conditions  described more fully in the Final Offering  Memorandum,  (a)
the Company  may be  required  by holders of the  Securities  to  purchase  all or a
portion of the  Securities  on November 9, 2009,  November 9, 2014 or November 9, 2019 or
upon the  occurrence of a fundamental  change as defined in the  Indenture,  and (b) the
 Company may redeem all or a portion of the  Securities  for cash at any time on or after
 November 9, 2009 at a redemption  price equal to 100% of the principal  amount of the
notes being  redeemed, plus accrued and unpaid interest to, but excluding, the redemption
date. 





Sch B-1















SCHEDULE C


Designated Subsidiaries



(1)     AudioCodes
Inc., a Delaware corporation. 



(2)     AudioCodes
National Inc., a wholly-owned subsidiary of AudioCodes Inc., is a Delaware corporation. 



(3)     Ai-Logix
Inc., a wholly owned subsidiary of AudioCodes Inc., is a Delaware corporation 




Sch C-1















SCHEDULE D


List of Persons and Entities Subject to Lock-Up



Shabtai Adlersberg

Dr. Eyal Kishon

Doron Nevo

Dana Gross

Joseph Tenne

Nachum Falek

Lior  Aldema

Tal Dor

David Furstenberg

Yehuda Hershkovits

Eli Nir

Ben Rabinowitz




Sch D-1











Exhibit A 




Opinion of Naschitz,
Brandes & Co., 

Israeli Counsel to the Company 



         (i)       
          The Company has been duly incorporated and is validly existing as a company
          under the laws of the State of Israel. 



         (ii)       
          The Company has corporate power and authority to own, lease and operate its
          properties and to conduct its business as described in the Offering Memorandum
          and to enter into and perform its obligations under the Purchase Agreement, the
          Registration Rights Agreement, the Indenture and the Securities. 



         (iii)       
          The authorized share capital of the Company is as set forth in the Offering
          Memorandum under the caption “Capitalization.” To the best of our
          knowledge, the issued and outstanding share capital of the Company is as set
          forth in the Offering Memorandum in the column entitled “Actual” under
          the caption “Capitalization” (except for subsequent issuances, if any,
          pursuant to the Purchase Agreement or pursuant to reservations, agreements,
          employee benefit plans or the exercise of convertible securities or options
          referred to in the Offering Memorandum); the issued and outstanding shares of
          the Company have been duly authorized and validly issued and are fully paid and
          non-assessable; and none of the outstanding shares of share capital of the
          Company was issued in violation of the preemptive or other similar rights of any
          security holder of the Company. 



         (iv)       
          The Purchase Agreement, the Registration Rights Agreement and the Initial
          Securities have each been duly authorized, executed and delivered by the
          Company. The Option Securities have been duly authorized by the Company. 



         (v)       
          We are not aware of any pending or threatened action, suit, proceeding, inquiry
          or investigation, to which the Company or any subsidiary is a party, or to which
          the property of the Company or any subsidiary thereof is subject, before or
          brought by any Israeli court or governmental agency or body, which would
          reasonably be expected to result in a Material Adverse Effect, or which would
          reasonably be expected to materially and adversely affect the properties or
          assets thereof or the consummation of the transactions contemplated in the
          Purchase Agreement or the performance by the Company of its obligations
          thereunder or the transactions contemplated by the Offering Memorandum. 



         (vi)       
          The rights, privileges and preferences of the share capital of the Company,
          including the Ordinary Shares issuable upon conversion of the Securities,
          conform in all material respects to the descriptions thereof contained in the
          Offering Memorandum. 



         (vii)       
          To the best of our knowledge the Company is not in violation of its Memorandum
          of Association or Articles of Association. 



         (viii)       
          Assuming that none of the Initial Purchasers is a resident of Israel, and
          further assuming that the Ordinary Shares to be issued upon conversion of the
          Notes will be registered pursuant to a registration statement filed with the US
          Securities and Exchange Commission prior to the conversion of the Notes, no
          filing with, or authorization, approval, consent, license, order, registration,
          qualification or decree of, any Israeli court or governmental authority or
          agency is necessary or required in connection with the due authorization,
          execution and delivery of the Purchase Agreement or the due execution, delivery
          or performance of the Indenture by the Company or for the offering, issuance,
          sale or delivery of the Securities to the Initial Purchasers or the resale by
          the Initial Purchasers in accordance with the terms of the Purchase Agreement,
          other than (a) notice to the Investment Center upon the issuance of the Ordinary
          Shares, and (b) the approval of the Office of the Chief Scientist of the
          Ministry of Industry, Trade and Labor. 



A - 1










         (ix)       
          The execution, delivery and performance of the Purchase Agreement, the
          Indenture, the Securities and the Registration Rights Agreement, and the
          consummation of the transactions contemplated in the Purchase Agreement and in
          the Offering Memorandum (including the use of the proceeds from the sale of the
          Securities as described in the Offering Memorandum under the caption “Use
          Of Proceeds” and the issuance of the Ordinary Shares issuable upon
          conversion of the Securities) and compliance by the Company with its obligations
          under the Purchase Agreement, the Registration Rights Agreement, the Indenture
          and the Securities do not and will not, whether with or without the giving of
          notice or lapse of time or both, conflict with or constitute a breach of, or
          default or Repayment Event (as defined in Section 1(a)(xiii) of the Purchase
          Agreement) under or result in the creation or imposition of any lien, charge or
          encumbrance upon any property or assets of the Company pursuant to any contract,
          indenture, mortgage, deed of trust, loan or credit agreement, note, lease or any
          other agreement or instrument, known to us, to which the Company is a party or
          by which it is bound, or to which any of the property or assets of the Company
          is subject (except for such conflicts, breaches, defaults or Repayment Events or
          liens, charges or encumbrances that would not have a Material Adverse Effect),
          nor will such action result in any violation of the provisions of the Memorandum
          of Association or Articles of Association of the Company, or any applicable
          Israeli law, statute, rule or regulation, or any judgment, order, writ or
          decree, known to us, of any Israeli government instrumentality or court having
          jurisdiction over the Company or any of its properties, assets or operations. 



         (x)       
          The Ordinary Shares issuable upon conversion of the Securities (including the
          Option Securities) have been duly authorized and reserved for issuance upon such
          conversion by all necessary corporate action of the Company; such shares, when
          issued upon such conversion (assuming Securities are issued and delivered in
          accordance with the Purchase Agreement and Indenture and the conversion is in
          accordance with the terms of the Securities and the Indenture), will be validly
          issued and will be fully paid and non-assessable and no holder of such Ordinary
          Shares will be subject to personal liability solely by reason of being such a
          holder of Ordinary Shares under the laws of the State of Israel. 



         (xi)       
          The issuance of the Ordinary Shares upon conversion of the Securities by the
          Company is not subject to any contractual or written preemptive or other similar
          rights known to us of any securityholder of the Company which rights have not
          been waived or satisfied, or except as specified in the Offering Memorandum, to
          any restriction upon the voting or transfer thereof pursuant to applicable law
          or the Memorandum and Articles of Association of the Company, except that
          nationals of countries which are, or have been, in a state of war with Israel
          may not be recognized as owners of Ordinary Shares; and except as described in
          the Offering Memorandum or in the documents incorporated therein by reference,
          we are not aware of any outstanding subscriptions, rights, warrants, options,
          calls, convertible securities, commitments of sale or rights related to or
          entitling any person to purchase or otherwise acquire any shares of, or any
          security convertible into or exercisable or exchangeable for, the share capital
          of, or other ownership interest in, the Company. 



         (xii)       
          The form of certificate used to evidence the Ordinary Shares which will be
          issued and delivered upon the conversion of the Securities complies in all
          material respects with all applicable requirements of Israeli corporate law,
          with any applicable requirements of the Company’s Memorandum of Association
          or Articles of Association, as in effect on the date hereof, and the
          requirements of the Tel Aviv Stock Exchange, if any. 



         (xiii)       
          We are not aware of any persons with registration rights or other similar rights
          to have any securities (1) registered pursuant to the registration statement to
          be filed pursuant to the Registration Rights Agreement, or (2) otherwise
          registered by the Company under the 1933 Act, other than as described in the
          Offering Memorandum or documents incorporated by reference. 



A - 2










         (xiv)       
          Assuming the Initial Purchasers are not otherwise subject to Israeli taxation by
          the conduct of their business activities, the issuance, delivery and sale to the
          Initial Purchasers of the Securities to be issued and sold by the Company to the
          Initial Purchasers are not subject to any tax imposed on the Company by any
          Israeli court or government agency or body, except the Israeli stamp duty, if
          any. 



         (xv)       
          Upon issuance and delivery of the Securities in accordance with the Purchase
          Agreement and the Indenture, the Securities shall be convertible at the option
          of the holder thereof for Ordinary Shares in accordance with the terms of the
          Securities and the Indenture. 



         (xvi)       
          Under the laws of Israel, the submission by the Company to the jurisdiction of
          the Specified Courts and the designation of the law of the State of New York to
          apply to the Purchase Agreement, is binding upon the Company and, if properly
          brought to the attention of the court in accordance with the laws of Israel,
          would be enforceable in any judicial proceedings in Israel subject to the
          exercise of judicial discretion or the existence of special circumstances or
          considerations, such as differences in the provision of the statutes of
          limitations in the two jurisdictions, reciprocity agreement as to the
          enforceability between the two jurisdictions, or if enforcement of such
          submission clause would be contrary to the interest of justice or public good. 



         (xvii)       
          The Company has duly authorized the appointment of AudioCodes, Inc. as the
          Company’s authorized agent for service of process pursuant to the Purchase
          Agreement. 



         (xviii)       
          We are not aware that the Company has received any notice of proceedings
          relating to the revocation or modification of any such approval of an Israeli
          Governmental Authority that, if determined adversely to the Company, would
          individually or in the aggregate have a Material Adverse Effect. 



         (xix)       
          The information in the Offering Memorandum under Risk Factors—The Israeli
          government program and tax benefits that we currently participate
          in...", “Business—Law for Encouragement of Industrial Research
          and Development, 5744-1984” and “Description of Capital Stock” to
          the extent that it constitutes matters of law, summaries of agreements or legal
          matters, the Company’s Memorandum of Association or Articles of
          Association, or legal proceedings, or legal conclusions, has been reviewed by us
          and is correct in all material respects. 



        In
addition, we have participated conferences with officers and other representatives of the
Company, representatives of the Initial Purchasers and representatives of the independent
certified public accountants of the Company, at which conferences the contents of the
Offering Memorandum and related matters were discussed and, although we are not passing
upon and do not assume any responsibility for the accuracy, completeness or fairness of
the statements contained in the Offering Memorandum (except as specified in the foregoing
opinions). On the basis of the foregoing, no facts have come to our attention that would
lead us to believe that the Offering Memorandum or any amendment or supplement thereto
(except for financial statements and schedules and other financial data included or
incorporated by reference therein or omitted therefrom as to which we need make no
statement), at the time the Offering Memorandum was issued, at the time any such amended
or supplemented Offering Memorandum was issued or at Closing Time, included or includes an
untrue statement of a material fact or omitted or omits to state a material fact necessary
in order to make the statements therein, in the light of the circumstances under which
they were made, not misleading. 



A - 3











Exhibit B 




Opinion of Eyal Shenhav
& Co., 

Israeli Tax Counsel to
the Company 



        The
statements in the Offering Memorandum under the caption “Israeli Tax
Considerations,” insofar as they purport to summarize certain provisions of the
statutes and regulations referred to therein or legal conclusions with respect thereto,
are accurate summaries in all material respects. 



B - 1











Exhibit C 




Opinion of Itamar
Rosen, Adv. 

General Counsel to the
Company 



         (i)       
          There is not pending or, to the best of my knowledge, threatened any action,
          suit, proceeding, inquiry or investigation, to which the Company or any
          subsidiary is a party, or to which the property of the Company or any subsidiary
          thereof is subject, before or brought by any court or governmental agency or
          body, which would reasonably be expected to result in a Material Adverse Effect,
          or which would reasonably be expected to materially and adversely affect the
          properties or assets thereof or the consummation of the transactions
          contemplated in the Purchase Agreement or the performance by the Company of its
          obligations thereunder or the transactions contemplated by the Offering
          Memorandum. 



         (ii)       
          To the best of my knowledge, there are no franchises, material contracts,
          indentures, mortgages, material loan agreements, notes, material leases or other
          material instruments that would be required to be described or referred to in
          the Offering Memorandum that are not described or referred to in the Offering
          Memorandum other than those described or referred to therein or incorporated by
          reference thereto, and the descriptions thereof or references thereto are
          correct in all material respects. 



         (iii)       
          The Ordinary Shares which will be issued and delivered upon the conversion of
          the Securities will be duly listed (and the Company has undertaken to so advise
          the Tel Aviv Stock Exchange after the Closing), admitted and authorized for
          trading, subject to official notice of issuance, on the Tel Aviv Stock Exchange. 



         (iv)       
          Other than in connection with Israeli’s Stamp Duty on Documents Law,
          5721-1961, to the best of my knowledge, the Company is not in violation in
          respect of any laws of the State of Israel known to me to which it or its
          property or assets are subject or has failed to obtain or violated any approval
          of an Israeli Government Authority necessary in the State of Israel to the
          ownership of its property or to the conduct of its business as described in the
          Offering Memorandum, except for such defaults, violations or failures that,
          individually or in the aggregate, would not be reasonably likely to have a
          Material Adverse Effect. 



C - 1











Exhibit D 




Opinion of Fulbright
& Jaworski L.L.P. 

United States Counsel
to the Company 



        For
purposes of the opinions set forth below, “Non-Acquired Subsidiary” refers to
each Designated Subsidiary other than Ai-Logix, Inc. 



         (i)       
          Each Non-Acquired Subsidiary has been duly incorporated. Each Designated
          Subsidiary is validly existing as a corporation in good standing under the laws
          of the State of Delaware and has corporate power and authority to own, lease and
          operate its properties and to conduct its business as described in the Offering
          Memorandum. Each Non-Acquired Subsidiary is duly qualified as a foreign
          corporation to transact business in the jurisdictions set forth on Annex A
          hereto. Each Designated Subsidiary is in good standing in the jurisdictions set
          forth on Annex A hereto. All of the issued and outstanding capital stock of each
          Non-Acquired Subsidiary has been duly authorized and validly issued and is fully
          paid and non-assessable. 



         (ii)       
          The Registration Rights Agreement (assuming the due authorization, execution and
          delivery thereof by the Company) constitutes a legal valid and binding agreement
          of the Company and is enforceable against the Company in accordance with its
          terms, except as the enforcement thereof may be limited by bankruptcy,
          insolvency (including, without limitation, all laws relating to fraudulent
          transfers), reorganization, moratorium or other similar laws relating to or
          affecting enforcement of creditors’ rights generally, or by general
          principles of equity (regardless of whether enforcement is considered in a
          proceeding in equity or at law) and except that rights to indemnification or
          contribution may be limited by federal or state securities laws or public policy
          considerations with respect thereto. 



         (iii)       
          The Indenture (assuming the due authorization, execution and delivery thereof by
          the Company and the Trustee) constitutes a valid and binding agreement of the
          Company, enforceable against the Company in accordance with its terms, except as
          the enforcement thereof may be limited by bankruptcy, insolvency (including,
          without limitation, all laws relating to fraudulent transfers), reorganization,
          moratorium or other similar laws relating to or affecting enforcement of
          creditors’ rights generally, or by general principles of equity (regardless
          of whether enforcement is considered in a proceeding in equity or at law). 



         (iv)       
          The Initial Securities are in the form contemplated by the Indenture and
          (assuming (a) the due authorization, execution, issuance and delivery against
          the purchase price therefor by the Company, (b) authentication by the Trustee in
          the manner provided in the Indenture, and (c) the due authorization, execution
          and delivery of the Indenture by the Trustee) will constitute valid and binding
          obligations of the Company, enforceable against the Company in accordance with
          their terms, except as the enforcement thereof may be limited by bankruptcy,
          insolvency, reorganization, moratorium (including, without limitation, all laws
          relating to fraudulent transfers), or other similar laws relating to or
          affecting enforcement of creditor’s rights generally, or by general
          principles of equity (regardless of whether enforcement is considered in a
          proceeding in equity or at law), and will be entitled to the benefits of the
          Indenture. 



         (v)       
          The Registration Rights Agreement, the Indenture and the Initial Securities
          conform in all material respects to the descriptions thereof contained in the
          Offering Memorandum. 



         (v)       
          The statements in the Offering Memorandum under the caption “United States
          Federal Income Tax Considerations,” to the extent they address matters of
          United States federal income tax law or legal conclusions with respect thereto,
          are accurate summaries in all material respects. 



D - 1










         (vi)       
          The documents incorporated by reference in the Offering Memorandum (other than
          the financial statements (including the notes thereto) and supporting schedules
          therein, as to which no opinion need be rendered), when they were filed with the
          Commission, complied as to form in all material respects with the requirements
          of the 1934 Act and the rules and regulations of the Commission thereunder. 



         (vii)       
          To the best of our knowledge, no independent investigation having been made,
          there is not pending or threatened any action, suit, proceeding, inquiry or
          investigation, to which the Company or any Non-Acquired Subsidiary is a party,
          or to which the property of the Company or any Non-Acquired Subsidiary thereof
          is subject, before or brought by any court or governmental agency or body, which
          would reasonably be expected to result in a Material Adverse Effect, or which
          would reasonably be expected to materially and adversely affect the properties
          or assets thereof or the consummation of the transactions contemplated in the
          Purchase Agreement or the performance by the Company of its obligations
          thereunder or the transactions contemplated by the Offering Memorandum. 



         (viii)       
          No filing with, or authorization, approval, consent, license, order,
          registration, qualification or decree of, any New York State or Federal
          government court or governmental authority (or, in the case of the Designated
          Subsidiaries, any Delaware governmental agency or body pursuant to the Delaware
          General Corporation Law) (other than the filing of the Form T-1, the resale
          registration statement required under the Registration Rights Agreement and as
          may be required under the applicable securities laws of the various
          jurisdictions in which the Securities will be offered or sold, as to which we
          need express no opinion) is necessary or required in connection with the due
          authorization, execution and delivery of the Purchase Agreement by the Company
          or the due execution, delivery or performance of the Indenture by the Company or
          for the offering, issuance, sale or delivery of the Initial Securities to the
          Initial Purchasers or the resale by the Initial Purchasers in accordance with
          the terms of the Purchase Agreement. 



         (ix)       
          Subject to compliance by the Initial Purchasers with the representations and
          warranties set forth in Section 2 and the procedures set forth in Section 6 of
          the Purchase Agreement, it is not necessary in connection with the offer, sale
          and delivery of the Securities to the Initial Purchasers and to each Subsequent
          Purchaser in the manner contemplated by the Purchase Agreement and the Offering
          Memorandum to register the Securities under the 1933 Act or to qualify the
          Indenture under the Trust Indenture Act of 1939. 



         (x)       
          The execution, delivery and performance of the Purchase Agreement, the DTC
          Agreement, the Registration Rights Agreement, the Indenture and the Initial
          Securities, and the consummation of the transactions contemplated in the
          Purchase Agreement and in the Offering Memorandum (including the use of the
          proceeds from the sale of the Initial Securities as described in the Offering
          Memorandum under the caption “Use Of Proceeds”) and compliance by the
          Company with its obligations under the Purchase Agreement, the Registration
          Rights Agreement, the Indenture and the Initial Securities do not and will not,
          whether with or without the giving of notice or lapse of time or both, conflict
          with or constitute a breach of, or default or Repayment Event (as defined in
          Section 1(a)(xv) of the Purchase Agreement) under or result in the creation or
          imposition of any lien, charge or encumbrance upon any property or assets of the
          Company or any Non-Acquired Subsidiary thereof pursuant to any contract,
          indenture, mortgage, deed of trust, loan or credit agreement, note, lease or any
          other agreement or instrument, known to us, to which the Company or any
          Non-Acquired Subsidiary is a party or by which it or any of them may be bound,
          or to which any of the property or assets of the Company or any Non-Acquired
          Subsidiary is subject (except for such conflicts, breaches, defaults or
          Repayment Events or liens, charges or encumbrances that would not have a
          Material Adverse Effect), nor will such action result in any violation of the
          provisions of the charter, by-laws or other governing document, as applicable,
          of any Non-Acquired Subsidiary, or any applicable law, statute, rule,
          regulation, judgment, order, writ or decree, known to us, of any government,
          government instrumentality or court, domestic or foreign, having jurisdiction
          over the Company or any Non-Acquired Subsidiary or any of their respective
          properties, assets or operations. 



D - 2










         (xiv)       
          The Company is not required, and upon the issuance and sale of the Securities as
          herein contemplated and the application of the net proceeds therefrom as
          described in the Offering Memorandum will not be required to, register as
          “investment company” under the 1940 Act. 



         (xv)       
          Assuming the validity of such actions under the laws of the State of Israel,
          under the laws of the State of New York relating to the submission to
          jurisdiction, the Company has validly appointed AudioCodes, Inc. as its
          authorized agent for service of process pursuant to the Purchase Agreement, and
          service of process effected on such agent in the manner set forth in Section 18
          of the Purchase Agreement will be effective under the laws of the State of New
          York to confer personal jurisdiction over the Company. 



        In
addition to the legal opinion set forth above, we have been asked to make certain other
observations. In the course of the preparation of the Offering Memorandum, we have
participated in conferences with officers and other representatives of the Company,
Israeli counsel for the Company, representatives of the independent public accountants of
the Company, representatives of the Initial Purchasers and Israeli and United States
counsel for the Initial Purchasers, at which the contents of the Offering Memorandum were
discussed and, although we are not passing upon, and do not assume responsibility for, the
accuracy, completeness or fairness of the statements contained in the Offering Memorandum,
and have made no independent check or verification thereof (relying as to materiality to
an extent we deem appropriate upon the opinions of officers and other representatives of
the Company), no facts have come to our attention that have given us reason to believe
that the Offering Memorandum, at the time the Offering Memorandum was issued or at the
Closing Time included or includes any untrue statement of a material fact or omitted or
omits to state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, in each case,
except for the financial statements and the notes thereto and the schedules and other
financial or accounting data included or incorporated by reference therein (for which we
understand you are relying on Ernst & Young Global, independent public accountants for
the Company) or omitted therefrom, as to which we make no statement or observation. 



D - 3











Exhibit E 




Form of Lock-Up
Agreement 



November  ___, 2004


Merrill Lynch & Co.

Merrill Lynch, Pierce, Fenner & Smith

        Incorporated,

Lehman Brothers Inc.

 as Representatives of the several

 Underwriters to be named in the

 within-mentioned Purchase Agreement

c/o  Merrill Lynch & Co.

        Merrill Lynch, Pierce, Fenner & Smith

                Incorporated




4 World Financial Center

New York, New York  10080




	         	         Re:  	Proposed
Convertible Debt Offering by AudioCodes Ltd. 







Dear Sirs: 



        The
undersigned, a shareholder and an officer and/or director of AudioCodes Ltd., an Israeli
company (the “Company”), understands that Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”), Lehman
Brothers Inc. (“Lehman Brothers”) and CIBC World Markets Corp. propose to enter
into a Purchase Agreement (the “Purchase Agreement”) with the Company providing
for the offering (the “Offering”) of $100,000,000 aggregate principal amount of
Senior Convertible Notes due 2024 of the Company (the “Securities”) and the
grant by the Company to the Initial Purchasers (as defined below) of the option to
purchase additional Securities to cover over-allotments, if any. In recognition of the
benefit that such an offering will confer upon the undersigned as a shareholder and an
officer and/or director of the Company, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the undersigned agrees with each
initial purchaser to be named in the Purchase Agreement (collectively, the “Initial
Purchasers”) that, during a period of 90 days from the date of the Purchase
Agreement, the undersigned will not, without the prior written consent of Merrill Lynch
and Lehman Brothers, directly or indirectly, (i) offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant for the sale of, or otherwise dispose of or transfer any of
the Company’s ordinary shares, nominal value NIS 0.01 per share (the “Ordinary
Shares”), or any securities convertible into or exchangeable or exercisable for
Ordinary Shares, whether now owned or hereafter acquired by the undersigned or with
respect to which the undersigned has or hereafter acquires the power of disposition, or
file, or cause to be filed, any registration statement under the Securities Act of 1933,
as amended, with respect to any of the foregoing (collectively, the “Lock-Up
Securities”) or (ii) enter into any swap or any other agreement or any transaction
that transfers, in whole or in part, directly or indirectly, the economic consequence of
ownership of the Lock-Up Securities, whether any such swap or transaction is to be settled
by delivery of Ordinary Shares or other securities, in cash or otherwise. 



E - 1










        Notwithstanding
the foregoing, and subject to the conditions below, the undersigned may transfer the
Lock-Up Securities without the prior written consent of Merrill Lynch and Lehman Brothers,
provided that (1) the Initial Purchasers receive a signed lock-up agreement for the
balance of the lockup period from each donee, trustee, distributee, or transferee, as the
case may be, (2) any such transfer shall not involve a disposition for value, (3) such
transfers are not required to be reported in any public report or filing with the
Securities and Exchange Commission, or otherwise and (4) the undersigned does not
otherwise voluntarily effect any public filing or report regarding such transfers: 



	 	(i) 	as
a bona fide gift or gifts; or 






	 	(ii) 	to
any trust for the direct or indirect benefit of the undersigned or the
               immediate family of the undersigned; or 






	 	(iii) 	as
a distribution to limited partners or shareholders of the undersigned; or 






	 	(iv) 	to
the undersigned’s affiliates or to any investment fund or other entity
               controlled or managed by the undersigned. 






        For
purposes of this lock-up agreement, “immediate family” shall mean any
relationship by blood, marriage or adoption, not more remote than first cousin. 



        Furthermore,
the undersigned may sell Ordinary Shares of the Company purchased by the undersigned on
the open market following the Offering if and only if (i) such sales are not required to
be reported in any public report or filing with the Securities and Exchange Commission, or
otherwise and (ii) the undersigned does not otherwise voluntarily effect any public filing
or report regarding such sales, in each case (i) or (ii) above within one week of such
sale. 



        In
addition, notwithstanding anything contained herein to the contrary, during the portion of
the lock-up period beginning on the 15th day thereof, the undersigned (except
if the undersigned is Shabtai Adlersberg) is expressly permitted to sell, without the
prior written consent of Merrill Lynch and Lehman Brothers, in a single transaction or
series of transactions, up to a total of 15,000 Ordinary Shares acquired upon exercise of
options granted to the undersigned under the Company’s share option plans or as a
result of purchases of Ordinary Shares under the Company’s employee share purchase
plans. 



        In
the event the Initial Purchasers do not purchase the Securities pursuant to the Purchase
Agreement by December 1, 2004, this agreement shall terminate immediately upon such date
and the undersigned shall be deemed to be released from its obligations under this
agreement. 












			Very truly yours,



Signature:
——————————————



Print Name:
——————————————








E - 2