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Exhibit 4.31

# SERIES E PREFERRED
SHARE

# PURCHASE AGREEMENT

among

# CTI SQUARED LTD.(the Company)

and

# AUDIOCODES LTD.(the Purchaser)

Dated as of November
13, 2005



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# SERIES E PREFERRED
SHAREPURCHASE AGREEMENT

This Series E Preferred Share
Purchase Agreement dated as of November 13, 2005 (the Agreement) by and
among CTI Squared Ltd., a company organized under the laws of Israel (the
Company), and AudioCodes Ltd., a company organized under the laws of
Israel (Purchaser):

WHEREAS,
the Company wishes to issue and sell to the Purchaser an aggregate of 34,782,609
authorized but unissued Series E Preferred Shares, par value NIS 0.01 per share, of the
Company (the Preferred Shares) at a price of $0.02875per
PreferredShare (the Purchase Price), totaling an aggregate
purchase price of $1,000,000 (the Aggregate Purchase Price); and

WHEREAS,
the Purchaser wishes to purchase the Preferred Shares on the terms and subject to the
conditions set forth in this Agreement; and

WHEREAS,
the Company wishes to issue and sell the Preferred Shares on the terms and subject to the
conditions set forth in this Agreement;

NOW,
THEREFORE, in consideration of the premises and the mutual covenants contained in this
Agreement, the parties agree as follows:

ARTICLE 1 THE TRANSACTION

SECTION 1.01.     
    Issuance,  Sale and  Delivery of the  Preferred  Shares.  Subject to and in
 accordance  with the terms and conditions hereof, at the Closing, the Company shall:

| | (a)
          issue and sell to Purchaser, and Purchaser shall purchase from the Company, the
          Preferred Shares for the Aggregate Purchase Price. The Preferred Shares shall
          constitute ten percent (10%) of the Companys share capital on a
          Fully-Diluted Basis (as hereinafter defined), after the Closing. Fully
          Diluted Basis shall include conversion of all warrants, options,
          convertible loans and other convertible securities, all shares to be issued as
a           result of any existing anti-dilution protection, and all options issued to
          employees, directors and consultants, but excluding the First Option (as
defined           below) and the conversion of a loan pursuant to the Convertible Loan
Agreement           between the Company and the Purchaser dated August 15, 2005 (the
Bridge           Loan), which loan shall automatically convert to
Preferred Shares upon           the Closing, at a price per share equal to the Purchase
Price.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b)
          issue to Purchaser, in the form attached hereto as Exhibit A, an option
          (the First Option) in the amount of $1,000,000 to acquire
          that number of Series E Preferred Shares, that together with the Preferred
          Shares issued at the Closing, shall constitute twenty percent (20%) of the
          Companys share capital on a Fully-Diluted Basis. The First Option shall
be           exercisable at Purchasers sole discretion, exercisable in whole or in
          part, at once or in installments, at any time during the period terminating
          twelve (12) months after the Closing Date, all in accordance with the terms and
          conditions of the First Option agreement attached hereto as Exhibit A.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | (c)
          enter into an option agreement with the Purchaser (the Second
          Option) in substantially the form attached hereto as Exhibit B,
          in which the Purchaser is granted an option to purchase from the shareholders
of           the Company all of the then outstanding shares of the Company other than
those           issued pursuant to this Agreement and under the First Option, for
aggregate           consideration of (i) ten million dollars ($10,000,000) or (ii) five
million           dollars ($5,000,000) plus 375,000 shares of the Purchaser, as shall be
          determined by a written notice signed by the holders of the majority of the
          Series D Preferred Shares of the Company. The Second Option shall be
exercisable           at Purchasers sole discretion, exercisable at any time during
the period           terminating twelve (12) months after the Closing Date, upon a prior
written           notice to the Company of at least thirty (30) but not more than ninety
(90)           days. The Second Option shall be in accordance with the terms and
conditions of           the Second Option agreement set forth in Exhibit B attached
hereto.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

SECTION 1.02.     
Closing. The closing shall take place at the offices of Danziger, Klagsbald & Co.,
Law Offices, 7 Menachem Begin St., Ramat Gan, Israel, three (3) days after the
fulfillment of the closing conditions as noted hereinafter in Article 5, or at such other
location, date and time as may be agreed upon between the Purchaser and the Company (such
closing being called the Closing and such date and time being called
the Closing Date). At the Closing, the following transactions shall
occur, which transactions shall be deemed to take place simultaneously and no transaction
shall be deemed to have been completed or any document delivered until all such
transactions have been completed and all required documents delivered unless waived in
whole or in part by the applicable party:

| | (a)
          The Company shall issue and deliver to Purchaser (i) a share certificate,
          registered in the name of Purchaser, representing the Preferred Shares being
          purchased at the Closing (ii) an executed First Option in the form of Exhibit
          A; (iii) a fully executed Second Option in the form of Exhibit B          including
full execution of the Registration Rights Agreement attached thereto;           and (iv)
a Registration Rights Agreement in the form of Exhibit C(the           Rights
Agreement, and together with this Agreement, the First           Option and the
Second Option, the Transaction Documents).
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b)
          As payment in full for the Preferred Shares being purchased by it under this
          Agreement, and against delivery of the share certificate therefor as aforesaid,
          on the Closing Date, Purchaser shall (i) convert all monies advanced to the
          Company pursuant to the Bridge Loan into an investment hereunder, on the terms
          and conditions hereof, whereupon such loan shall be fully discharged, and (ii)
          cause the transfer to the Company of six hundred fifty thousand dollars
          ($650,000) in immediately available funds, by wire transfer, or such other form
          of payment as is mutually agreed by the Company and the Purchaser.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

- 3 -

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ARTICLE 2REPRESENTATIONS AND
WARRANTIES OF THE COMPANY

The
Company, acknowledging that Purchaser is entering into this Agreement in reliance hereon,
represents and warrants to the Purchaser that, except as set forth in the Disclosure
Schedule attached as Schedule I (the Disclosure
Schedule) as of the date hereof and as of the Closing Date:

SECTION 2.01.     
         Organization, Qualifications and Corporate Power.

| | (a)
          The Company is an Israeli company duly incorporated and validly existing under
          the laws of Israel and, if required by any applicable law, is duly licensed or
          qualified to transact business as a foreign corporation and is in good standing
          in each jurisdiction in which the nature of the business transacted by it or
the           character of the properties owned or leased by it requires such licensing
or           qualification, except where the failure to be so licensed or qualified would
not           have a material adverse effect on the business, operations or financial
          condition of the Company. The Company has the corporate power and authority to
          own and hold its properties and to carry on its business as now conducted and
as           currently proposed by the Company to be conducted except as may be otherwise
          requested by Purchaser (hereinafter referred to as  and as proposed to be
          conducted, to execute, deliver and perform the Transaction Documents, to
          issue, sell and deliver the Preferred Shares issued hereunder and pursuant to
          the First Option upon exercise (the First Option Shares) and
          to issue and deliver the Ordinary Shares, NIS 0.01 par value per share, of
          the Company (Ordinary Shares) issuable upon conversion of
the           Preferred Shares and First Option Shares (the Conversion
          Shares), and to perform its obligations pursuant to the Second Option
          upon exercise. The Company has furnished the Purchaser with copies of its
          Memorandum of Association and Articles of Association, as amended to date (the
          Corporate Documents). Said copies are true, correct and
          complete copies of the sole constituent documents of the Company, duly adopted
          by the shareholders of the Company, and reflects all amendments in effect on
the           date hereof.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

SECTION 2.02.     
Authorization of Agreements, Etc.

| | (a)
          The execution and delivery by the Company of the Transaction Documents, the
          performance by the Company of its obligations thereunder, the issuance, sale
and           delivery of the Preferred Shares and, upon exercise, of the First Option
Shares,           and the issuance and delivery of the Conversion Shares have been (or
will be           prior to the Closing) duly authorized by all requisite corporate action
and, as           at the Closing, will not violate any provision of applicable law, any
order of           any court or other agency of government applicable to the Company, the
Corporate           Documents, as amended, or any provision of any indenture, agreement
or other           instrument to which the Company, or any of its properties or assets is
bound, or           conflict with, result in a breach of or constitute (with due notice
or lapse of           time or both) a default under any such indenture, agreement or
other instrument,           or result in the creation or imposition of any lien, charge,
restriction, claim           or encumbrance of any nature whatsoever upon any of the
properties or assets of           the Company, which could materially and adversely
affect the business,           properties, or condition (financial or otherwise) affairs,
operations or assets           of the Company.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

- 4 -

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| | (b)
          The Preferred Shares and First Option Shares have been (or will be prior to the
          Closing) duly authorized and, when issued in accordance with this Agreement and
          due exercise of the First Option, as applicable, will be validly issued, fully
          paid and nonassessable and will be free and clear of all liens, charges, or
          claims, imposed by or through the Company, except as set forth in applicable
          securities laws. The First Option Shares have been (or will be prior to the
          Closing) duly reserved for issuance upon exercise of the First Option, and the
          Conversion Shares have been (or will be prior to the Closing) duly reserved for
          issuance upon conversion of the Preferred Shares and First Option Shares and,
          when so issued, will be duly authorized, validly issued, fully paid and
          nonassessable and will be free and clear of all liens, charges, or claims,
          imposed by or through the Company, except as set forth in applicable securities
          laws. As at the Closing Date, neither the issuance, sale or delivery of the
          Preferred Shares or the First Option Shares nor the issuance or delivery of the
          Conversion Shares shall be subject to any preemptive right of shareholders of
          the Company or to any right of first refusal or other right in favor of any
          person. As at the Closing Date, the exercise of the Second Option shall not be
          subject to the right of first refusal or any other right in favor of any
person.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

SECTION 2.03.     
    Subsidiaries.

The Company does not (i) own of
record or beneficially, directly or indirectly, (A) any share capital or securities
convertible into share capital of any other corporation or (B) any participating
interest in any partnership, joint venture or other non-corporate business enterprise or
(ii) control, directly or indirectly, any other entity, other than CTI Squared Inc., a
Delaware corporation, which is a wholly-owned subsidiary of the Company.

SECTION 2.04.    
    Validity.

This Agreement has been duly executed
and delivered by the Company and constitutes the legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms. The other
Transaction Documents, when executed and delivered in accordance with this Agreement, will
constitute the legal, valid and binding obligations of the Company, enforceable against
the Company in accordance with their respective terms, except as (i) such enforceability
may be limited by bankruptcy, insolvency, reorganization, arrangement, moratorium or
similar laws relating to or affecting the rights of creditors generally, and (ii) the
remedy of specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which any
proceeding therefore may be brought.

SECTION 2.05.     
Authorized Share Capital.

| | (a)
          Immediately prior to the Closing, the authorized share capital of the Company
          shall equal NIS7,800,000, divided into 780,000,000 shares par value NIS 0.01
          each, consisting of: 78,260,870 Series E Preferred Shares, par value NIS 0.01
          each, of which none are issued and outstanding; 288,906,400 Series D Preferred
          Shares, par value NIS 0.01 each, of which 288,906,400 are issued and
          outstanding; 10,490,080 Series C Preferred Shares, par value NIS 0.01 each of
          which 1,098,655 are issued and outstanding, 150,000 Series C1 Preferred Shares,
          par value NIS 0.01 each, of which 82,440 are issued and outstanding; 3,297,200
          Series B Preferred Shares, par value NIS 0.01 each, of which 2,809,600 are
          issued and outstanding; 874,600 Series B1 Preferred Shares, par value NIS 0.01
          each, of which 744,200 are issued and outstanding; 345,600 Series B2 Preferred
          Shares, par value NIS 0.01 each, of which 293,800 are issued and
          outstanding; 3,748,800 Series A Preferred Shares, par value NIS 0.01 each of
          which 2,000,000 are issued and outstanding and 393,926,450 Ordinary Shares, of
          which 3,706,200 are issued and outstanding; and
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

- 5 -

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| | (b)
          The Disclosure Schedule sets forth the number of Ordinary Shares that have been
          reserved for issuance under the Companys employee share option plans, the
          number of options granted under such plans and the vesting status of such
          granted options.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The shareholders of record and
holders of subscriptions, warrants, options, convertible securities, and other rights
(contingent or other) to purchase or otherwise acquire from the Company equity securities
of the Company, and the number of Ordinary Shares, Series A Preferred Shares, Series B
Preferred Shares, Series B1 Preferred Shares, Series C Preferred Shares, Series C1
Preferred Shares, Series D Preferred Shares, Series E Preferred Shares and the number of
such subscriptions, warrants, options, convertible securities, and other such rights held
by each, prior to the Closing and as of the Closing, and as of the exercise of the First
Option (assuming for such purpose that no changes in the capitalization of the Company
that shall mandate a change in the number of shares underlying the First Option shall
occur prior to the exercise of the First Option), are as set forth in the Capitalization
Table and Option Table attached as Schedule II. Immediately
after the Closing, the designations, powers, preferences, rights, qualifications,
limitations and restrictions in respect of each class and series of authorized share
capital of the Company shall be as set forth in the Amended Articles of Association
attached hereto as Exhibit D (Amended Articles)
and in the Transaction Documents, and all such designations, powers, preferences, rights,
qualifications, limitations and restrictions shall be valid, binding and enforceable
against the Company and in accordance with all applicable laws. Except as set forth in the
attached Schedule II, (i) no person owns of record beneficially
any shares of the Company, (ii) no subscription, warrant, option, convertible
security, or other right (contingent or other) to purchase or otherwise acquire from the
Company equity securities of the Company is authorized or outstanding and (iii) there
is no commitment by the Company to issue shares, subscriptions, warrants, options,
convertible securities, or other such rights or to distribute to holders of any of its
equity securities any evidence of indebtedness or asset. Except as provided for in the
Amended Articles or as set forth in the attached Schedule II,
the Company has no obligation (contingent or other) to purchase, redeem or otherwise
acquire any of its equity securities or any interest therein or to pay any dividend or
make any other distribution in respect thereof. Except as set forth in the attached
Schedule I and the Transaction Documents, to the best of the
Companys knowledge, there are no voting trusts or agreements, shareholders
agreements, pledge agreements, buy-sell agreements, rights of first refusal, preemptive
rights or proxies relating to any securities of the Company (whether or not the Company is
a party thereto). All of the outstanding securities of the Company were issued in
compliance with all applicable securities laws.

SECTION 2.06.     
    Financial Statements.

| | (a)
     The Company has furnished to the Purchaser the Company's:
| | ------------------------------------------------------------------

| | (i)        audited,
 consolidated,  United States Dollar-denominated annual financial statements (including a
balance   sheet,  statement of income,  changes in shareholders' equity and cash flow and
the notes thereto), as of and for   the period ended December 31, 2004; and
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (ii)        the
 unaudited,  consolidated,  U.S.  Dollar-denominated  balance  sheet,  statement  of
profit  and loss,   statement of cash flow for the period ended June 30, 2005.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

- 6 -

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| | ((i)
          and (ii) are collectively referred to herein as the Financial
          Statements), together with the customary report thereon of the
          independent certified public accountants in respect of the audited financial
          statements. The Financial Statements are true and correct in all material
          respects, are in accordance with the books and records of the Company and have
          been prepared in accordance with Israeli generally accepted accounting
          principles (GAAP) consistently applied, and fairly and
          accurately present in all material respects the financial position of the
          Company as of such dates and the results of its operations for the periods then
          ended.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b)
          Except as set forth in Schedule I and/or disclosed in the
          Financial Statements, the Company has no material liabilities or obligations of
          any type or nature, whether absolute, accrued, contingent or otherwise which
          exceed $25,000 individually and, in respect of related individual liabilities,
          $100,000 in the aggregate.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

SECTION 2.07.     
Events Subsequent to the Date of Financial Statements. Since December 31, 2004,
except as set forth in Schedule I, none of the Companys
business, financial condition, operations, property or affairs, has been materially
adversely affected by any occurrence or development, individually or in the aggregate,
whether or not insured against, relating directly to the Company, and, except as set
forth in Schedule I the Company has not:

| | (a)
          issued any stock, bond or other corporate security;
| | -----------------------------------------------------------------

| | (b)
          borrowed any amount or incurred or become subject to any liability (absolute,
          accrued or contingent), except current liabilities incurred and liabilities
          under contracts entered into in the ordinary course of business;
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c)
          discharged or satisfied any lien or encumbrance or incurred or paid any
          obligation or liability (absolute, accrued or contingent) other than current
          liabilities shown on the Financial Statements and current liabilities incurred
          since the date of the Financial Statements in the ordinary course of business;
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (d)
          declared or made any payment or distribution to shareholders or purchased or
          redeemed any of its share capital or other security;
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------

| | (e)
          mortgaged, pledged, encumbered or subjected to lien any of its assets, tangible
          or intangible, other than liens of current real property taxes not yet due and
          payable;
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (f)
          sold, assigned or transferred any of its material tangible assets except in the
          ordinary course of business, or cancelled any debt or claim;
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (g)
          sold, assigned, transferred or granted any exclusive license with respect to
any           patent, trademark, trade name, service mark, copyright, trade secret or
other           intangible asset;
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (h)
          suffered any material loss of property or waived any right of substantial value
          whether or not in the ordinary course of business;
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------

| | (i)
          made any material change in employee compensation;
| | ----------------------------------------------------------------

- 7 -

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| | (j)
          made any material change in the nature of the business or operations of the
          Company;
| | ------------------------------------------------------------------------------------------------------------

| | (k)
          entered into any transaction except in the ordinary course of business or as
          otherwise contemplated hereby; or
| | --------------------------------------------------------------------------------------------------------------------------------------

| | (l)
          entered into any commitment (contingent or otherwise) to do any of the
          foregoing.
| | ---------------------------------------------------------------------------------------------------------

SECTION 2.08.     
Litigation. Except as set forth in Schedule I, there is no (i) action,
suit, claim, or other judicial or administrative proceeding or investigation to which the
Company is a party pending or, to the Companys knowledge, threatened against the
Company or its directors (in their capacity as such), or to the Companys knowledge
any of its officers or employees (in their capacity as such), at law or in equity, or
before or by any municipal or governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign, (ii) arbitration proceeding to which the Company
or its directors (in their capacity as such) are parties or to the Companys
knowledge any of its officers or employees (in their capacity as such) are parties
pending under collective bargaining agreements or otherwise or (iii) governmental
inquiry to which the Company is a party pending or, to the best of the Companys
knowledge, threatened against the Company (including without limitation any inquiry as to
the qualification of the Company to hold or receive any license or permit). The Company
has not received any opinion or memorandum or legal advice from legal counsel to the
effect that it is exposed, from a legal standpoint, to any liability or disadvantage
which may be material to its respective business, prospects, financial condition,
operations, property or affairs. The Company is not in default with respect to any order,
writ, injunction or decree known to or served upon the Company of any court or of any
municipal or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign. There is no action or suit by the Company or its
directors (in their capacity as such) or to the Companys knowledge any of its
officers or employees (in their capacity as such) pending, threatened or contemplated
against others.

SECTION 2.09.     
Compliance with Law. To the best of the Companys knowledge the Company has
complied with all laws, rules, regulations and orders applicable to its respective
business, operations, properties, assets, products and services, the Company has all
necessary permits, licenses and other authorizations required to conduct its business as
conducted and, to its knowledge, as proposed to be conducted, and the Company has been
operating its respective business pursuant to and in compliance with the terms of all
such permits, licenses and other authorizations, except where any failure, violation or
non-compliance related to any of the above would not have a material adverse effect on
the business, operations or financial condition of the Company. The Company is not aware
of any existing law, rule, regulation or order applicable to the Company (other than
general corporate law and regulation similarly affecting all companies), which would
prohibit or restrict the Company from, or otherwise materially adversely affect the
Company in, conducting its respective business in any jurisdiction in which it is now
conducting business or as it proposes to conduct its business. The Company is not in
violation of, or in default under, any provisions of the Articles of Association.

- 8 -

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SECTION 2.10.     
Proprietary Information of Third Parties. No third party has claimed: (a) in
writing delivered to the Company, or (b) orally within the year prior to Closing, to the
Companys Chief Executive Officer, Chief Technology Officer, VP R&D and/or Chief
Financial Officer (Senior Management) or, to the Companys
knowledge, has a reason to claim that any person employed by or affiliated with the
Company has

| | (a)
          violated or may be violating any of the terms or conditions of his or her
          employment, non-competition or non-disclosure agreement with such third party
by           reason of such persons employment or affiliation with the Company; or
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b)
          interfered or may be interfering in the employment relationship between such
          third party and any of its present or former employees.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------

To the best of the Companys
knowledge, the carrying on of the businesses and the business as proposed to be conducted
by any officer, director or employee of the Company, will not conflict with or result in a
breach of the terms, conditions or provisions of or constitute a default under any
contract, covenant or instrument under which any such person is obligated.

SECTION 2.11.     
    Title to Assets, Intellectual Property Rights.

| | (a)
Title to Assets. The Company has good and marketable title to all of its
          tangible assets and properties, free of any mortgages, pledges, charges, liens,
          security interests or other encumbrances of any kind, except tax or
          materialmens liens for obligations not yet due or payable or being
          contested in good faith by appropriate proceedings or liens or encumbrances
          which have arisen in the ordinary course of business. To the Companys
best           knowledge, the Company enjoys peaceful and undisturbed possession under
all           leases under which it is operating, and all said leases are valid and
subsisting           and in full force and effect. Schedule III contains a
complete and           accurate list of the tangible property owned or leased by Company.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b)
          Items in this Agreement shall mean any and all of the
          following, in any and all legal jurisdictions around the world (i) patents,
          whether in the form of utility patents or design patents, patent applications,
          patent disclosures and all related continuations, continuations-in-part,
          divisionals, reissues, re-examinations and renewals (together           Patents);
(ii) trademarks, service marks, service names,           trade names, designs, logos,
trade dress and trade styles, domain names and           corporate names, whether or not
registered, and all registrations and           applications for registration of the same
(together           Trademarks); all applications for any of the
foregoing, and           (iii) every license, agreement or other permission received from
any third party           with respect to any of its Intellectual Property, (iv)
registered copyrights and           applications therefore, if any, and (v) registered
mask works and applications           for registration thereof, if any.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c)
          Set forth in Schedule I is a list of all Items that are owned by
          or registered in the name of the Company in any jurisdiction worldwide,
          indicating for each, the applicable jurisdiction, registration number (or
          application number), and date issued (or date filed), and indicating for each
          license agreement, the title and date of the license agreement and, with
respect           to the Items related to the Computer Programs, all Software Contracts.
The           Company is listed in the records of the appropriate domestic or foreign
agency           as the sole or joint owner of record for each application and
registration           relating to the Items that are owned by the Company, and all joint
owners, if           applicable, are listed in Schedule I and
identified as           joint owners. The registrations of any Intellectual Property
rights owned by the           Company and detailed in Schedule I are subsisting, in full
force and effect, and           have not been canceled, expired, or abandoned. To the
Companys knowledge,           there is no pending or threatened opposition,
interference, re-examination, or           cancellation proceeding before any court or
registration authority in any           jurisdiction against the applications and
registrations listed in the           Companys name in Schedule I.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

- 9 -

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| | (d)
          Without derogating from the representations herein, the Company has delivered
to           the Purchaser correct and complete copies of all Items (as amended to date),
and           has made available to the Purchaser correct and complete copies of all
other           written documentation evidencing ownership and prosecution (if
applicable) of           each such Item.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (e)
          Intellectual Property in this Agreement shall mean any and
          all of the following, in any and all legal jurisdictions around the world: (i)
          the Items, (ii) trade secrets and confidential business information, including
          without limitation, know-how, inventions, designs, processes, works of
          authorship, computer programs and technical data and information, (iii)
          manufacturing and product processes and techniques, research and development
          information, financial, marketing and business data, pricing and cost
          information, technical data, business and marketing plans and customer and
          supplier lists and information (together Trade Secrets), and
          (iv) other proprietary rights relating to any of the foregoing (including
          without limitation associated goodwill and remedies against infringements
          thereof and rights of protection of an interest therein under the laws of all
          jurisdictions). The licenses to any Intellectual Property licensed to the
          Company set forth in Schedule I have not been canceled,
          expired, or abandoned, by the Company, and, to the Companys knowledge, by
          any third party licensor.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (f)
          Except for the Intellectual Property rights expressly identified on Schedule
I and other than in-bound shrink-wrap          end-user
licenses that are not used for software development or in any software,
          products or services provided by the Company to customers, the licenses granted
          to the Company under the license agreements to which the Company is a party are
          perpetual and irrevocable licenses, and without obligation to pay royalty or
          commission.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (g)
          To the knowledge of the Company, the Intellectual Property that is owned by the
          Company is not subject to any outstanding injunction, judgment, order, decree,
          ruling, or charge.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (h)
          No action, suit, proceeding, hearing, investigation, charge, complaint, claim,
          or demand has been served on the Company or to the knowledge of the Company, is
          threatened, which challenges the legality, validity, enforceability, use, or
          ownership of the Intellectual Property owned or used by the Company. The
Company           has no reason to believe that any Intellectual Property owned or used
by the           Company may be invalid or unenforceable.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (i)
          To the knowledge of the Company, the conduct of the Companys businesses
as           now conducted and as proposed to be conducted, and all products and
processes,           as now or as currently proposed by the Company to be manufactured,
marketed,           licensed, distributed, offered, sold, imported or used by the
Company, do not           violate or infringe any right or claim of others or any
license, misappropriate           any Trade Secrets, or infringe (either directly or
indirectly, including without           limitation through contributory infringement or
inducement to infringe) any           Intellectual Property of any other person.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

- 10 -

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| | (j)
          To the Companys knowledge, no third party is misappropriating,
infringing,           or violating any Intellectual Property owned or exclusively
licensed by the           Company; and no such claims have been brought against any third
party by the           Company.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (k)
          Except as set forth in Schedule I, the Company is not a
          party to any agreement that obligates it to compensate any person for the use
of           any Intellectual Property, whether requiring the payment of royalties or
not.           Except as set forth in Schedule I, the Company has
not           entered into any agreement to indemnify any other person against any claim
of           infringement or misappropriation of any Intellectual Property Right. Except
as           set forth in Schedule I, there are no settlements,
          covenants not to sue, consents, judgments, or orders or any similar obligations
          to which the Companys is a party, that: (1) restrict the Companys
          rights to use any of its Intellectual Property or, (2) restrict the
          Companys business as now conducted or as proposed to be conducted with
          respect to its products and services currently under development, in order to
          accommodate a third partys Intellectual Property.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (l)
          The Company has complied in all respects with the requirements of, and has
filed           all documentation required in dealing with, the US Patent and Trademark
Office,           and any other local or foreign patent registry agency in which its
patent           applications were filed; and the registrations of these Patents are
fully valid           and in effect, and to the Companys knowledge there is no
prior act or any           other publication which renders the inventions of the Company,
referred to in           the Patents, and related documentation invalid in any manner.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (m)
          The Company has taken all customary measures necessary to ensure that any and
          all Intellectual Property of any kind which has been developed and is currently
          being developed, by any employee of the Company shall be the property solely of
          the Company. The Company has taken security measures to protect the secrecy,
          confidentiality and value of each Item, Trade Secrets and the other
Intellectual           Property, which measures are customary, including without
limitation, requiring           all of its current and former personnel, including
without limitation employees           and agents, and all of its current and former
consultants and contractors, who,           either alone or in concert with others,
developed, invented, discovered,           derived, programmed, designed or otherwise had
knowledge of, or access to, the           Intellectual Property, to execute written
non-disclosure agreements. No Trade           Secret has been disclosed or authorized to
be disclosed to any third party other           than pursuant to a non-disclosure
agreement that protects the Companys           proprietary interests in and to such
Trade Secrets. Neither the Company nor, to           the Companys knowledge, any
other party to any non-disclosure agreement           relating to the Companys
Trade Secrets is in breach or default thereof.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (n)
          None of the Companys employees, consultants or the Founders owns any
          Intellectual Property that is listed herein as Intellectual Property owned by
          the Company, and the Company owns all title and rights in such Intellectual
          Property which have been developed by, or in which any rights may have belonged
          to, in whole or in part, any of the Companys employees, consultants or
the           Founders that is listed herein as Intellectual Property owned by the
Company.           Other than as stated on Schedule I, the Intellectual Property
owned or           used by the Company is sufficient for the Company to conduct its
business as           currently conducted and as proposed to be conducted. Erez Marom,
Aaron Tzadikov,           Erez-Net Holdings Ltd. and Aaron-Com Holdings Ltd. are referred
to herein, each,           as a Founder and collectively the
          Founders.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| | (o)
          The Company has not received any written communications and the Senior
          Management has not received, within one year prior to Closing, any oral
          communications, alleging that the Company has violated or by conducting its
          business as is currently being conducted, would violate any Intellectual
          Property rights of any other person or entity.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (p)
          Except as set forth in Schedule I, the execution and
          delivery of the Transaction Documents and the consummation of the transactions
          contemplated herein, including the performance of the First Option and the
          Second Option, will not result in the loss or impairment of the Companys
          right to own, license or use any Intellectual Property that it currently uses,
          and will not require the consent of any governmental authority or third party
in           respect of any use of such Intellectual Property which consent has not been
          obtained prior to the Closing.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (q)
          It is not, and will not become, necessary to utilize any inventions of any of
          the Founders or, to the Companys knowledge, the Companys current
and           former employees (or people the Company currently intends to hire) made
prior to           their engagement with the Company other than those that have been
assigned to           the Company pursuant to the Non-Competition, Non-Disclosure,
Non-Solicitation           and Assignment Agreements signed by the Founders or such
employee and           consultants.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

SECTION 2.12.     
    Computer Programs.

Computer
Program(s) means (i) any and all computer programs (consisting of sets of
statements or instructions to be used directly or indirectly in a computer in order to
bring about a certain result) and portions thereof, and (ii) all associated data and
compilations of data, regardless of their form or embodiment. Computer
Programs shall include, without limitation, all source code, object code, natural
language code, all versions, all screen displays and designs, all component modules, all
descriptions, flow-charts and other work product used to design, plan, organize and
develop any of the foregoing, and all documentation, including without limitation user
manuals and training materials, relating to any of the foregoing.

Each and every Computer Program
included in whole or in part in the Companys products is either: (i) owned by
the Company, (ii) to the Companys best knowledge currently in the public domain
or otherwise available for use, modification and distribution by the Company without a
license from or the approval or consent of any third party, or (iii) licensed or
otherwise used by the Company pursuant to the terms of a valid, binding written agreement
(each such written agreement in this SECTION 2.12(iii), a Software
Contract). The Company is not required to give its products for free as a result
of the use of any open source, GNU or shareware software. Schedule I
identifies all Software Contracts.

- 12 -

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SECTION 2.13.     
Insurance. A complete list of all the Companys insurance policies is set
forth on Schedule I. The Company has not taken any action, or to its
knowledge omitted to take any action, which could render any such insurance policy void
or voidable or which could result in a material increase in the premium for any such
insurance policy. No written notice of any termination or threatened termination of any
of such policies has been received, and to the knowledge of the Company such policies are
in full force and effect. To the knowledge of the Company, all said policies of insurance
will continue in full force and effect immediately following the Closing.

SECTION 2.14.     
Taxes. The Company has timely filed all tax returns required to be filed by it,
and the Company has timely paid all taxes owed (whether or not shown on any tax return).
The Company has withheld and paid all taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, creditor, independent contractor,
shareholder or other third party. All such tax returns were complete and correct in all
respects, and such tax returns correctly reflected the facts regarding the income,
business, assets, operations, activities, status and other matters of the Company and any
other information required to be shown thereon. The Company established adequate
reasonable reserves for all taxes accrued but not yet payable. The Company will use its
best efforts not to incur any liability for taxes through the Closing Date except in the
ordinary course of business and consistent with the Companys past tax reporting
practices. The Company has never been audited by and no issues have been raised or
adjustments made or proposed by any tax authority, domestic or foreign, in connection
with any such taxes or tax returns. No deficiency assessment with respect to or proposed
adjustment of the Companys taxes is pending or, to the Companys knowledge,
threatened. There is no tax lien (other than for current taxes not yet due and payable),
imposed by any taxing authority, domestic or foreign, outstanding against the assets,
properties or business of the Company. Except as set forth in Schedule I,
all material tax elections of any type which the Company has made as of the date hereof
are set forth in the financial statements referred to in Section 2.06.

SECTION 2.15.     
Other Agreements. The Company represents and warrants it has delivered, disclosed
or made available to Purchaser all currently effective written or oral agreements, and
all currently effective written contracts, commitments and other instruments and
arrangements to which the Company is a party (the Contracts). The Contracts
so delivered, disclosed or made available by the Company are listed in Schedule IV.

| | (a)
     Except for the  Contracts  listed in Schedule IV, the Company is not a party to or
bound by any  currently effective contract, including, without limitation:
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (i)        any
contract with a customer, user, supplier or distributor;
| | -----------------------------------------------------------------------

| | (ii)        any
 contract  limiting  the freedom of the  Company to engage in any line of business or to
compete  with   any other entity or person;
| | ----------------------------------------------------------------------------------------------------------------------------------------------------

| | (iii)        any
contract  with any entity with whom the Company does not deal at arm's  length,  any
contract  entered   into not in the ordinary course of business, or any contract with an
interested or related party of the Company;
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (iv)        any
contracts involving exclusivity or other forms of "most favored nation" arrangements;
| | -----------------------------------------------------------------------------------------------------

| | (v)        agreement
under which it has granted any person any registration rights;
| | -----------------------------------------------------------------------------------

- 13 -

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| | (vi)        agreement
 which  entitles a party to terminate or revise its  obligations  as a result of
 performance of   the First Option and/or the Second Option;
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (vii)        any
 agreement  not  terminable  by the Company  without  cause and without  penalty upon
notice of thirty   (30) days or less.
| | --------------------------------------------------------------------------------------------------------------------------------------------

The Company has, and to the
Companys knowledge all other parties have, in all material respects performed all
their obligations required to be performed by it/them to date (or each non performing
party has received a valid, enforceable and irrevocable written waiver with respect to its
non-performance), received no notice of default and is not in default (with due notice or
lapse of time or both) under any agreement, instrument, commitment, plan or arrangement to
which the Company is a party or by which it or its property may be bound, in each such
event which breach or default would have a material adverse effect on the business,
operations or financial condition of the Company. The Company has no present expectation
or intention of not fully performing all its obligations under each such agreement,
instrument, commitment, plan or arrangement, and the Company has no knowledge of any
breach by the other party to any agreement, instrument, commitment, plan or arrangement to
which the Company is a party which breach or default would have a material adverse effect
on the business, operations or financial condition of the Company. The Company is in full
compliance with all of the terms and provisions of its current Articles.

SECTION 2.16.     
Loans and Advances. The Company does not have any outstanding loans or advances to
any person and is not obligated to make any such loans or advances, except, in each case,
for advances to employees of the Company in respect of reimbursable business expenses
anticipated to be incurred by them in connection with their performance of services for
the Company.

SECTION 2.17.     
Assumptions, Guaranties, Etc. of Indebtedness of Other Persons. The Company has
not assumed, guaranteed, endorsed or otherwise become directly or contingently liable on
any indebtedness of any other person (including, without limitation, liability by way of
agreement, contingent or otherwise, to purchase, to provide funds for payment, to supply
funds to or otherwise invest in the debtor, or otherwise to assure the creditor against
loss), except for guaranties by endorsement of negotiable instruments for deposit or
collection in the ordinary course of business.

SECTION 2.18.     
Significant Suppliers. No supplier which was significant to the Company during the
period covered by the Financial Statements or which has been significant to the Company
thereafter, has terminated, materially reduced or threatened orally within the year prior
to Closing, to Senior Management, or in writing to terminate or materially reduce its
provision of products or services to the Company.

SECTION 2.19.     
    Governmental Approvals.

| | (a)
          Except as set forth in Schedule I, the Company is not
          required to give any notice to, or to obtain any permit, authorization,
license,           approval, order, action, designation, declaration, or filing with any
          governmental authority in connection with the valid execution, delivery and
          performance of the Transaction Documents, the offer, sale or issuance of the
          Preferred Sharesto the Purchaser or the consummation or performance of
          any of the transactions contemplated under the Transaction Documents, including
          the performance of the First Option and issuance of the First Option Shares,
and           the performance of the Second Option. Subject to the accuracy of the
          representations and warranties of the Purchaser set forth in ARTICLE 3, no
          registration or filing with, or consent or approval of or other action by, any
          governmental agency or instrumentality is or will be necessary for the valid
          execution, delivery and performance by the Company of the Transaction
Documents,           the issuance, sale and delivery of the Preferred Sharesand
the First           Option Shares or, upon conversion thereof, the issuance and delivery
of the           Conversion Shares, other than with respect to the Rights Agreement.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

- 14 -

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| | (b)
          Neither the execution and delivery of the Transaction Documents and the
          performance of the terms thereof, nor the consummation of the transactions
          contemplated thereby will conflict with, or result in, a violation of, or
          constitute any default under the Amended Articles, or any agreement, indenture
          or other instrument to which the Company is a party or by which it is bound, or
          to which any of the Companys properties are subject, nor will the
          performance by the Company of its obligations thereunder violate any law, rule,
          administrative regulation, order or decree of any court, or of any governmental
          agency or body having jurisdiction over the Company or applicable to the
Company           or to any of the Companys properties, except where such violation
would           not have a material adverse effect on the business, operations or
financial           condition of the Company. In addition, such execution, delivery and
compliance           will not: (i) give to any person, any rights of termination,
cancellation or           acceleration, with respect to any agreement, contract or
commitment referred to           in the Transaction Documents, or to any of the
properties of the Company; (ii)           contravene, conflict with, or result in a
violation of, or give any governmental           body or other person the right to
exercise any remedy or obtain any relief           under, any existing applicable laws or
any order to which the Company or any of           its assets is subject except where
such contravention, conflict or violation           would not have a material adverse
effect on the business, operations or           financial condition of the Company; or
(iii) contravene, conflict with, or           result in a violation of any of the
existing material terms or requirements of,           or give any governmental body the
right to revoke, withdraw, suspend, cancel,           terminate or modify, any material
permit, authorization, license or consent that           is held by the Company, or that
otherwise relates to the business of, or any of           the assets owned or used by
them.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

SECTION 2.20.     
Disclosure. Neither this Agreement, including any Schedule or Exhibit to this
Agreement, contains an untrue statement of a material fact or omits a material fact
necessary to make the statements contained herein or therein not misleading. There is no
fact which the Company has not disclosed to the Purchaser and its counsel in writing and
of which the Company is aware which materially and adversely affects the business,
financial condition, operations, property or affairs of the Company and which, had it
been disclosed to a reasonable experienced investor, such as the Purchaser, would have
caused such investor to refrain from investing in the Company.

SECTION 2.21.     Offering of the
Preferred Shares. Neither the Company nor any person authorized or employed by the
Company as agent, broker, dealer or otherwise in connection with the offering or sale of
the Preferred Shares or any security of the Company similar to the Preferred Shares has
offered the Preferred Shares or any such similar security for sale to, or solicited any
offer to buy the Preferred Shares or any such similar security from, or otherwise
approached or negotiated with respect thereto with, any person or persons, and neither the
Company nor any person acting on its behalf has taken or will take any other action, in
either case so as to subject the offering, issuance or sale of the Preferred Shares to the
registration provisions of the Securities Act or the Israeli Securities Law, 1968.

- 15 -

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SECTION 2.22.     Brokers. The
Company has no contract, arrangement or understanding with any broker, finder or similar
agent with respect to the transactions contemplated by this Agreement.

SECTION 2.23.     Employees and
Consultants. Set forth in Schedule I is a list of the names
of the employees, consultants, officers and other individuals receiving compensation from
the Company, together with the title or job classification of each such person and the
monthly salary to be paid to each such person by the Company, the engagement commencement
date, notice period, bonuses, company vehicle, social benefits, other compensation and
other special terms.

SECTION 2.24.     Transactions With
Affiliates. Except as set forth in Schedule I, to the knowledge
of the Company, without inquiry, no officer or director of the Company, no shareholder of
the Company, or any person directly or indirectly controlled by any such person or entity,
has either directly or indirectly, (a) an interest in any person or entity which
(i) furnishes or sells services or products which are furnished or sold by the
Company, or (ii) purchases from or sells or furnishes to the Company any goods or
services, or (b) a beneficial interest in any contract or agreement to which the
Company is a party or by which it may be bound, except for normal compensation for
services for employees and consultants which has been disclosed in writing to the
Purchaser and which have been duly approved by the Board and/or the shareholders of the
Company in accordance with Sections 268-284 of the Israeli Companies Law (1999), if
necessary. To the Companys knowledge, there are no existing arrangements or proposed
transactions, between (a) the Company and (b) any officer, director, or holder of more
than 5% of the capital stock of the Company, or any affiliate or associate of any such
person (each, a Related Person) other than employment-at-will
arrangements in the ordinary course of business. No Related Person or employee of the
Company is indebted to it, nor is the Company indebted (or committed to make loans or
extend or guarantee credit) to any Related Person or employee, except for expenses
incurred in the ordinary course of business, and, with regard to employees and officers
other than current compensation and benefits incurred in the ordinary course of business.

SECTION 2.25.     Employee and
Consultant Agreements. Each of the officers of the Company and each employee now or
previously employed by the Company has executed a Non-Competition, Non-Disclosure,
Non-Solicitation and Assignment Agreement with the Company substantially in the form of
Exhibit E. Each consultant now engaged by Company including (without limitation)
the Founders, and each consultant previously engaged by the Company who, either alone or
in concert with others, developed, invented, discovered, derived, programmed or designed
the Intellectual Property of the Company, or who had knowledge of, or access to,
information relating in any way to the Intellectual Property of the Company, has executed
a Non-Competition, Non-Disclosure, Non-Solicitation and Assignment of Inventions Agreement
with the Company which is reasonably protective of the Companys Intellectual
Property Rights. All such agreements are in full force and effect. True and correct copies
of all such agreements have been delivered to the Purchaser. No current officer or key
employee of the Company has advised the Company (orally to Senior Management or in
writing) that he intends to terminate employment with the Company. Except as set forth in
Schedule I, the Company does not have any contract with any officer
or employee or any other consultant or person that is not terminable by it at will without
liability, upon a thirty (30) day prior notice. The Company has complied with all legal
requirements relating to employment, equal employment opportunity, nondiscrimination,
immigration, wages, hours, benefits, collective bargaining, the payment of social security
and similar taxes, occupational safety and health except for such non-compliances which
would not have a material adverse effect on the Company. All of the Companys payment
obligations regarding severance, pension and other payments to employees required by
applicable law have been fully paid by the Company or properly reserved as reflected in
the Companys financial statements. The Company is not bound by or subject to any
contract, commitment or arrangement with any labor union; no labor union has requested,
sought or attempted to represent any employees, representatives or agents of the Company,
nor is the Company aware of any other labor organization activity involving any of them.

- 16 -

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SECTION 2.26.     Records. The
minute books of the Company, which have been provided to the Purchaser, contain accurate
and complete copies of the minutes of every meeting of the Companys shareholders and
Board of Directors (and any committee thereof). No resolutions have been passed, enacted,
consented to or adopted, and no action was taken, by the directors (or any committee
thereof) or shareholders of the Company, except for those contained in such minute books.
The books of account, share record books and all other corporate records of the Company
are complete and accurate in all material respects.

SECTION 2.27.     Environmental and
Safety Laws. To the Companys knowledge the Company is not in violation of any
applicable statute, law, or regulation relating to the environment or occupational health
and safety, and to the Companys knowledge no material expenditures are required in
order to comply with existing law and regulations. The Company is not aware of any facts
or circumstances that exist with respect to the past or present operations or facilities
of the Company which would give rise to a material liability or material corrective or
remedial obligation under any such statute, law or regulation.

SECTION 2.28.        Employee Benefit
Plans.

| | (a)
Schedule I lists all the documents relating to any employee
          benefit plans, including any bonus, profit sharing, compensation, pension,
          severance, savings, deferred compensation, fringe benefit, insurance, welfare,
          medical, post-retirement health or welfare benefit, medical reimbursement,
          health, life, option, share purchase, bonus or other plan, agreement, policy,
          trust fund or arrangement, established, maintained, sponsored or contributed to
          by the Company on behalf any employee, officer or director of it (whether
          current, former or retired) or their beneficiaries or with respect to which the
          Company has or has had any obligation on behalf of any such employee, officer,
          director, or beneficiary, if any (each a Plan and,
          collectively, the Plans). The Company provided the
          Purchasers counsel with true and correct copies of all Plans. Schedule I
          includes a chart of all currently outstanding options granted under the Plans,
          including amount vested, date granted and vesting schedule.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b)
          The Company has performed all of its obligations under all Plans, and has made
          entries in its financial records and statements as required by the GAAP for all
          obligations and liabilities under such Plans. The Company is in compliance with
          all applicable laws regarding such Plans, and no accumulated funding
deficiency,           whether or not waived, exists with respect to any such Plans. All
filings           required by applicable laws have been timely filed, and all notices and
          disclosures to participants required by applicable laws have been timely
          provided. All contributions and payments made or accrued with respect to the
          Plans are deductible under the applicable tax laws.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

- 17 -

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| | (c)
          No employee of the Company will become entitled to any bonus, retirement,
          severance or similar benefit or enhanced benefit solely as a result of the
          transactions contemplated under the Transaction Documents.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

SECTION 2.29.     Employees.
Except as set forth in Schedule I, each officer and key employee of
the Company is currently devoting one hundred percent (100%) of his or her business time
to the conduct of the business of the Company. The Company is not aware of any officer or
key employee of the Company planning to work less than full-time at the Company in the
future.

SECTION 2.30.     Office of Chief
Scientist; Investment Center. As set forth in Schedule I, the
Company has received grants from the Office of the Chief Scientist and possible tax relief
from the Investment Center of the Ministry of Industry and Trade and is in full compliance
with the requirements of such governmental bodies. The Company has not received any other
grants from any governmental entity or other person.

ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

Purchaser represents and warrants to
the Company that:

SECTION 3.01.      Organization, Standing and Power

Purchaser is a company duly organized
and validly existing under the laws of the State of Israel.

SECTION 3.02.      Authority;
Conflicts; Consents

Purchaser has all requisite corporate
power and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement, the performance by
Purchaser of its obligations hereunder, and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action on the
part of Purchaser. This Agreement has been duly executed and delivered by Purchaser and
constitutes the valid and binding obligation of Purchaser, enforceable against Purchaser
in accordance with its terms.

SECTION 3.03.     
Brokers and Finders Fees

Purchaser has not incurred, nor will
incur, directly or indirectly, any liability for brokerage or finders fees or
agents commissions or investment bankers fees or any similar charges in
connection with this Agreement or any transaction contemplated hereby.

- 18 -

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SECTION 3.04.         Investment Intent.

Purchaser is purchasing the Preferred
Shares and, if relevant, will purchase the First Option Shares for investment for its own
account and not with a view to, or for sale in connection with, any distribution thereof.
Purchaser confirms that it has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks relating to entering into this
Agreement. Purchaser has not been organized for the sole purpose of acquiring the
Preferred Shares.

SECTION 3.05.         No Market for Shares.

Purchaser acknowledges that the
Company is a privately held company and that its Preferred Shares are not registered or
listed for trade on any stock exchange.

ARTICLE 4 COVENANTS OF THE COMPANY

SECTION 4.01.     Information and Inspection Rights.

| | (a)
          So long as Purchaser continues to hold at least 5% of the Companys share
          capital, the Company shall deliver to Purchaser: (i) as soon as practicable,
but           in any event within sixty (60) days after the end of each fiscal year of
the           Company, a consolidated income statement for such fiscal year, a
consolidated           balance sheet of the Company and statement of shareholders
equity as of           the end of such year, and a consolidated statement of cash flows
for such year,           such year-end financial reports to be in reasonable detail,
prepared in           accordance with US GAAP, and audited and certified by one of the
Big           Four independent public accountant firms,; (ii) as soon as
practicable,           but in any event within thirty (30) days after the end of each of
the first           three (3) quarters of each fiscal year of the Company, an unaudited
and reviewed           income statement, statement of cash flows for such fiscal quarter
and an           unaudited and reviewed balance sheet as of the end of such fiscal
quarter. The           aforesaid reports shall be in reasonable detail, prepared in
accordance with US           GAAP consistently applied with prior practice for earlier
periods; (iii) within           fifteen (15) days of the end of each month, a short form
report as determined by           the Board of Directors of the Company for and as of the
end of such month, in           reasonable detail, and compared against plan (iv) a
budget and business plan for           the next fiscal year, prepared on a monthly basis,
including operating budget,           balance sheets, income statements and statements of
cash flows for such months           at least 30 days prior to the beginning of the
fiscal year (v) monthly CEO           status report covering the past month together with
R&D, Sales and Marketing           activities and plans for the following month; (vi)
prompt notice of any           litigation or material adverse claims or disputes; and
(vii) such other           information relating to the financial condition, business,
prospects or           corporate affairs of the Company as the Purchaser may from time to
time           reasonably request.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b)
          With respect to the financial statements called for in subsections (i) and
(ii),           estimates made in good faith shall be delivered to Purchaser immediately
upon           closing of the fiscal year or quarter (as applicable). With respect to the
          financial statements called for in subsection (ii) of Section (a), such shall
          include an instrument executed by the Chief Financial Officer or Chief
Executive           Officer on behalf of the Company certifying that such financials were
prepared           in accordance with the terms of those subsections and fairly present
the           financial condition of the Company and its results of operation for the
period           specified, subject to year-end audit adjustment.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| | (c)
          So long as Purchaser appoints a director, such reports will be based on the
          requests of such director.
| | ------------------------------------------------------------------------------------------------------------------------------

| | (d)
          So long as Purchaser continues to hold at least 5% of the Companys share
          capital, Purchaser shall be entitled to visit and inspect the Companys
          properties, to examine its books of account and records and to discuss the
          Companys affairs, finances and accounts with its officers, all at such
          reasonable times as may be requested by Purchaser.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (e)
          Notwithstanding this Section 4.01, a majority of the Companys Board of
          Directors may determine in good faith that Purchaser should not have access to
          certain information if (i) such exclusion is necessary in order to avoid a
          material conflict of interest, and (ii) its disclosure to Purchaser may cause
an           adverse effect on the Company. If such information is related to a
transaction           with a third party, this limitation shall only apply with respect
to such third           partys proprietary information.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (f)
          These information rights shall terminate upon the Companys initial public
          offering or upon a merger or other acquisition of the Company.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (g)
          Without derogating from any other agreement or undertaking to which any of the
          parties hereto is or may become in the future subject, and in addition to any
          such agreement or undertaking, the Purchaser undertakes that it shall keep in
          confidence, and not to use for any purpose whatsoever except in connection with
          the exercise of any of its rights under this Agreement, any and all information
          relating to the Company which has been provided to it by the Company or was
          otherwise obtained by it, except for information which is or shall be in the
          public domain not due to any act of the Purchaser in breach of law or agreement
          or which the Purchaser is required to disclose under any applicable law or
stock           exchange regulations.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

SECTION 4.02.     Use of Proceeds.

The Company and its subsidiaries
undertake to use the funds received from Purchaser substantially for the purpose of: A)
building a sales and marketing team that will mainly promote the sale of joint
CTI2-AudioCodes solutions and (B) successfully completing the integration of the
Companys applications into AudioCodes IPmedia product line. The Company
covenants to use the proceeds in accordance with the Statement of Work and Budget,
attached hereto as Exhibit F.

SECTION 4.03.     Protection of Proprietary Information.

The Company will take all reasonable
measures necessary to ensure that any and all Intellectual Property developed in the
future by any employee or consultant of the Company and necessary for the Company to carry
on its business as now conducted and as proposed to be conducted, shall be the property
solely of the Company.

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SECTION 4.04.     Distribution
Agreement

Purchaser and the Company shall
execute a non exclusive distribution and marketing agreement by which Purchaser shall be
entitled to resell the Companys products and/or refer customers to Company and
receive a commission on such referrals, within thirty (30) days of the Closing Date, in
the form as shall be agreed upon by the parties.

ARTICLE 5CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER

The
obligation of Purchaser to purchase and pay the Aggregate Purchase Price for the Preferred
Shares being purchased at the Closing is, at its option, subject to the satisfaction or
waiver, at or before the Closing, of the following conditions:

| | (a)
     Opinion of  Company's  Counsel.  The  Purchaser  shall have  received  from Ori
Rosen & Co.,  Law Offices, counsel for the Company,  an opinion dated as of the Closing
Date, in form and scope  satisfactory to the Purchaser and its counsel, as set forth on
Exhibit G.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b)
     Representations and Warranties to be True and Correct.  The  representations  and
warranties  contained in Article 2 shall be true,  complete  and correct on and as of the
 Closing  Date with the same effect as though such representations  and  warranties  had
been made on and as of such date,  and the  Company,  by its Chief  Executive Officer,
shall have certified to such effect to the Purchaser in writing.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c)
     Performance.  The Company shall have  performed and complied in all material
 respects with all agreements contained  herein  required  to be  performed  or  complied
 with by it prior to or at the  Closing  Date,  and the Company,  by its Chief  Executive
 Officer,  shall have certified to the Purchaser in writing to such effect and to the
further effect that all of the conditions set forth in this Article 5 have been satisfied.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (d)
     All  Proceedings  to be  Satisfactory.  All corporate and other  proceedings to be
taken by the Company in connection  with the  transactions  contemplated  hereby and all
 documents  incident  thereto  shall be reasonably satisfactory  in form and substance to
the Purchaser and their  counsel,  and the Purchaser and their counsel shall have
 received all such  counterpart  originals or certified or other copies of such
 documents as they  reasonably may request.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (e)
     Supporting  Documents.  The  Purchaser  and their  counsel  shall have  received
 copies of the  following documents:
| | ------------------------------------------------------------------------------------------------------------------------------

| | (i)        the
Amended Articles;
| | --------------------------------

| | (ii)        a
certified copy of the Company's Register of Shareholders;
| | -----------------------------------------------------------------------

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| | (iii)        a
certificate  of the Company,  by its Chief  Executive  Officer,  dated the Closing Date
and  certifying:   (A) that  attached  thereto is a true and complete copy of all
resolutions  adopted by the Board of Directors and   the  shareholders  of the  Company
 authorizing  the  execution,  delivery  and  performance  of the  Transaction
  Documents,  the issuance,  sale and delivery of the Preferred Shares and the
 reservation,  issuance and delivery   of the First Option Shares  against  payment
 therefore in accordance  with the First Option,  and the Conversion   Shares and the
issuance and  delivery of the First  Option,  and  reconfirmation  of issuances of the
 previously   authorized  classes of  Preferred  shares of the  Company;  and that all
such  resolutions  are in full force and   effect and are all the resolutions  adopted in
connection with the  transactions  contemplated by the Transaction   Documents; (B) that
the Amended Articles has not been amended since the date of their adoption; and
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (iv)        such
additional  supporting  documents and other information with respect to the operations
and affairs of   the Company as the Purchaser or their counsel reasonably may request.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (f)
     Rights  Agreement.  The Company and other  parties  whose  signature is required for
the  amendment of the Rights Agreement, shall have executed and delivered the Rights
Agreement.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (g)
     Employment  Agreements.  Employees  shall be bound by or have entered  into
 employment  agreements  and a Non-Competition,  Non-Disclosure,  Non-Solicitation  and
Assignment  Agreement with the Company,  pursuant to terms acceptable to Purchaser.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (h)
     Employee Bonus Plan. The Company shall have adopted an employee bonus plan,
acceptable to Purchaser.
| | -------------------------------------------------------------------------------------------------------------

| | (i)
     Articles.  The Amended Articles shall read in its entirety as set forth in Exhibit D.
| | ----------------------------------------------------------------------------------------------

| | (j)
     Election of Directors.  The number of directors  constituting  the entire Board of
Directors shall consist of up to seven members.  Mr. Shabtai  Adlesberg  shall have been
appointed by Purchaser as a member of the Board of Directors  and  Yehuda  Hershkovits
 shall  have  been  appointed  by  Purchaser  as an  observer  to the  Board of Directors.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (k)
     Preemptive  Rights.  All shareholders of the Company having any preemptive,  first
refusal or other rights with respect to the issuance of the Preferred Shares,  First
Option Shares or the Conversion  Shares,  and exercise of the Second  Option,  shall have
 irrevocably  waived the same in writing or, in the absence of such waiver,  the same
have irrevocably expired.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (l)
     Insurance. The Company shall have obtained from a financially sound and reputable
insurer a directors and officers liability insurance coverage covering all the directors
of the Company on terms acceptable to the Purchaser (the "D&O Insurance Policy").
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| | (m)
     Third Party Consents. The Company shall have delivered to Purchaser,  all third
party consents,  including the consent of any  governmental  authority,  required or
necessary,  in the  reasonable  opinion of Purchaser,  in order to consummate the
transactions contemplated under the Transaction Documents.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (n)
     Injunction.  There shall be no effective injunction,  writ, preliminary  restraining
order or any order of any nature issued by a court of competent  jurisdiction  directing
that the transactions provided for herein or any of them not be consummated as herein
provided.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (o)
     Absence of Adverse  Changes.  From the date  hereof  until the  Closing,  there will
have been no material adverse  change in the  financial  or business  condition  or the
assets or  properties  of the Company in the good faith judgment of the Purchaser, except
for any change resulting from lack of funds.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

ARTICLE 6 CONDITIONS TO THE
OBLIGATIONS OF THE COMPANY

The
obligation of the Company to sell the Preferred Shares to the Purchaser at the Closing is,
at its option, subject to the satisfaction or waiver, at or before the Closing Date, of
the following conditions:

| | (a)
Representations and Warranties to be True and Correct. The
          representations and warranties contained in ARTICLE 3 shall be true, complete
          and correct on and as of the Closing Date with the same effect as though such
          representations and warranties had been made on and as of such date.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b)
Performance. Purchaser and any other party whose signature on any of the
          Transaction Documents shall have performed and complied in all material
respects           with all covenants, agreements and conditions contained herein
required to be           performed or complied with by it prior to or at the Closing
Date.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c)
Rights Agreement. The Purchaser shall have executed and delivered the
          Rights Agreement.
| | -----------------------------------------------------------------------------------------------------

| | (d)
Payment of Purchase Price. Purchaser shall have paid to the Company the
          Aggregate Purchase Price.
| | ---------------------------------------------------------------------------------------------------------------

ARTICLE 7 INDEMNIFICATION

SECTION 7.01.     Survival of
Agreements. All covenants, agreements, representations and warranties made by the
Company, and on behalf of the Company in any of the Transaction Documents shall survive
the execution and delivery of all of the Transaction Documents, the issuance, sale and
delivery of the Preferred Shares and the First Option Shares, and the issuance and
delivery of the Conversion Shares.

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SECTION 7.02.     Indemnification.
Subject to the terms of this Article 7, the Company (an Indemnifying
Party) shall indemnify, defend and hold harmless Purchaser from and against, and
pay or reimburse, as the case may be, the Purchaser for, any and all Damages as actually
incurred or suffered by Purchaser directly based upon, arising out of or otherwise in any
way relating to or in respect of :

| | (a)
          any breach of any of the representations or warranties contained in this
          Agreement or on the Closing Date; or
| | -------------------------------------------------------------------------------------------------------------------------------------

| | (b)
          any breach or violation of any covenant or agreement of the Company contained
in           any Transaction Document.
| | ----------------------------------------------------------------------------------------------------------------------------------

| | (c)
          Notwithstanding anything above to the contrary: (i) the Indemnifying Parties
          shall not have any obligation to indemnify the Purchaser from and against any
          Damages (a) until Purchaser has suffered Damages by reason of all such breaches
          of representations and warranties and/or covenants and agreements herein in
          excess of $50,000 in the aggregate (not taking into account any           materiality qualifiers
to such representations and warranties), or           (b) that exceed, in the aggregate,
the Aggregate Purchase Price plus any legal           fees payable pursuant to this
Article 7 .
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (ii)        the
representations or warranties contained in this Agreement or on the Closing
          Date shall expire eighteen months after the Closing hereunder, except with
          respect to any good faith claim made in writing by the Purchaser prior to such
          date, and reasonably supported by documentary evidence, which claim shall
          survive until finally resolved between the parties.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (d)
          Damages means any and all direct losses, liabilities,
claims,           deficiencies, fines, payments, taxes, liens, costs and expenses
(including all           amounts paid in connection with any demands, assessments,
judgments, settlements           and compromises relating thereto; interest and penalties
with respect thereto;           and reasonable costs and expenses, including reasonable
attorneys,           accountants and other experts fees and expenses,
incurred in           investigating, preparing for or defending against any such actions
or in           asserting, preserving or enforcing Purchasers rights hereunder).
For the           avoidance of doubt, none of the parties shall be liable to the other
party for           any indirect or consequential damage, including lost profits, loss of
          opportunities, damage to reputation etc.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

SECTION 7.03.     Procedures
for Indemnification

| | (a)
          If a claim or demand is made against Purchaser, or if Purchaser shall otherwise
          learn of an assertion, by any person who is not a party to this Agreement (a
          Third Party Claim) as to which the Indemnifying Party may be
          obligated to provide indemnification pursuant to this Agreement, Purchaser will
          notify the Indemnifying Party in writing, and in reasonable detail, of the
Third           Party Claim in a prompt manner a reasonable amount of time after becoming
aware           of such Third Party Claim; provided, however, that failure to give
any           such notification will not affect the indemnification provided hereunder
except           to the extent the Indemnifying Party shall have demonstrated that it has
been           actually prejudiced as a result of such failure.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| | (b)
          If a Third Party Claim is made against Purchaser, the Indemnifying Party will
be           entitled to assume the defense thereof (at the expense of the Indemnifying
          Party) with counsel selected by the Indemnifying Party and reasonably
          satisfactory to Purchaser. Should the Indemnifying Party so elect to assume the
          defense of a Third Party Claim, the Indemnifying Party will not be liable to
          Purchaser for any legal or other expenses subsequently incurred by Purchaser in
          connection with the defense thereof; provided that, if pursuant to an opinion
of           an independent legal counsel retained by both parties a conflict of interest
          exists in respect of such claim, Purchaser will have the right to employ
          separate counsel to represent Purchaser and in that event the reasonable fees
          and expenses of such separate counsel will be paid by Indemnifying Party.
          Purchaser will have the right to be involved in (but not to lead) the defense
          thereof and to employ counsel, at its own expense, separate from the counsel
          employed by the Indemnifying Party. The Indemnifying Party will be liable for
          the reasonable fees and expenses of counsel employed by the Purchaser for any
          period during which the Indemnifying Party has failed to assume the defense
          thereof. The Indemnifying Party will keep Purchaser fully informed of all
          developments relating to or in connection with such Third Party Claim.
Purchaser           will fully cooperate with the Indemnifying Party in the defense
thereof if           requested by the Indemnifying Party (such cooperation to be at the
expense,           including reasonable legal fees and expenses, of the Indemnifying
Party).
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c)
          Indemnifying Party will not consent to any settlement, compromise or discharge
          (including the consent to entry of any judgment) of any Third Party Claim
          without the Purchaser s prior written consent which will not be
          unreasonably withheld.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (d)
          Any claim on account of Damages which does not involve a Third Party Claim
shall           be asserted by written notice given by the Purchaser to the Indemnifying
Party           within the time period set forth above and reasonably supported by
documentary           evidence.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

SECTION 7.04.     Set-off Right. Purchaser shall not be entitled to set-off from any amount due hereunder or pursuant
to the Transaction Documents (including pursuant to the First Option and/or the Second
Option) any Damages sustained by Purchaser and which are indemnifiable hereunder.

SECTION 7.05.     Exclusive
Remedy. This Article 7 constitutes the sole and exclusive remedy to the Purchaser and
the sole and exclusive liability of the Company or anyone on its behalf or related to it,
in respect of all covenants, agreements, representations and warranties made by the
Company, and on behalf of the Company in this Agreement and any schedule or exhibit
instrument hereunder, except as specifically stated in the Second Option.

ARTICLE 8 MISCELLANEOUS

SECTION 8.01.     Termination.
Purchaser, at its sole discretion, shall be entitled to terminate this Agreement prior to
the Closing (whether before or after approval of the Companys Board of Directors or
shareholders meeting), if the conditions to Closing listed in Article 5 have not been
satisfied on or before December 9, 2005. In the event of the termination of this Agreement
as provided above, this Agreement shall be of no further force or effect; provided,
however, that all confidentiality obligations shall survive the termination of this
Agreement and shall remain in full force and effect.

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SECTION 8.02.     Transfer Taxes.
Any transfer, documentary, stamp, sales, use or other taxes assessed upon or with the
execution of this Agreement, the issuance, sale and delivery of the Preferred Shares, the
First Option Shares and the Conversion Shares, and any recording or filing fees with
respect thereto, shall be the responsibility of the Company.

SECTION 8.03.     Brokerage. Each
party hereto will indemnify and hold harmless the others against and in respect of any
claim for brokerage or other commissions relative to this Agreement or to the transactions
contemplated hereby, based in any way on agreements, arrangements or understandings made
or claimed to have been made by such party with any third party.

SECTION 8.04.     Parties in
Interest. All representations, covenants and agreements contained in this Agreement by
or on behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or not.

SECTION 8.05.     Notices. All
notices, requests, consents and other communications hereunder shall be in writing and
shall be delivered in person, mailed by certified or registered mail, return receipt
requested, or sent by telecopier or telex, addressed as follows:

| | (a)
          if to the Company, at 5 Sapir Street, POB 12112, Herzeliya Pituach, Israel
          46733, with a copy, which shall not constitute a service of process, to Adv.
Ori           Rosen & Co. Law Offices, 1 Azrieli Center, Tel Aviv, Israel 67021;
          Facsimile: +972-3-607-4701; and
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b)
          if to Purchaser, at 1 Hayarden Street, Airport City Lod, Israel 70151, with a
          copy which shall not constitute a service of process, to Noma Floom, 7 Menachem
          Begin St, Ramat Gan, Israel, Facsimile: + 972  3  6110788;
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

or, in any such case, at such other
address or addresses as shall have been furnished in writing by such party to the others.

SECTION 8.06.     Governing Law;
Jurisdiction. This Agreement shall be governed by and construed in accordance with the
laws of Israel, without giving effect to the principles of conflicts of law thereof. Any
dispute arising under or in relation to this Agreement shall be resolved in the competent
court in the city of Tel Aviv-Jaffa, and each of the parties hereby submits irrevocably to
the jurisdiction of such court.

SECTION 8.07.     Entire
Agreement. This Agreement, including the Schedules and Exhibits hereto, constitutes
the sole and entire agreement of the parties with respect to the subject matter hereof.
All Schedules and Exhibits hereto are hereby incorporated herein by reference.

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SECTION 8.08.     Counterparts.
This Agreement may be executed and delivered (including by facsimile transmission) in more
than one counterpart, each of which shall be deemed to be an original and which, together,
shall constitute one and the same instrument.

SECTION 8.09.     Amendments. This
Agreement may not be amended or modified, and no provisions hereof may be waived, without
the written consent of the Company and the Purchaser.

SECTION 8.10.     Severability. If
any provision of this Agreement shall be declared void or unenforceable by any judicial or
administrative authority, the validity of any other provision and of the entire Agreement
shall not be affected thereby.

SECTION 8.11.     Titles and
Subtitles. The titles and subtitles used in this Agreement are for convenience only
and are not to be considered in construing or interpreting any term or provision of this
Agreement.

SECTION 8.12.     Confidentiality.

| | (a)
Disclosure of Terms. The terms and conditions of this Agreement, the
          Transaction Documents (including without limitation the existence or terms of
          the First Option and the Second Option) and all transactions contemplated
          therein (collectively, the Financing Terms), including their
          existence, shall be considered confidential information and shall not be
          disclosed by the Company to any third party.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b)
Permitted Disclosures. Notwithstanding the foregoing,  the Company
          may disclose any of the Financing Terms (i) to all of its shareholders,
          directors, officers and employees, as required for the execution and
performance           hereof, or in order to comply with applicable law; (ii) to their
attorneys,           independent accountants and other professional advisors or
consultants, in each           case only where such persons or entities are under
appropriate nondisclosure           obligations, and (iii) in connection with the
enforcement of this Agreement or           its exhibits.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c)
Legally Compelled Disclosure. In the event that the Company is requested
          or becomes legally compelled to disclose the existence of the Financing Terms
in           contravention of the foregoing provisions, the Company shall provide
Purchaser           with prompt written notice of that fact so that Purchaser may seek
(with the           cooperation and reasonable efforts of the Company) a protective
order,           confidential treatment or other appropriate remedy. In such event, the
Company           shall furnish only that portion of the information which is legally
required, as           determined by the written legal opinion of legal counsel, and
shall exercise           reasonable efforts to obtain reliable assurance that
confidential treatment will           be accorded such information to the extent
reasonably requested by Purchaser.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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IN
WITNESS WHEREOF, the Company, and the Purchaser have executed this Series E Preferred
Share Purchase Agreement as of the date first above written.

| |  | CTI SQUARED LTD.By: /s/ Ofer Barshad
Name: Ofer BarshadTitle:   Chief Financial Officer
| |  | --------------------------------------------------------------------------------------------------------

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IN
WITNESS WHEREOF, the Company, and the Purchaser have executed this Series E Preferred
Share Purchase Agreement as of the date first above written.

| |  | PURCHASER:AUDIOCODES LTD.By: /s/ Shabtai Adlersberg
Name: Shabtai AdlersbergTitle: Chairman of the Board, President and CEO
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------

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