Document:

20-F

Exhibit 4.28  

AGREEMENT AND PLAN OF
MERGER 

DATED AS OF MAY 16, 2006 

AMONG 

AUDIOCODES LTD., 

AUDIOCODES, INC., 

GREEN ACQUISITION CORP., 

NUERA COMMUNICATIONS, INC. 

AND 

ROBERT WADSWORTH, AS
SELLERS’ REPRESENTATIVE 

TABLE OF CONTENTS 

			PAGE

				 
				 
				 
				 
	ARTICLE 1	THE MERGER	1 	 
	        SECTION 1.1.	THE MERGER	1 	 
	        SECTION 1.2.	CLOSING	1 	 
	        SECTION 1.3.	ACTIONS AT THE CLOSING	1 	 
	        SECTION 1.4.	EFFECTIVE TIME	2 	 
	        SECTION 1.5.	EFFECTS OF THE MERGER	2 	 
	        SECTION 1.6.	CERTIFICATE OF INCORPORATION AND BY-LAWS	2 	 
	        SECTION 1.7.	DIRECTORS AND OFFICERS OF SURVIVING CORPORATION	2 	 
	 
	ARTICLE 2	EFFECT ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES 	3 	 
	        SECTION 2.1.	CONVERSION OF CAPITAL STOCK	3 	 
	        SECTION 2.2.	OPTIONS AND WARRANTS	3 	 
	        SECTION 2.3.	EARN-OUT	4 	 
	        SECTION 2.4.	APPRAISAL RIGHTS	6 	 
	        SECTION 2.5.	EXCHANGE PROCEDURES	6 	 
	        SECTION 2.6.	NO FURTHER OWNERSHIP RIGHTS	8 	 
	 
	ARTICLE 3	REPRESENTATIONS AND WARRANTIES OF THE COMPANY	8 	 
	        SECTION 3.1.	ORGANIZATION AND STANDING	8 	 
	        SECTION 3.2.	SUBSIDIARIES	8 	 
	        SECTION 3.3.	POWER AND AUTHORITY; BINDING AGREEMENT	9 	 
	        SECTION 3.4.	AUTHORIZATION	9 	 
	        SECTION 3.5.	CAPITALIZATION	9 	 
	        SECTION 3.6.	NONCONTRAVENTION	11 	 
	        SECTION 3.7.	COMPLIANCE WITH LAWS	12 	 
	        SECTION 3.8.	PERMITS	12 	 
	        SECTION 3.9.	FINANCIAL STATEMENTS	12 	 
	        SECTION 3.10.	ABSENCE OF CHANGES OR EVENTS	13 	 
	        SECTION 3.11.	UNDISCLOSED LIABILITIES	13 	 
	        SECTION 3.12.	ASSETS OTHER THAN REAL PROPERTY	13 	 
	        SECTION 3.13.	REAL PROPERTY	13 	 
	        SECTION 3.14.	CONTRACTS	14 	 
	        SECTION 3.15.	INTELLECTUAL PROPERTY	16 	 
	        SECTION 3.16.	LITIGATION	17 	 
	        SECTION 3.17.	TAXES	18 	 
	        SECTION 3.18.	INSURANCE	19 	 
	        SECTION 3.19.	BENEFIT PLANS	20 	 
	        SECTION 3.20.	EMPLOYEE AND LABOR MATTERS	23 	 
	        SECTION 3.21.	ENVIRONMENTAL MATTERS	24 	 
	        SECTION 3.22.	TRANSACTIONS WITH AFFILIATES	25 	 
	        SECTION 3.23.	ACCOUNTS; OFFICERS AND DIRECTORS	25 	 
	        SECTION 3.24.	BROKERS	25 	 
	        SECTION 3.25.	CERTAIN BUSINESS PRACTICES	26 	 
	        SECTION 3.26.	CORPORATE BOOKS AND RECORDS	26 	 
	        SECTION 3.27.	NO FORMER BUSINESS	26 	 
	        SECTION 3.28.	CUSTOMERS	26 	 
	        SECTION 3.29.	SUPPLIERS	26 	 

ii

				 
				 
				 
				 
				 
	ARTICLE 4	REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB	26 	 
	        SECTION 4.1.	ORGANIZATION AND STANDING	26 	 
	        SECTION 4.2.	POWER AND AUTHORITY; BINDING AGREEMENT	27 	 
	        SECTION 4.3.	NONCONTRAVENTION	27 	 
	        SECTION 4.4.	BROKERS	28 	 
	        SECTION 4.5.	AVAILABILITY OF FUNDS	28 	 
	        SECTION 4.6.	MERGER SUB	28 	 
	        SECTION 4.7.	OWNERSHIP	28 	 
	 
	ARTICLE 5	CERTAIN COVENANTS	28 	 
	        SECTION 5.1.	CONDUCT OF BUSINESS	28 	 
	        SECTION 5.2.	ACCESS	31 	 
	        SECTION 5.3.	TAX MATTERS	31 	 
	        SECTION 5.4.	NOTICE OF CERTAIN EVENTS	32 	 
	        SECTION 5.5.	INSURANCE	33 	 
	        SECTION 5.6.	EXCLUSIVITY	33 	 
	        SECTION 5.7.	STOCKHOLDER APPROVAL; NOTICES TO STOCKHOLDERS	33 	 
	        SECTION 5.8.	ADDITIONAL DELIVERIES PRIOR TO CLOSING	34 	 
	        SECTION 5.9.	DELIVERY OF INTERIM FINANCIAL STATEMENTS	35 	 
	        SECTION 5.10.	SATISFACTION OF CONDITIONS INCLUDING CONSENTS	35 	 
	        SECTION 5.11.	BENEFITS FOR CONTINUING EMPLOYEES	35 	 
	        SECTION 5.12.	INDEMNIFICATION	36 	 
	 
	ARTICLE 6	MUTUAL COVENANTS	36 	 
	        SECTION 6.1.	COMMERCIALLY REASONABLE EFFORTS	36 	 
	        SECTION 6.2.	PUBLICITY	37 	 
	        SECTION 6.3.	ANTITRUST NOTIFICATION	37 	 
	        SECTION 6.4.	EXPENSES	37 	 
	 
	ARTICLE 7	CONDITIONS PRECEDENT	38 	 
	        SECTION 7.1.	CONDITIONS TO EACH PARTY'S OBLIGATION	38 	 
	        SECTION 7.2.	CONDITIONS TO AUDIOCODES' AND PARENT'S OBLIGATIONS	38 	 
	        SECTION 7.3.	CONDITIONS TO THE COMPANY'S OBLIGATION	41 	 
	 
	ARTICLE 8	INDEMNIFICATION	42 	 
	        SECTION 8.1.	INDEMNIFICATION OF PARENT	42 	 
	        SECTION 8.2.	INDEMNIFICATION OF SELLER INDEMNIFIED PARTIES	43 	 
	        SECTION 8.3.	INDEMNIFICATION CLAIMS	43 	 
	        SECTION 8.4.	TERMINATION OF INDEMNIFICATION	45 	 
	        SECTION 8.5.	NO RIGHT OF CONTRIBUTION	45 	 

ii

				 
				 
				 
				 
				 
				 
	ARTICLE 9	TERMINATION	45 	 
	        SECTION 9.1.	TERMINATION	45 	 
	        SECTION 9.2.	EFFECT OF TERMINATION	46 	 
	 
	ARTICLE 10	GENERAL PROVISIONS	46 	 
	        SECTION 10.1.	NOTICES	46 	 
	        SECTION 10.2.	DEFINITIONS	48 	 
	        SECTION 10.3.	DESCRIPTIVE HEADINGS; CERTAIN INTERPRETATIONS	56 	 
	        SECTION 10.4.	SELLERS' REPRESENTATIVE	57 	 
	        SECTION 10.5.	ASSIGNMENT	57 	 
	        SECTION 10.6.	SPECIFIC ENFORCEMENT	58 	 
	        SECTION 10.7.	WAIVER AND AMENDMENT	58 	 
	        SECTION 10.8.	ENTIRE AGREEMENT	58 	 
	        SECTION 10.9.	NO THIRD-PARTY BENEFICIARIES	58 	 
	        SECTION 10.10.	COUNTERPARTS	58 	 
	        SECTION 10.11.	GOVERNING LAW; JURISDICTION; VENUE; SERVICE OF PROCESS; WAIVER OF JURY TRIAL 	59 	 
	        SECTION 10.12.	SEVERABILITY	59 	 
	        SECTION 10.13.	CURRENCY	59 	 
	        SECTION 10.14.	TRANSACTION COSTS	59 	 

EXHIBITS:  

		
		
		
		
		
	EXHIBIT A	FORM OF ESCROW AGREEMENT
	EXHIBIT B	FORM OF EXPENSES ESCROW AGREEMENT
	EXHIBIT C	FORM OF LETTER OF TRANSMITTAL
	EXHIBIT D	FORM OF BONUS RETENTION AGREEMENT
	EXHIBIT E	FORM OF OPINION OF DLA PIPER RUDNICK GRAY CARY US LLP
	EXHIBIT F	FORM OF STOCKHOLDER WRITTEN CONSENT

SCHEDULES:  

DISCLOSURE SCHEDULE 

SCHEDULE 2.3 

SCHEDULE 5.8(c) 

iii

INDEX OF DEFINED TERMS 

(BY PAGE NUMBER) 

			 		
			 		
			 		
			 		
			 		
	Accounting Firm	5 	 	HSR Act	11 
	Actual Value	5 	 	Intellectual Property Rights	16 
	Agreement	1 	 	Interim Financial Statements	35 
	Appraisal Shares	6 	 	Judgment	11 
	Appraisal Statute	6 	 	Law	11 
	AudioCodes	1 	 	Leased Property	13 
	Certificate	3 	 	Legal Proceeding	17 
	Certificate of Merger	1 	 	Letter of Transmittal	7 
	Closing	1 	 	Lien	11 
	Closing Date	1 	 	Low Value	5 
	COBRA	22 	 	Material Contract	14 
	Code	4 	 	Merger	1 
	Common Stock	9 	 	Merger Sub	1 
	Company	1 	 	Most Recent Balance Sheet	12 
	Company Indemnified Parties	36 	 	Most Recent Balance Sheet Date	12 
	Company Personnel	12 	 	Objection Notice	5 
	Company Stock Plans	4 	 	Option Consideration	4 
	Confidentiality Agreement	31 	 	Ordinary Course of Business	12 
	Consideration Certificate	40 	 	Outside Date	45 
	Customers	26 	 	Parent	1 
	Delaware Secretary of State	1 	 	Parent Indemnified Party	42 
	DGCL	1 	 	Party	37 
	Disclosure Statement	33 	 	Paying Agent	6 
	DOJ	37 	 	Pension Plan	20 
	Earn Out Amount	4 	 	Permits	12 
	Effective Time	2 	 	Pre-Closing Statement	34 
	ERISA	20 	 	Pre-Closing Tax Return	31 
	ERISA Affiliate	22 	 	Preferred Stock	9 
	Escrow Agent	2 	 	Required Disclosure	37 
	Escrow Agreement	2 	 	Required Portion	45 
	Escrow Amount	2 	 	Securities Act	31 
	Escrow Fund	42 	 	Seller Indemnified Party	43 
	Exchange Act	31 	 	Seller Indemnity Threshold	43 
	Exchange Fund	7 	 	Sellers' Representative	57 
	Exon-Florio Act	11 	 	Series A Preferred	9 
	Expenses Escrow Agreement	2 	 	Statement	5 
	Expenses Escrow Amount	2 	 	Stockholder Approval	9 
	Expiration Date	45 	 	Suppliers	26 
	Financial Statements	12 	 	Surviving Corporation	1 
	Foreign Antitrust Laws	11 	 	Voting Company Debt	10 
	FTC	37 	 	Warrant Consideration	4 
	GAAP	12 	 	Written Consent	46 
	High Value	5 	 	 

iv

	 	
AGREEMENT
AND PLAN OF MERGER dated as of May 16, 2006 (this “Agreement”), among
AUDIOCODES LTD., a company organized under the laws of the State of Israel “AudioCodes”)
, AUDIOCODES, INC., a Delaware Corporation (“Parent”), GREEN ACQUISITION
CORP., a Delaware corporation (“Merger Sub”), NUERA COMMUNICATIONS,
INC., a Delaware corporation (the “Company”) and ROBERT WADSWORTH, as
Sellers’ Representative. 	 
	 	 
	 

INTRODUCTION 

        The
Boards of Directors of each of the Company, AudioCodes, Parent and Merger Sub have
approved the merger of Merger Sub with and into the Company (the “Merger”)
on the terms and subject to the conditions set forth in this Agreement, and such Boards
of Directors have approved in all respects this Agreement and the transactions
contemplated hereby and the other Transaction Agreements. As a result of the Merger, each
issued and outstanding share of capital stock of the Company will be converted into the
right to receive the consideration provided in this Agreement.  

        In
consideration of the foregoing and the respective representations, warranties, covenants
and agreements set forth herein, the Parties agree as follows:  

ARTICLE 1

THE MERGER 

        Section
1.1. The Merger.  Upon the terms and subject to the conditions set forth
in this Agreement, and in accordance with the Delaware General Corporation Law (the “DGCL”),
at the Effective Time, Merger Sub shall be merged with and into the Company. At the
Effective Time, the separate corporate existence of Merger Sub shall cease and the
Company shall continue as the surviving corporation (the “Surviving Corporation”).  

        Section
1.2. Closing.  The closing of the Merger (the “Closing”)
shall be held at the offices of DLA Piper Rudnick Gray Cary US LLP, 4365 Executive Drive,
Suite 1100, San Diego, California 92121, at 10:00 a.m. on the date as soon as
practicable, and in any event not later than two (2) Business Days, following
satisfaction of all conditions and taking of all other actions (other than those that by
their terms are to be satisfied or taken at the Closing) set forth in Article 7 (or, to
the extent permitted by Law, waived by the Parties entitled to the benefits thereof), or
on such other date, and at such other time or place, as Parent and the Company may
mutually agree in writing. The date on which the Closing occurs is referred to in this
Agreement as the “Closing Date.” 

        Section
1.3. Actions at the Closing. At the Closing (a) the Parties shall cause a
certificate of merger in customary form acceptable to the Parent and the Company and
executed in accordance with the relevant provisions of the DGCL (the “Certificate
of Merger”) and other required documents to be filed in the office of the
Secretary of State of the State of Delaware (the “Delaware Secretary of State”),
and Parent, Merger Sub and the Company shall make all other filings or recordings
required under the DGCL and applicable Law to give effect to the Merger and the other
transactions contemplated hereby; (b) Parent and AudioCodes shall deposit or cause to be
deposited $7,500,000 (the “Escrow Amount”) with U.S. Bank Trust National
Association, in its capacity as escrow agent (the “Escrow Agent”) under
the Escrow Agreement to be entered into on or prior to the Closing Date by Parent, the
Sellers’Representative and the Escrow Agent in substantially the form attached
hereto as Exhibit A (the “Escrow Agreement”), to be administered
in accordance with the Escrow Agreement; and (c) Parent and AudioCodes shall deposit or
cause to be deposited $1,000,000 (the “Expenses Escrow Amount”) with the
Escrow Agent under the Expenses Escrow Agreement to be entered into on or prior to the
Closing Date by the Parent, Sellers’ Representative and the Escrow Agent in
substantially the form attached hereto as Exhibit B (the “Expenses Escrow
Agreement”), to be administered in accordance with the Expenses Escrow
Agreement. The Expenses Escrow Fund shall be available solely to compensate the Sellers’Representative
and the Sellers for all fees and expenses reasonably incurred by: (i) the Sellers’ Representative
in performing its duties under this Agreement; and (ii) the Sellers’ Representative
and the Sellers in defending against any claims for indemnification or other claims for
damages by AudioCodes, Parent or any other Parent Indemnified Party pursuant to this
Agreement or otherwise.  

        Section
1.4. Effective Time. The Merger shall become effective at such time (the “Effective
Time”) as the Certificate of Merger is duly filed with the Delaware Secretary of
State or at such later time as Parent and the Company shall agree and specify in the
Certificate of Merger.  

        Section
1.5. Effects of the Merger.  The Merger shall have the effects set forth
in Section 259 of the DGCL.  

        Section
1.6. Certificate of Incorporation and By-laws.  Subject to the
provisions of Section 5.12, the Certificate of Incorporation of the Surviving Corporation
shall be amended and restated, as of the Effective Time, so as to read the same as the
Certificate of Incorporation of Merger Sub as in effect immediately prior to the
Effective Time, except that the name of the corporation set forth therein shall be
changed to the name of the Company and any references therein to the incorporator and the
initial directors shall be deleted, and, as so amended, such Amended and Restated
Certificate of Incorporation shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter changed or amended as provided therein or by applicable Law.
Subject to the provisions of Section 5.12, the By-laws of Merger Sub as in effect
immediately prior to the Effective Time, shall be the By-laws of the Surviving
Corporation until amended, except that the name of the corporation set forth therein
shall be changed to the name of the Company.  

        Section
1.7. Directors and Officers of Surviving Corporation.  The directors of
Merger Sub immediately prior to the Effective Time shall be the directors of the
Surviving Corporation, until the earlier of their resignation or removal or until their
respective successors are duly elected or appointed and qualified, as the case may be.
The officers of Merger Sub immediately prior to the Effective Time shall be the officers
of the Surviving Corporation, until the earlier of their resignation or removal or until
their respective successors are duly elected or appointed and qualified, as the case may
be.  

2

ARTICLE 2 

EFFECT ON THE
CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; 

EXCHANGE OF
CERTIFICATES 

        Section
2.1. Conversion of Capital Stock. At the Effective Time, by virtue of the Merger
and without any action on the part of the holder of any shares of Capital Stock of the
Company or any shares of Capital Stock of Merger Sub:  

		    (a)       Capital
Stock of Merger Sub. Each issued and outstanding share of Capital           Stock of
Merger Sub shall be converted into and shall become one fully paid and
          nonassessable share of common stock, par value $.001 per share, of the
Surviving           Corporation.  

		    (b)       Cancellation
of Treasury Stock. Each share, if any, of Capital Stock of           the Company that
is held by the Company as treasury stock or owned by the           Company or any of its
Subsidiaries shall no longer be outstanding and shall be           automatically
cancelled and retired and shall cease to exist and no           consideration shall be
delivered or deliverable in exchange therefor.  

		    (c)        Conversion
of Common Stock. Each share of Company Common Stock issued and           outstanding
immediately prior to the Effective Time, other than the Appraisal           Shares and
shares to be cancelled and retired in accordance with Section 2.1(b),           shall be
converted into the right to receive, without interest and subject to           Section
2.5(a), the Closing Common Merger Consideration, plus, when           payable, any
amounts required to be paid in respect of such Company Common Stock           pursuant to
Section 2.3 of this Agreement, the Escrow Agreement and the Expenses           Escrow
Agreement.  

		    (d)        Conversion
of Preferred Stock. Each share of Preferred Stock issued and           outstanding
immediately prior to the Effective Time, other than the Appraisal           Shares and
shares to be cancelled and retired in accordance with Section 2.1(b),           shall be
converted into the right to receive, without interest and subject to           Section
2.5(a), the Closing Preferred Merger Consideration, plus, when           payable,
any amounts required to be paid in respect of such Preferred Stock           pursuant to
Section 2.3 of this Agreement, the Escrow Agreement and the Expenses           Escrow
Agreement.  

		    (e)        Effect
on Capital Stock. At the Effective Time, all shares of Capital           Stock of the
Company shall no longer be outstanding and shall automatically be           cancelled and
retired and shall cease to exist, and each holder of a certificate           that
immediately prior to the Effective Time represented any such shares (a           “Certificate”)
shall cease to have any rights with respect           thereto, except the right to
receive the Closing Merger Consideration upon           surrender of such Certificate in
accordance with Section 2.5, without           interest. In no event shall the
aggregate Merger Consideration, the aggregate           Option Consideration and the
aggregate Warrant Consideration exceed $85,000,000           plus any increase under
Section 2.3 hereof up to the Earn Out Amount.  

        Section
2.2. Options and Warrants. 

3

    (a)        Each
Option (whether vested or not) outstanding immediately prior to the           Effective
Time with an exercise price per share that is less than the Common           Merger
Consideration shall be terminated at the Effective Time in exchange for           the
right to receive, without interest, for each share subject to such Option           (i) following
the Effective Time an amount equal to the product of (A) the           excess of the
Common Merger Consideration over the exercise price per share of           such Option multiplied
by (B) the Closing Percentage plus          (ii) for each share subject
to such Option when payable, any amounts           required to be paid in respect of a
share of Company Common Stock pursuant to           the Escrow Agreement and the Expenses
Escrow Agreement and any Earn Out Per           Share Amount (the “Option
Consideration”). Each Warrant           outstanding immediately prior to the
Effective Time with an exercise price per           share that is less than the Preferred
Merger Consideration shall be terminated           in exchange for the right to receive,
without interest, for each share subject           to such Warrant (i) following the
Effective Time, an amount equal to the product           of (A) the excess of the
Preferred Merger Consideration over the exercise price           per share of such
Warrant multiplied by (B) the Closing Percentage plus (ii) when payable,
any amounts required to be paid in respect of a           share of Preferred Stock
pursuant to the Escrow Agreement and the Expenses           Escrow Agreement and any Earn
Out Per Share Amount (the “Warrant           Consideration”). The right
of any holder of an Option to receive the           Option Consideration shall be subject
to and reduced by the amount of any tax or           other withholding that is required
under applicable Law. After the Closing,           Parent will cause the Option
Consideration and the Warrant Consideration that is           payable following the
Effective Time to be paid as soon as practicable; provided, however, that
Parent or the Surviving Corporation, as           applicable, shall be entitled to deduct
and withhold from the Option           Consideration such amounts as may be required to
be deducted and withheld with           respect to the making of such payment under the
Internal Revenue Code           of 1986 (the “Code”) or any
provision of any other           applicable Law.  

    (b)        At
the Effective Time, each Option outstanding as of the Effective Time with an
          exercise price per share that is equal to or greater than the Common Merger
          Consideration and each Warrant outstanding as of the Effective Time with an
          exercise price per share that is equal to or greater than the Common Merger
          Consideration or the Preferred Merger Consideration, as applicable, shall be
          terminated, without any consideration therefor. 

    (c)        The
Company agrees that the Board of Directors of the Company (or, if           appropriate,
any committee administering any stock option plan or other stock or
          equity-related plan of the Company (the “Company Stock Plans”)
          shall adopt such resolutions or take such other actions (including obtaining
any           required consents but not including the payment of any cash or non-cash
          consideration) as may be required to effect the transactions described in this
          Section 2.2 as of the Effective Time. The Company shall terminate all Company
          Stock Plans at the Effective Time.  

        Section
2.3. Earn-Out. 

    (a)       Subject
to this Section 2.3, the Merger Consideration, Option Consideration and           Warrant
Consideration shall be subject to an increase up to a maximum aggregate           amount
of $5,000,000 if the Surviving Corporation achieves any of the levels of           Net
Product Sales specified on Schedule 2.3 to this Agreement, during the Earn           Out
Period, from sales of the specified products and the provision of services           set
forth on Schedule 2.3 to the specified customers set forth on Schedule 2.3           and
such other customers as AudioCodes may determine in its sole and absolute
          discretion. The specific “Earn Out Amount” shall be determined
          in accordance with the formula set forth on Schedule 2.3 and shall be payable
in           accordance with this Section 2.3.  

4

    (b)       Within
seventy-five (75) days following each of December 31, 2006, March 31,           2007 and
June 30, 2007, the Surviving Corporation shall (i) prepare a statement           (the
“Statement”) setting forth the Net Product Sales from the
          beginning of the Earn Out Period through the applicable date, and (ii) deliver
          or cause to be delivered the Statement, together with a summary of the basis
for           the determination set forth therein, to the Sellers’ Representative.  

    (c)       If
the Sellers’ Representative objects to the calculations set forth in the
          Statement for any period for which a Statement is required to be delivered
under           Section 2.3(b), then within thirty (30) days after the delivery to the
          Sellers’ Representative of such Statement, the Sellers’ Representative
          may deliver to the Company and Parent a written notice (the “Objection
          Notice”), describing in reasonable detail the Sellers’          Representative’s
objections to the Statement and setting forth the           calculation determined by the
Sellers’ Representative to be correct. The           failure of the Sellers’ Representative
to deliver an Objection Notice in           connection with a particular Statement (other
than the final Statement delivered           after June 30, 2007) will not constitute an
acknowledgement of, or agreement to,           the calculations contained in such
Statement should the Sellers’          Representative deliver an Objection Notice in
connection with a subsequent           Statement. If the Sellers’ Representative
gives the Objection Notice to the           Company and Parent within such 30-day period,
the Company and the Sellers’          Representative will use commercially
reasonable efforts to resolve the dispute           during the 45-day period commencing
on the date Parent receives the Objection           Notice from Sellers’ Representative.
If the Sellers’ Representative           and Parent do not obtain a final resolution
within such 45-day period, then the           items in dispute shall be submitted
immediately to a nationally-recognized,           independent accounting firm reasonably
acceptable to the Sellers’          Representative and Parent (the “Accounting
Firm”); provided           that the Parties agree that the Accounting Firm shall
not be Ernst & Young           LLP. The Accounting Firm shall be required to render a
determination of the           applicable dispute within forty-five (45) days after
referral of the matter to           the Accounting Firm, which determination must be in
writing and must set forth,           in reasonable detail, the basis therefor. The
determination of the Accounting           Firm shall be conclusive and binding upon the
Sellers’ Representative, the           Company and the other parties hereto.  

    (d)        In
the event the Sellers’ Representative and Parent submit any unresolved
          objections to an Accounting Firm for resolution as provided in Section 2.3(c),
          the responsibility for the fees and expenses of the Accounting Firm shall be as
          follows:  

		    (i)       if
such Accounting Firm resolves all of the remaining objections in favor of           Parent’s
position (the calculation so determined is referred to herein as           the “Low
Value”), then all of the fees and expenses of the           Accounting Firm
shall be paid by the Sellers’ Representative;  

		    (ii)       if
the Accounting Firm resolves all of the remaining objections in favor of the
          Sellers’ Representative’s position (the calculation so determined is
          referred to herein as the “High Value”), then all of the fees
          and expenses of the Accounting Firm shall be paid by the Company; and  

		    (iii)       if
such Accounting Firm neither resolves all of the remaining objections in           favor
of Parent’s position nor resolves all of the remaining objections in           favor
of the Sellers’ Representative’s position (the calculation so
          determined is referred to herein as the “Actual Value”), then
          that fraction of the fees and expenses of the Accounting Firm equal to (x) the
          difference between the High Value and the Actual Value over (y) the difference
          between the High Value and the Low Value shall be paid by the Sellers’          Representative,
and the Company will be responsible for the remainder of the           fees and expenses
of the Accounting Firm.  

5

    (e)       Within
ten (10) Business Days of the later of (i) the delivery of any Statement           that
provides that Net Product Sales equals or exceeds any of the target levels           of
Net Product Sales set forth on Schedule 2.3, or (ii) a resolution of the
          calculation set forth in a Statement for which an Objection Notice has been
          given in accordance with Section 2.3(c), which resolution provides that Net
          Product Sales equals or exceeds any of the target levels set forth in Schedule
          2.3, Parent and AudioCodes shall deliver, or shall cause to be delivered, to
the           Paying Agent the Earn Out Amount determined to be payable (less any portion
of           the aggregate Earn Out Amount previously earned and delivered to the Paying
          Agent), for distribution to the holders of the Earn Out Shares. The Paying
Agent           shall deliver to each such holder the Earn Out Per Share Amount for each
Earn           Out Share held by such holder. In no event shall the aggregate Earn Out
Amount           payable by Parent and/or AudioCodes exceed $5,000,000. The Earn Out Per
Share           Amount for any holder of an Earn Out Share that holds such share by
virtue of           the cancellation of an Option pursuant to Section 2.2(a) shall be
subject to and           reduced by the amount of any tax or other withholding that is
required under           applicable Law.  

        Section
2.4. Appraisal Rights. Notwithstanding anything in this Agreement to the contrary,
shares (the “Appraisal Shares”) of the Company’s Capital Stock
issued and outstanding immediately prior to the Effective Time that are held by any
holder who is entitled to demand and properly demands appraisal of such shares pursuant
to, and who complies in all respects with, Section 262 of the DGCL (the “Appraisal
Statute”) shall not be converted into the right to receive the applicable Merger
Consideration as provided in Section 2.1, but instead such holder shall be entitled to
payment of the fair value of such Appraisal Shares in accordance with the Appraisal
Statute. At the Effective Time, the Appraisal Shares shall no longer be outstanding and
shall automatically be cancelled and shall cease to exist, and each holder of Appraisal
Shares shall cease to have any rights with respect thereto, except the right to receive
the fair value of such shares in accordance with the provisions of the Appraisal Statute.
Notwithstanding the foregoing, if any such holder shall fail to perfect or otherwise
shall waive, withdraw or lose the right to appraisal under the Appraisal Statute, or a
court of competent jurisdiction shall determine that such holder is not entitled to the
relief provided by the Appraisal Statute, then the right of such holder to be paid the
fair value of such holder’s Appraisal Shares under the Appraisal Statute shall cease
and such Appraisal Shares shall be deemed to have been converted at the Effective Time
into, and shall have become solely, the right to receive the Merger Consideration as
provided in Section 2.1. The Company shall serve prompt notice to Parent of any demands
for appraisal of any shares of the Company’s Capital Stock, withdrawals of such
demands and any other related instruments served pursuant to the DGCL and received by the
Company, and Parent shall have the right to participate in and direct all negotiations
and proceedings with respect to such demands. Prior to the Effective Time, the Company
shall not, without the prior written consent of Parent, make any payment with respect to,
or settle or offer to settle, any such demands, nor shall the Company agree to or commit
to making any such payment or settlement or admit to any liability with respect to such
matters.  

        Section
2.5. Exchange Procedures. 

6

    (a)        Promptly
following the Effective Time, Parent and AudioCodes shall, provide or           cause to
be provided to U.S. Bank National Trust Association (the           “Paying Agent”),
cash necessary to pay for the shares of           Company Capital Stock converted into
the right to receive the Closing Common           Merger Consideration or the Closing
Preferred Merger Consideration pursuant to           Section 2.1 (such cash, being
hereinafter referred to as the           “Exchange Fund”). Prior to or
as soon as practicable after the           Closing, the Company shall provide to each
holder of a Certificate (i) a letter           of transmittal in substantially the form
attached as Exhibit C (a           “Letter of Transmittal”) and
(ii) instructions for effecting           the surrender of such Certificate in exchange
for the Closing Common Merger           Consideration or the Closing Preferred Merger
Consideration with respect to each           of the shares of Capital Stock of the
Company represented thereby. Following           surrender of a Certificate to the Paying
Agent, together with such Letter of           Transmittal duly executed and completed in
accordance with the instructions           thereto, a properly executed substitute Form
W-9 or Form W-8BEN, if applicable,           from such holder in form and substance
acceptable to Parent, and such other           documents as may reasonably be required by
Parent or the Paying Agent, the           holder of such Certificate shall be entitled to
receive in exchange therefor an           amount equal to the Closing Common Merger
Consideration or the Closing Preferred           Merger Consideration (rounded up to the
nearest $0.01) for the shares of Capital           Stock of the Company represented by
such Certificate pursuant to Section 2.1,           without interest and the Certificate
so surrendered shall forthwith be           cancelled. Until so surrendered, such
Certificates shall upon and following the           Effective Time represent solely the
right to receive the Closing Common Merger           Consideration or Closing Preferred
Merger Consideration with respect to the           shares of Capital Stock of the Company
represented thereby, without interest.  

    (b)        If
any Certificate shall have been lost, stolen, mutilated, defaced or           destroyed,
upon the making of an affidavit of that fact by the Person claiming           such
Certificate to be lost, stolen, mutilated, defaced or destroyed, the holder           of
such Certificate shall be entitled to receive, subject to           Section 2.5(a),
in exchange for such lost, stolen, mutilated, defaced or           destroyed Certificate,
the amount of the Closing Merger Consideration with           respect to the shares of
Capital Stock of the Company pursuant to Section 2.1; provided, however,
that Parent may, in its discretion and as a           condition precedent to the receipt
of such amount by such holder, require the           owner of such lost, stolen,
mutilated, defaced or destroyed Certificate to           deliver a bond in such sum as it
may reasonably require as indemnity against any           claim that may be made against
Parent or the Surviving Corporation with respect           to the Certificate alleged to
have been lost, stolen, mutilated, defaced or           destroyed.  

         (c)       
          Any portion of the Exchange Fund that remains undistributed to the holders of
          Capital Stock of the Company for six months after the Effective Time shall be
          delivered to the Surviving Corporation, upon demand, and any holder of Capital
          Stock of the Company who has not theretofore complied with this Article 2 shall
          thereafter look only to the Surviving Corporation for payment of its claim for
          Merger Consideration. 

         (d)       
          None of Parent, Merger Sub, the Company or the Paying Agent shall be liable to
          any Person in respect of any cash from the Exchange Fund properly delivered to a
          public official pursuant to any applicable abandoned property, escheat or
          similar Law. If any Certificate has not been surrendered prior to five years
          after the Effective Time (or immediately prior to such earlier date on which
          Merger Consideration in respect of such Certificate would otherwise escheat to
          or become the property of any Governmental Entity), any such cash in respect of
          such Certificate shall, to the extent permitted by applicable Law, become the
          property of the Surviving Corporation, free and clear of all claims or interest
          of any Person previously entitled thereto. The Paying Agent shall invest any
          cash included in the Exchange Fund, as directed by Parent, and agreed to by the
          Sellers’ Representative. Any interest and other income resulting from such
          investments shall be paid to Parent. 

7

         (e)       
          Parent or the Surviving Corporation, as applicable, shall be entitled to deduct
          and withhold from the consideration otherwise payable to any holder of Capital
          Stock of the Company pursuant to this Agreement such amounts as may be required
          to be deducted and withheld with respect to the making of such payment under the
          Code or under any provision of tax Law. 

        Section
2.6. No Further Ownership Rights. The Closing Merger Consideration paid in
accordance with the terms of this Article 2 upon conversion of any shares of Capital
Stock of the Company shall be deemed to have been paid in full satisfaction of all rights
pertaining to such shares of Capital Stock, subject, however, to the
obligations to pay any further Merger Consideration in accordance with the Escrow
Agreement, the Expenses Escrow Agreement and Section 2.3 of this Agreement. After the
Effective Time, there shall be no further registration of transfers on the stock transfer
books of the Surviving Corporation of shares of Capital Stock of the Company that were
outstanding immediately prior to the Effective Time. If, after the Effective Time, any
certificates formerly representing shares of Capital Stock of the Company are presented
to the Surviving Corporation or the Paying Agent for any reason, they shall be canceled
and exchanged as provided in this Article 2.  

ARTICLE 3 

REPRESENTATIONS AND
WARRANTIES OF THE COMPANY 

        The
Company makes the representations and warranties set forth in this Article 3 to
AudioCodes, Parent and Merger Sub as of the date of this Agreement and as of the Closing,
subject to the exceptions set forth in the attached Disclosure Schedule. 

        Section
3.1. Organization and Standing.  Each of the Company and its
Subsidiaries (i) is duly organized, validly existing and in good standing under the laws
of its jurisdiction or organization, (ii) has all requisite corporate power and authority
to carry on its business as now being conducted and (iii) is duly qualified or licensed
to do business and is in good standing in each jurisdiction in which the nature of its
business or the ownership, leasing or operation of its properties makes such
qualification or licensing necessary, which jurisdictions are listed in Section 3.1 of
the Disclosure Schedule, except where failure to be so qualified and in good standing
would not have a Material Adverse Effect. Each of the Company and its Subsidiaries has
made available to Parent complete and correct copies of its Constitutive Documents, as
amended. The Company is not a foreign company subject to Section 2115 of the California
Corporations Code. No more than one-half of the Company’s outstanding voting
securities were held of record by persons having addresses in the State of California,
based on the books of the Company on the record date for the latest meeting of
stockholders held during its fiscal year 2006 or, if no meeting was held during that
year, on March 25, 2006.  

        Section
3.2. Subsidiaries. The Company does not have any Subsidiaries and does not own or
control, directly or indirectly, any membership interest, partnership interest, joint
venture interest, other equity interest or any other Capital Stock in any Person.  

8

        Section
3.3. Power and Authority; Binding Agreement. The Company has all requisite
corporate power and authority to execute and deliver this Agreement, to consummate the
Merger and the other transactions contemplated hereby and to perform its obligations
hereunder. The execution and delivery by the Company of this Agreement and the
consummation by the Company of the Merger and the other transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of the Company,
subject, in the case of the Merger, to the receipt of the Stockholder Approval. This
Agreement has been duly executed and delivered by the Company and, assuming due execution
and delivery by the other parties thereto, constitutes a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with its terms
except as such enforceability may be limited by bankruptcy, insolvency or other similar
laws affecting creditors’ rights generally.  

        Section
3.4. Authorization. 

    (a)        The
Board of Directors of the Company unanimously adopted resolutions (i)           approving
and declaring advisable the Merger, this Agreement and the other           Transaction
Agreements and the other transactions contemplated hereby and           thereby (ii)
determining that the Merger Consideration and the other terms of           this Agreement
are fair to and in the best interest of the Company and the           stockholders of the
Company, (iii) authorizing the Company to enter into this           Agreement and to
consummate the Merger and the other transactions contemplated           hereby, on the
terms and subject to the conditions set forth in this Agreement,           (iv) directing
that the Merger and this Agreement be submitted to the           stockholders of the
Company for approval and adoption of the Merger and this           Agreement and (v)
recommending that the Company’s stockholders adopt this           Agreement.  

    (b)        The
only votes of holders of any class or series of Capital Stock of the           Company,
which may be taken by written consent, necessary to approve, adopt and           effect
the Merger, this Agreement, the other Transaction Agreements and the           other
transactions contemplated hereby are the affirmative votes to adopt this
          Agreement of holders of (i) a majority of the outstanding shares of Capital
          Stock of the Company, voting together as a single class and (ii) a majority of
          the outstanding shares of Series A Preferred, voting as a separate class
          (collectively, the “Stockholder Approval”). None of the
Sellers           has purported to vote under Section 251 of the DGCL (or execute or
deliver an           effective written consent under Section 228 of the DGCL) for
the adoption           of this Agreement prior to both the approval of this Agreement and
the           declaration of its advisability by the Company’s Board of Directors
and the           execution and delivery of this Agreement.  

        Section
3.5. Capitalization.  

9

    (a)        The
authorized capital stock of the Company consists of 80,000,000 shares of           common
stock, par value $0.001 per share (the “Common Stock”)           and
35,650,000 shares of preferred stock, par value $0.001 per share (the           “Preferred
Stock”), of which 35,650,000 shares are designated           as Series A
Preferred Stock (the “Series A Preferred”). At           the close of
business on the date hereof (i) 28,253,368 shares of Common           Stock and
34,709,907 shares of Series A Preferred were issued and outstanding,           (ii)
403,703 shares of Common Stock were held by the Company in its treasury,           (iii)
10,567,407 shares of Common Stock were subject to outstanding Options and           an
additional 13,984,725 shares of Common Stock were reserved for issuance
          pursuant to the Company Stock Plans (iv) 123,624 shares of Series A Preferred
          were subject to outstanding Warrants and (v) 35,650,000 shares of Common Stock
          were reserved for issuance in connection with the conversion of the
          Series A Preferred. Except as set forth above, at the close of business on
          the date hereof, no shares of Capital Stock of the Company were issued,
reserved           for issuance or outstanding. All outstanding shares of Capital Stock
of the           Company and each of its Subsidiaries are, and all such shares that may
be issued           prior to the Effective Time will be when issued, duly authorized,
validly           issued, fully paid and nonassessable and not subject to or issued in
violation           of any purchase option, call option, right of first refusal,
preemptive right,           subscription right or any similar right under any provision
of the DGCL or other           Law, the Company’s or any of such Subsidiaries’ Constitutive
Documents           or any Contract to which the Company or any of such Subsidiaries are
a party or           otherwise bound. There are not any bonds, debentures, notes or other
          Indebtedness of the Company having the right to vote (or convertible into, or
          exchangeable for, securities having the right to vote) on any matters on which
          holders of Capital Stock of the Company may vote (“Voting Company
          Debt”). Except as set forth above, as of the date of this Agreement,
          there are not any options, warrants, rights, convertible or exchangeable
          securities, “phantom” stock rights, stock appreciation rights,
          stock-based performance units, commitments, Contracts, arrangements or
          undertakings of any kind to which the Company or any of its Subsidiaries is a
          party or by which it is bound (i) obligating the Company or any of such
          Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
          sold, additional shares of Capital Stock or other equity interests in, or any
          security convertible or exercisable for or exchangeable into any Capital Stock
          of or other equity interest in, the Company or any of its Subsidiaries or any
          Voting Company Debt, (ii) obligating the Company or any of its Subsidiaries to
          issue, grant, extend or enter into any such option, warrant, call, right,
          security, commitment, Contract, arrangement or undertaking or (iii) that give
          any person the right to receive any economic benefit or right similar to or
          derived from the economic benefits and rights occurring to holders of Capital
          Stock of the Company or any of its Subsidiaries. There are not any outstanding
          contractual obligations of the Company or any of its Subsidiaries to
repurchase,           redeem or otherwise acquire any shares of Capital Stock of the
Company or any of           its Subsidiaries. Since April 10, 2003, the Company has not
declared or paid any           dividends or distributions on any of the Capital Stock of
the Company.  

    (b)        Section
3.5(b) of the Disclosure Schedule sets forth a complete and accurate           list of
the holders of Capital Stock of the Company as of the date hereof,           showing the
number of shares of such Capital Stock, and the class or series of           such shares,
held by each such stockholder and, with respect to shares other           than Company
Common Stock, the number of shares of Company Common Stock (if any)           into which
such shares are convertible. There has been no adjustment to the           conversion
price for the Series A Preferred. All of the issued and outstanding           shares of
Capital Stock of the Company and its Subsidiaries have been offered,           issued and
sold by the Company in compliance with all applicable federal and           state
securities Laws.  

    (c)        Section
3.5(c) of the Disclosure Schedule sets forth a complete and accurate           list of
all Company Stock Plans. Section 3.5(c) of the Disclosure Schedule sets           forth a
complete and accurate list of (i) all holders of outstanding Options as           of the
date hereof, indicating, with respect to each Option, the Company Stock           Plan
under which it was granted, the number of shares of Company Common Stock
          subject to such Option, the exercise price and the date of grant; and (ii) all
          holders of outstanding Warrants, indicating, with respect to each Warrant, the
          Contract or other document under which it was granted, the number of shares of
          Capital Stock of the Company, and the class or series of such shares, subject
to           such Warrant, the exercise price, the date of issuance and the expiration
date           thereof. The Company has made available to Parent complete and accurate
copies           of all Company Stock Plans and all Contracts evidencing Options and
Warrants. No           Option is exercisable for any class or series of Capital Stock of
the Company           other than Company Common Stock.  

10

    (d)        Except
as set forth in Section 3.5(d) of the Disclosure Schedule, there is no           Contract
between the Company or any of its Subsidiaries and any holder of its
          securities, or, to the Company’s Knowledge, among any holders of its
          securities, relating to the sale or transfer (including agreements relating to
          rights of first refusal, co-sale rights or “drag-along” rights),
          registration under the Securities Act of 1933 or voting, of any Capital Stock
of           the Company or any of its Subsidiaries.  

        Section
3.6. Noncontravention.  

    (a)        The
execution and delivery by the Company of this Agreement, the other           Transaction
Agreements, the consummation of the Merger and the other           transactions
contemplated hereby and thereby and the compliance by the Company           with the
provisions hereof and thereof do not and will not conflict with, or           result in
any violation or default (with or without notice or lapse of time or           both)
under, or give rise to a right of, or result in, termination, cancellation           or
acceleration of any obligation or to a loss of a material benefit under, or
          result in the creation of any lien, pledge, claim, charge, mortgage,
encumbrance           or other security interest of any kind, whether arising by Contract
or by           operation of Law (a “Lien”), in or upon any of the
properties           or assets of the Company under, or give rise to any increased,
additional,           accelerated or guaranteed rights or entitlements under, any
provision of (i) the           Constitutive Documents of the Company, (ii) any Material
Contract or (iii)           subject to the governmental filings and other matters
referred to in Section           3.6(b)(i) and (ii), any constitution, act, statute, law
(including common law),           ordinance, treaty, rule or regulation of any
Governmental Entity (a           “Law”) or any judgment, order or decree
(a           “Judgment”), in each case applicable to the Company or its
          properties or assets, except in the case of clauses (ii) and (iii) where such
          conflict, violation, default or other result is not likely to have a Material
          Adverse Effect on the Company.  

    (b)        No
consent, approval, license, permit, order or authorization of, registration,
          declaration or filing with, or notice to, any Governmental Entity is required
by           or with respect to the Company in connection with the execution and delivery
by           the Company of this Agreement, the other Transaction Agreements, the
          consummation by the Company of the Merger and the other transactions
          contemplated hereby or thereby or the compliance by the Company with the
          provisions hereof and thereof, except for (i) filings required under, and
          compliance with other applicable requirements of, the Hart Scott Rodino
          Antitrust Improvements Act of 1976 (the “HSR Act”), (ii)
          filings required under, and compliance with other applicable requirements of,
          non-U.S. Laws intended to prohibit, restrict or regulate actions or
transactions           having the purpose or effect of monopolization, restraint of
trade, harm to           competition or effectuating foreign investment (collectively,
“Foreign           Antitrust Laws”), (iii) filings pursuant to, and
compliance with other           applicable requirements of Section 5021 of the Omnibus
Trade and Competitiveness           Act of 1988 (the “Exon-Florio Act”),
(iv) the filing of the           Certificate of Merger with the Delaware Secretary of
State and appropriate           documents with the relevant authorities of other states
in which the Company is           qualified to do business and (v) such other consents,
approvals, orders,           authorizations, registrations, declarations, filings and
notices, the failure of           which to be obtained or made individually or in the
aggregate would not cause a           Material Adverse Effect.  

11

        Section
3.7. Compliance with Laws. Each of the Company and its Subsidiaries is, and for
the last five years, has been, in material compliance with all applicable Judgments and
all material applicable Laws. In the last five years, none of the Company or any of its
Subsidiaries has received a notice or other communication alleging a violation by the
Company or such Subsidiary of any material applicable Law or Judgment applicable to its
businesses or operations.  

        Section
3.8. Permits. Each of the Company and its Subsidiaries validly holds and has in
full force and effect all material federal, state or local, domestic or foreign,
governmental consents, approvals, orders, authorizations, certificates, filings, notices,
permits, concessions, registrations, franchises, licenses or rights (“Permits”)
necessary for it to own, lease or operate its properties and assets and to carry on its
businesses as now conducted, and there has occurred no material violation of, or default
(with or without notice or lapse of time or both) under, or event giving to the issuer
thereof the right to terminate, amend or cancel any such Permit. Each of the Company and
its Subsidiaries has complied in all material respects with the terms and conditions of
all Permits issued to or held by the Company or such Subsidiary, and such Permits will
not be subject to suspension, modification, revocation or nonrenewal as a result of the
consummation of the Merger, the execution and delivery of this Agreement or the other
transactions contemplated hereby. No proceeding is pending or, to the Knowledge of the
Company, threatened seeking the revocation or limitation of any Permit. No Permits are
held in the name of any current or former director, officer, employee, independent
contractor or consultant of the Company or its Subsidiaries (“Company Personnel”)
or agent or otherwise on behalf of the Company or its Subsidiaries.  

        Section
3.9. Financial Statements.  

    (a)        The
Company has delivered (A) the unaudited consolidated balance sheet (the
          “Most Recent Balance Sheet”) of the Company and its
          Subsidiaries as of March 25, 2006 (the “Most Recent Balance Sheet
          Date”), and the unaudited consolidated statements of income and cash
          flows of the Company and its Subsidiaries for the year ended March 25, 2006,
and           (B) the audited consolidated balance sheets of the Company and its
          Subsidiaries as of March 26, 2005 and March 27, 2004, and the audited
          consolidated statements of income and cash flows of the Company and it
          Subsidiaries for the years ended March 31, 2005 and March 31, 2004, together
          with the notes to such financial statements (the financial statements described
          in clauses (A) and (B) above, together with the financial statements to be
          delivered pursuant to Section 5.8(a)(i) and 5.9 (after such financial
statements           are delivered), collectively, the “Financial Statements”).
The           Financial Statements (i) are consistent with the books and records of the
          Company, (ii) have been prepared in accordance with United States generally
          accepted accounting principles, consistently applied (“GAAP”),
          except that the Financial Statements listed in clause (A) and any delivered
          pursuant to Section 5.9 do not or will not contain notes and remain subject to
          year end adjustments, and (iii) present fairly the consolidated financial
          condition, results of operations, stockholders’ equity and cash flows of
          the Company as of the respective dates thereof and for the periods referred to
          therein.  

    (b)        All
accounts receivable of the Company and its Subsidiaries reflected on the           Most
Recent Balance Sheet are current and arose from valid transactions in the
          ordinary course of business in substantially the same manner as presently
          conducted and consistent with past practice (the “Ordinary Course of
          Business”) with unrelated third parties. Neither of the Company nor
any           of its Subsidiaries has received any notice or other indication that any of
the           Company’s or such Subsidiary’s accounts receivable will not be
          collectible in full, net of any reserves shown on the Most Recent Balance
Sheet.  

12

    (c)        The
Company maintains a system of internal accounting controls sufficient to
          provide reasonable assurance that: (i) transactions are executed in accordance
          with management’s general or specific authorizations; (ii) transactions
are           recorded as necessary to permit preparation of financial statements in
          accordance with GAAP; (iii) access to material assets is permitted only in
          accordance with management’s general or specific authorization; and (iv)
          the recorded accountability for material assets is compared with the existing
          assets at reasonable intervals and appropriate actions are taken with respect
to           any differences.  

        Section
3.10. Absence of Changes or Events.  Since the Most Recent Balance Sheet
Date, (a) each of the Company and its Subsidiaries has conducted its businesses only in
the Ordinary Course of Business, (b) there has occurred no Material Adverse Effect,
and (c) neither the Company nor any of its Subsidiaries has taken any of the actions
that, if taken after the date of this Agreement, would constitute a breach of any of the
covenants set forth in Section 5.1.  

        Section
3.11. Undisclosed Liabilities.  Neither the Company nor any of its
Subsidiaries has any material liabilities or obligations of any nature (whether known,
absolute, contingent, accrued or otherwise), except for such liabilities and obligations
(a) to the extent shown on the Most Recent Balance Sheet, (b) that were incurred in
the Ordinary Course of Business since the Most Recent Balance Sheet Date or (c) set forth
in Contracts, other than obligations due to any material breaches or non-performance
thereunder.  

        Section
3.12. Assets other than Real Property.  

    (a)        Each
of the Company and its Subsidiaries is the true and lawful owner or lessor           and
has good and valid title to, or a valid leasehold interest in, all assets
          (tangible or intangible) reflected on the Most Recent Balance Sheet or
          thereafter acquired, except those sold or otherwise disposed of in the Ordinary
          Course of Business since the Most Recent Balance Sheet Date and not in
violation           of this Agreement, in each case free and clear of all Liens (other
than           Permitted Liens).  

    (b)        Each
of the Company and its Subsidiaries owns or leases all tangible assets
          sufficient for the conduct of its businesses as presently conducted. The
          tangible assets of the Company and each Subsidiary are free from material
          defects, have been maintained in accordance with the past practice of the
          Company or such Subsidiary and generally accepted industry practice, are in
good           working order and are suitable for the purposes for which they are
presently           used. All material leased personal property of the Company or any of
its           Subsidiaries is in good working order, ordinary wear and tear excepted.  

    (c)        This
Section 3.12 does not relate to real property or interests in real           property,
such items being the subject of Section 3.13, or to Intellectual           Property or
interests in Intellectual Property, such items being the subject of           Section
3.15.  

        Section
3.13. Real Property. Neither the Company nor any of its Subsidiaries owns any real
property or interests in real property. Section 3.13 of the Disclosure Schedule lists all
real property and interests in real property leased by the Company or its Subsidiaries
(each, a “Leased Property”). The Company has made available to Parent
complete and accurate copies of all such leases, and any operating agreements relating
thereto. With respect to each Leased Property, the Company and each of its Subsidiaries
have good and valid title to the leasehold estate relating thereto, free and clear
of all Liens (other than Permitted Liens), leases, assignments and subleases and the
Company and each of its Subsidiaries enjoy peaceful and undisturbed possession
thereunder.  

13

        Section
3.14. Contracts.  

    (a)       Section
3.14(a) of the Disclosure Schedule lists each of the following Contracts           which
the Company or any of its Subsidiaries are a party to or are bound by           (each
such Contract, whether or not set forth in such section of the Disclosure
          Schedule, a “Material Contract”):  

		    (i)       employment
or consulting Contract, or any employee collective bargaining           agreement or
other Contract with any labor union or any Company Personnel;  

		    (ii)       Contract
not to compete or otherwise restricting the Company or any of its           Subsidiaries
in the development, manufacture, marketing, distribution or sale of           any of
their respective products or services or otherwise in their respective
          operations and business;  

		    (iii)       Contract
containing any “non-solicitation” or “no-hire”          provision
that restricts the Company or such Subsidiary;  

		    (iv)       lease,
sublease or similar Contract with any Person under which the Company is a
          lessor or sublessor of, or makes available for use to any Person (other than
the           Company), (A) any Leased Property or (B) any portion of any
premises           otherwise occupied by the Company or its Subsidiaries;  

		    (v)       lease
or similar Contract with any Person under which (A) the Company or           any of
its Subsidiaries is lessee of, or holds or uses, any machinery,           equipment,
vehicle or other tangible personal property owned by any Person or           (B) the
Company or any of its Subsidiaries is a lessor or sublessor of, or           makes
available for use by any Person, any tangible personal property owned or           leased
by the Company or any of its Subsidiaries;  

		    (vi)       Contract
(or substantially related Contracts) for the purchase or sale of           products or
the furnishing or receipt of services (A) requiring or otherwise           involving, or
reasonably be expected to involve, payment by or to the Company or           any of its
Subsidiaries of more than an aggregate of $100,000, (B) in which the           Company
has granted manufacturing rights, “most favored nation”          pricing
provisions or marketing or distribution rights relating to any products           or
territory, (C) in which the Company or any of its Subsidiaries has agreed to
          purchase a minimum quantity of goods or services which would exceed an
aggregate           of $100,000 or has agreed to purchase goods or services exclusively
from a           certain party or (D) with any of the Customers or Suppliers (each as
defined           herein);  

		    (vii)       Contract
for the disposition of any significant portion of the assets or           business of the
Company or any of its Subsidiaries or any agreement for the           acquisition,
directly or indirectly, of a significant portion of the assets or           business of
any other Person;  

		    (viii)       Contract
for any joint venture or partnership;  

14

		    (ix)       Contract
granting a third party, including but not limited to Affiliates of the           Company,
any license or other right to any Intellectual Property Right, or           pursuant to
which the Company or any of its Subsidiaries has been granted by a           third party
any right or license to any Intellectual Property (excluding           non-exclusive
licenses for commercial off-the-shelf Software), or pursuant to           which the
Company obtained any option to purchase or obtain a license to, the
          Intellectual Property of any other Person;  

		    (x)       Contract
(other than trade debt incurred in the Ordinary Course of Business)           under which
the Company or any of its Subsidiaries has borrowed any money from,           or issued
any note, bond, debenture or other evidence of Indebtedness to, any           Person;  

		    (xi)       Contract
under which (A) any Person has directly or indirectly guaranteed
          Indebtedness, liabilities or obligations of the Company or any of its
          Subsidiaries or (B) the Company or any of its Subsidiaries has directly or
          indirectly guaranteed Indebtedness, liabilities or obligations of any Person
(in           each case other than endorsements for the purpose of collection in the
Ordinary           Course of Business);  

		    (xii)       Contract
under which the Company or any of its Subsidiaries has, directly or           indirectly,
made any advance, loan, extension of credit or capital contribution           to, or
other investment in, any Person;  

		    (xiii)       Contract
providing for any mortgage or other Lien;  

		    (xiv)       Contract
providing for indemnification of any Person by the Company or any of           its
Subsidiaries (other than the Constitutive Documents of the Company or any of
          its Subsidiaries);  

		    (xv)       Contract
providing that the Company, any of its Subsidiaries or any Company           Personnel
maintain the confidentiality of any information, or providing for any           Person to
maintain the confidentiality of any information material to the           Company or any
of its Subsidiaries;  

		    (xvi)       Contract
involving a research or development collaboration or similar           arrangement;  

		    (xvii)       Contract
involving a confidentiality, standstill or similar obligation of the           Company or
any of its Subsidiaries to a third party or of a third party to the           Company or
any of its Subsidiaries; and  

		    (xviii)       Contract
or other document involving the grant of a Warrant.  

    (b)       Each
Material Contract is in full force and effect, and is legal, valid, binding           and
enforceable in accordance with its terms except as limited by bankruptcy,
          insolvency or other similar laws affecting creditors’ rights generally.
          True and complete copies of each Material Contract (and a written summary of
the           terms of any oral Material Contracts) have been made available to Parent.
Except           for matters that would not have a Material Adverse Effect, there is no
          violation, breach or default under any Material Contract by the Company or any
          of its Subsidiaries or, to the Knowledge of the Company, by any other party
          thereto, and no event has occurred or condition exists that with the lapse of
          time or the giving of notice or both would constitute a default thereunder by
          the Company or any of its Subsidiaries or, to the Knowledge of the Company, any
          other party thereto. No notice, waiver, consent or approval is required (or the
          lack of which would give rise to a right of termination, cancellation or
          acceleration of, or entitle any party to accelerate, whether after the giving
of           notice or lapse of time or both, any obligation under the Material
Contracts)           under or relating to any Material Contract in connection with the
execution,           delivery and performance of this Agreement or the consummation of
the Merger or           any of the other transactions contemplated hereby where such
termination,           cancellation or acceleration would have a Material Adverse Effect.  

15

        Section
3.15. Intellectual Property.  

    (a)        With
respect to Intellectual Property owned by the Company and its Subsidiaries,           the
Company or one of its Subsidiaries is the sole and exclusive owner of such
          Intellectual Property and has the right to use, sell and license, as the case
          may be, such Intellectual Property as currently used, sold and licensed by the
          Company or any of its Subsidiaries. With respect to Intellectual Property
          licensed to the Company, the Company has the right to use, sell and license
such           Intellectual Property as currently used, sold and licensed by the Company
or any           of its Subsidiaries. Such Intellectual Property owned by or licensed to
the           Company and its Subsidiaries is referred to herein as the “Intellectual
          Property Rights.” 

    (b)        The
products and operation of the business of the Company and each of its
          Subsidiaries and the use of the Intellectual Property Rights or the tangible
          embodiment thereof owned by the Company and each of its Subsidiaries in
          connection therewith, and its present business practices and methods, do not,
to           the Knowledge of the Company, infringe, constitute an unauthorized use of,
or           violate any Intellectual Property right of any third party. To the Knowledge
of           the Company, the Intellectual Property owned by or licensed to the Company
or           any of its Subsidiaries includes all of the Intellectual Property necessary
to           enable the Company or any of its Subsidiaries to conduct its business in the
          manner in which such business has been and is currently being conducted.  

    (c)        Except
with respect to licenses of commercial off-the-shelf Software, and except
          pursuant to the licenses listed in Section 3.15(c) of the Disclosure Schedule,
          neither the Company nor any of its Subsidiaries is obligated under any Contract
          to make any payments by way of royalties, fees or otherwise to any owner or
          licensor of, or other claimant to, any Intellectual Property, with respect to
          the Company’s or any of its Subsidiaries’ use thereof in connection
          with the conduct of its business.  

    (d)        Section
3.15(d) of the Disclosure Schedule sets forth a complete and correct           list of
all Patents, registered Marks, pending applications for registration of           any
Marks, unregistered Marks currently being used by the Company, registered
          Copyrights, and pending applications for registration of Copyrights, in each
          case, owned by the Company and each of its Subsidiaries, including the
          jurisdictions in which such Patents, Marks and Copyrights have been issued or
          registered or in which such applications have been filed. The Company and each
          of its Subsidiaries have taken all action necessary in their reasonable
          discretion to maintain the registration, grant or issuance of the Intellectual
          Property listed in Section 3.15(d) of the Disclosure Schedule, other than any
          unregistered Marks currently being used by the Company as set forth on Section
          3.15(d) of the Disclosure Schedule.  

16

    (e)        Except
as disclosed in Section 3.15(e) of the Disclosure Schedule, neither the           Company
nor any of its Subsidiaries has licensed any of its Intellectual           Property to
any Person on an exclusive basis, nor has the Company or any of its
          Subsidiaries entered into any Contract limiting its ability to exploit fully
any           of its Intellectual Property.  

    (f)        No
non-public, proprietary Intellectual Property Right material to the business           of
the Company as presently conducted has been authorized to be disclosed or, to
          the Knowledge of the Company,actually disclosed by the Company to any
          employee or third party other than pursuant to a non-disclosure agreement that
          protects the proprietary interests of the Company in and to such Intellectual
          Property Right.  

    (g)        Except
as disclosed in Section 3.15(g) of the Disclosure Schedule, neither the           Company
nor any of its Subsidiaries is the subject of any pending or, to the           Knowledge
of the Company, threatened action, suit, proceeding, claim,           arbitration,
mediation or investigation (a “Legal Proceeding”)           which
involvesa claim or notice of infringement of, unauthorized use of,           or
violation of any Intellectual Property of any third party or challenging the
          ownership, use, validity, priority, duration, scope or enforceability of any
          Intellectual Property Rights, and has not received written notice of any such
          threatened claim, and, to the Knowledge of the Company, there are no facts or
          circumstances which are likely to form the basis for any claim of infringement
          of, unauthorized use of, or violation of any Intellectual Property of any third
          party or challenging the ownership, use, validity, priority, duration, scope or
          enforceability of any Intellectual Property Rights. To the Knowledge of the
          Company, all material Intellectual Property Rights owned by the Company and
each           of its Subsidiaries are valid and enforceable.  

    (h)        To
the Knowledge of the Company, no third party is infringing, violating,           misusing
or misappropriating any material Intellectual Property Rights and no           such
claims have been made against a third party by the Company or any of its
          Subsidiaries.  

    (i)        The
Company and each of its Subsidiaries have taken reasonable measures to           protect
the secrecy and/or confidentiality of all non-public and proprietary
          Intellectual Property Rights, including requiring all Company and Subsidiary
          employees or consultants with access to such Intellectual Property Rights and
          all other Persons with access to such Intellectual Property Rights, as
          necessary, to execute a binding confidentiality agreement. The Company and each
          of its Subsidiaries have taken reasonable measures to protect the value of all
          Intellectual Property used in the conduct of the business of the Company or any
          of its Subsidiaries, including requiring all Company and Subsidiary employees
to           execute an agreement which includes provisions assigning to the Company or
its           Subsidiaries the ownership of any Intellectual Property created by such
          employees within the scope of his or her employment, or in the case of a Person
          other than an employee from the services such Person performs for the Company
or           any of its Subsidiaries. Copies or forms of the agreement or agreements
referred           to in this clause (i) have been made available to Parent and, to the
Knowledge           of the Company, there has not been a material breach of any such
agreement or           agreements.  

        Section
3.16. Litigation. There is no Legal Proceeding that is pending or, to the
Knowledge of the Company, has been threatened against the Company or any of its
Subsidiaries. There are no Judgments outstanding against the Company or any of its
Subsidiaries. Since January 1, 2001, there has not been any Legal Proceeding in respect
of the Company or any of its Subsidiaries that (a) resulted in a Judgment against or
settlement by the Company or such Subsidiary (whether or not such Judgment or settlement
was paid, in whole or in part, by an insurer of the Company or other third party) or (b) resulted
in any equitable relief. There is no Legal Proceeding pending by the Company or any of
its Subsidiaries, or which the Company or such Subsidiary intend to initiate, against any
other Person.  

17

        Section
3.17. Taxes.  

		    (a)        All
Tax Returns required to be filed by or on behalf of the Company and its
          Subsidiaries, have been timely filed and all Taxes shown as due on such Tax
          Returns have been timely paid.  

		    (b)        All
Tax Returns filed by or on behalf of the Company and its Subsidiaries are           true
and complete in all material respects. The charges, accruals and reserves           for
Taxes with respect to the Company and its Subsidiaries reflected on the Most
          Recent Balance Sheet are adequate to cover all Tax liabilities payable or
          anticipated to be payable in respect of all periods or portions thereof ending
          on or before the Most Recent Balance Sheet Date. There are no Liens (other than
          Permitted Liens) for Taxes against the Company or any of its Subsidiaries or
the           Company’s or any of its Subsidiary’s assets.  

		    (c)        No
property of the Company or any of its Subsidiaries is “tax exempt use
          property” within the meaning of Section 168(h) of the Code and
neither           the Company nor any of its Subsidiaries is a party to any lease made
pursuant to           Section 168(f)(8) of the Internal Revenue Code of 1954
(without regard to           any amendments or modifications to the Internal Revenue Code
of 1954 following           its original enactment).  

		    (d)       Section
3.17(d) of the Disclosure Schedule (i) indicates those Tax Returns that           have
been audited; and (ii) indicates those Tax Returns that currently are the
          subject of an audit. The Company has delivered to Parent correct and complete
          copies of all income Tax Returns, examination reports, and statements of
          deficiency assessed against or agreed to by the Company or any of its
          Subsidiaries for taxable years in which the statute of limitations (including
          extensions thereof) has not expired, with respect to Taxes of any type. There
          are no actions, suits, proceedings, audits, investigations, proposed
adjustments           or claims pending, or to the Knowledge of the Company, proposed
against the           Company or any of its Subsidiaries concerning the Tax liability of
the Company           or any of its Subsidiaries. No issue has been raised in any
examination by any           Governmental Entity with respect to the Company or any of
its Subsidiaries           which, by application of similar principles, reasonably could
be expected to           result in a proposed deficiency or increase in Taxes for any
other period not so           examined.  

		    (e)        There
are no outstanding agreements or waivers extending the statutory period of
          limitation applicable to any Tax assessment or deficiency with respect to the
          Company or any of its Subsidiaries, and neither the Company nor any of its
          Subsidiaries has requested any extension of time within which to file any Tax
          Return, which Tax Return has not yet been filed.  

		    (f)        Each
of the Company and its Subsidiaries has withheld and paid all Taxes           required by
Law to have been withheld and paid and has complied in all material           respects
with all rules and regulations relating to the withholding or           remittance of
Taxes (including, without limitation, employee-related Taxes).  

18

		    (g)        Each
of the Company and its Subsidiaries is not a party to any Contract that,
          individually or collectively, could give rise to any payment (whether in cash
or           property) that would be non-deductible pursuant to Sections 162(a)(1),
          162(m), 162(n) or 280G of the Code or similar provision of state, local or
          foreign Law.  

		    (h)        Neither
the Company nor any of its Subsidiaries will be required to include any           item of
income in, or exclude any item of deduction from, taxable income for any
          taxable period ending after the Closing Date as a result of any: (i) adjustment
          pursuant to Section 481 of the Code or similar provision of state, local or
          foreign Law associated with a change of accounting method that is effective on
          or before the date of this Agreement; (ii) closing agreement or other agreement
          with any Governmental Entity executed on or before the date of this Agreement;
          or (iii) installment sale or open transaction disposition made on or before the
          date of this Agreement.  

		    (i)        Since
the Company’s formation, neither the Company nor any of its           Subsidiaries
has constituted either a “distributing corporation” or a           “controlled
corporation” (within the meaning of           Section 355(a)(1)(A) of the Code)
in a distribution qualifying for tax-free           treatment under Section 355(a)
of the Code.  

		    (j)        The
Company has not been a United States real property holding corporation           within
the meaning of Section 897(c)(2) of the Code during the 5-year           period that
will end on the Closing Date.  

		    (k)        No
written claim has ever been received by the Company or any Subsidiary from a
          Governmental Entity in a jurisdiction where the Company or any Subsidiary does
          not file Tax Returns that the Company or any Subsidiary is or may be subject to
          Tax in that jurisdiction.  

		    (l)        Neither
the Company nor any of its Subsidiaries is a party to any Tax           allocation,
indemnity or sharing Contract. Neither the Company nor any of its           Subsidiaries
has any liability for Taxes of any Person (i) under Treasury           Regulation Section 1.1502-6
or similar provision of state, local or foreign           Law, (ii) as transferee or
successor, (iii) by Contract, or (iv) otherwise.           Neither the Company nor any of
its Subsidiaries has ever been a member of any           affiliated, combined,
consolidated or unitary group (other than a group the           common parent of which
was the Company) and has never filed Tax Returns as a           member of such group.  

		    (m)        The
Company is not a “personal holding company” as defined in Section           542
of the Code (or any similar provision of state, local or foreign law).  

		    (n)        The
Company has disclosed on its federal income Tax Returns all positions taken
          therein that could give rise to a substantial understatement of federal income
          Tax within the meaning of Section 6662 of the Code and neither the Company nor
          any of its Subsidiaries has participated in any “reportable
          transaction” within the meaning of Treasury Regulations Section 1.6011-4.  

		    (o)        Neither
the Company nor any of its Subsidiaries is the subject of any private           letter
ruling or similar ruling issued by any Governmental Entity relating to           Taxes.  

19

        Section
3.18. Insurance.  The insurance policies owned and maintained by the
Company and each of its Subsidiaries and the coverage amounts thereunder are listed in
Section 3.18 of the Disclosure Schedule. All such policies are in full force and effect,
all premiums due and payable thereon have been paid, the Company and each of its
Subsidiaries shall not be liable for retroactive premiums or similar payments related
thereto, and the Company and each of its Subsidiaries are in compliance with the terms of
such policies. There is no claim pending under any such policy as to which coverage has
been questioned, denied or disputed by the underwriter of such policy. To the Knowledge
of the Company, there has been no notice of cancellation or termination (or any other
threatened termination) of, or premium increase with respect to, any such policy.  

        Section
3.19. Benefit Plans.  

    (a)        Section
3.19(a) of the Disclosure Schedule contains a list of all Benefit Plans.           The
Company has delivered to Parent true and complete copies of (i) each Benefit
          Plan (including amendments since the most recent restatement) or, in the case
of           any unwritten Benefit Plans, written descriptions thereof, (ii) the annual
          report (Form 5500) filed with the IRS or the Department of Labor with respect
to           each Benefit Plan (if any such report was required) for each plan year since
the           Company’s formation, (iii) the most recent determination letter issued
to           each “employee pension benefit plan,” as defined in Section 3(2)
of           ERISA (a “Pension Plan”), that is intended to be qualified
          under Section 401(a) of the Code and any pending applications for a
          determination letter for such plans, (iv) the most recent summary plan
          description (and any summary of material modifications since the most recent
          summary plan description) for each Benefit Plan for which such a summary plan
          description is required and any material summaries or other communications
          distributed to participants for each Benefit Plan whether or not required to
          provide a summary plan description, (v) all personnel, payroll, and employment
          manuals and policies, (vi) each trust agreement, recordkeeping or other
          third-party agreement and group annuity Contract relating to any Benefit Plan,
          (vii) for any Pension Plan described in Section 401(a) of the Code, copies of
          confirmations that such Pension Plan satisfied applicable nondiscrimination
          tests in each plan year since the Company’s formation, (viii) all notices
          in the Company’s possession that were given by the Company or any Benefit
          Plan to the IRS, the Pension Benefit Guaranty Corporation, the Department of
          Labor, the Securities and Exchange Commission, the Equal Employment Opportunity
          Commission, or any other Governmental Entity relating to a Benefit Plan, and
          (ix) all notices that were given by the IRS, the Pension Benefit Guaranty
          Corporation, the Department of Labor, the Securities and Exchange Commission,
          the Equal Employment Opportunity Commission, or any other Governmental Entity
to           the Company relating to any Benefit Plan.  

    (b)        Each
Benefit Plan has been operated and administered in all material respects in
          accordance with its terms and applicable Law (including but not limited to Laws
          specifically mentioned in this Section 3.19). The Company and each of its
          Subsidiaries and all the Benefit Plans are in all material respects in
          compliance with the applicable provisions of the Employee Retirement Income
          Security Act of 1974 (“ERISA”), the Code, and other
          applicable Laws. All reports, returns and similar documents with respect to the
          Benefit Plans required to be filed with any Governmental Entity or distributed
          to any Benefit Plan participant, beneficiary, or alternate payee have been duly
          and timely filed or distributed. There are no lawsuits, actions, termination
          proceedings or other proceedings pending, or, to the Knowledge of the Company,
          threatened against or involving any Benefit Plan and there are no
investigations           by any Governmental Entity or other claims (except claims for
benefits payable           in the normal operation of the Benefit Plans) pending or, to
the Knowledge of           the Company, threatened against or involving any Benefit Plan
or asserting any           rights to benefits under any Benefit Plan. To the Knowledge of
the Company,           there are no unasserted claims that, if pending or threatened,
would be of the           type described in this Section 3.19(b). The Company and each of
its Subsidiaries           does not have any liability to the IRS with respect to any
Benefit Plan,           including any liability imposed under Chapter 43 of the Code.  

20

    (c)        All
contributions to, and payments from, the Benefit Plans that were or are
          required to be made in accordance with the terms of the Benefit Plans and
          applicable Laws, including, when applicable, Section 302 of ERISA or
          Section 412 of the Code, have been timely made. All such contributions to,
          and payments from, the Benefit Plans, except those payments to be made from a
          trust exempt under Section 501(a) of the Code, for any period ending
before           the Closing Date that are not yet, but will be, required to be made,
will be           properly accrued and reflected on the Most Recent Balance Sheet. There
is no           Lien on the assets of the Company or any of its Subsidiaries arising
under           Section 302(f) or 4068(a) of ERISA or Section 412(n) of the Code.  

    (d)        All
Pension Plans intended to be qualified and exempt from federal income Taxes
          under Sections 401(a) and 501(a) of the Code, respectively, have received
          determination letters from the IRS to the effect that such Pension Plans are so
          qualified and exempt from federal income Taxes, and no such determination
letter           has been revoked nor, to the Knowledge of the Company, has revocation of
any           such determination letter been threatened. No such Pension Plan has been
amended           since the date of its most recent determination letter or application
therefor           in any respect, nor has any other circumstance or event occurred, that
would           adversely affect its qualification or materially increase its cost. A
          determination letter covering “GUST” (as defined in footnote 1 of
Rev.           Proc. 2004-25) has been received for each Pension Plan intended to be
qualified           under Section 401(a) of the Code or an application for such a letter
has been           filed within the applicable remedial amendment period. Timely “good
          faith” amendments (within the meaning of Notice 2001-42) with respect to
          the Economic Growth and Tax Relief Reconciliation Act of 2001 have been made
for           each Pension Plan intended to be qualified under Section 401(a) of the
Code. The           Company and each of its Subsidiaries performed all material
obligations required           to be performed by them under, and are not in default
under or in violation of,           the material terms of any Benefit Plan.  

    (e)        No
transaction prohibited by Section 406 of ERISA and no “prohibited
          transaction” (as defined in Section 4975 of the Code) has occurred
          with respect to any Benefit Plan. None of the Pension Plans has been terminated
          nor have there been any “reportable events” (as defined in
          Section 4043 of ERISA) with respect thereto. No Company Personnel, nor any
          trustee, administrator or other fiduciary of any Benefit Plan nor any agent of
          any of the foregoing has engaged in any transaction or acted or failed to act
in           a manner that could subject the Company or any of its Subsidiaries to any
          material liability for breach of fiduciary duty under ERISA or any other
          applicable Law (whether such liability is directly against the Company or any
of           its Subsidiaries or the result of any existing indemnity agreements).  

    (f)        No
Benefit Plan is or has ever been (or has ever been the successor or           transferee
of) a “multiemployer plan” (as defined in           Section 3(37) of
ERISA) or a “defined benefit plan” (as defined           in Section 3(35) of
ERISA). Neither the Company nor any of its Subsidiaries has           any actual or
potential, secondary, or contingent liability to any Person under           Title IV
of ERISA and no Benefit Plan is subject to Title IV of ERISA.           Neither the
Company nor any of its Subsidiaries has contributed to, been           required to
contribute to, or withdrawn from any “multiemployer plan”          (as defined
in Section 3(37) of ERISA).  

21

    (g)        Neither
the Company nor any of its Subsidiaries has ever established, maintained           or
contributed to, or had an obligation to maintain or contribute to or has or           had
any liability with respect to, any “voluntary employees’          beneficiary
association” (within the meaning of Section 501(c)(9) of the           Code), any
organization or trust described in Sections 501(c)(17) or 501(c)(20)           of the
Code or any “welfare benefits fund” described in           Section 419(e)
of the Code.  

    (h)        Neither
the Company nor any of its Subsidiaries has offered to provide health or           life
insurance coverage to any individual, or to the family members or           beneficiaries
of any individual, for any period extending beyond the termination           of the
individual’s employment by the Company, except to the extent           required by
the health care continuation (also known as           “COBRA”)
provisions of ERISA and the Code or similar state           benefit continuation Laws.
Each Benefit Plan that is a group health plan, as           such term is defined in
Section 5000(b)(1) of the Code, complies in all           respects with Sections 601
et seq. and 701 et seq. of ERISA and Section 4980B           and Subtitle K of the Code.  

    (i)        Neither
the Company nor any of its Subsidiaries has any current or projected           liability
or contingent obligation in respect of medical or other benefits for           retired or
former Company Personnel or any predecessor Person, except as           required under
COBRA or similar state benefit continuation Laws.  

    (j)        Each
Benefit Plan (including any such plan covering retirees or other former
          employees) may be discontinued or terminated without liability to the Company
or           any of its Subsidiaries (other than the administrative costs of termination)
on           or at any time after the Effective Time.  

    (k)        Neither
the execution and delivery of this Agreement, nor the consummation of           the
Merger or the other transactions contemplated thereby will result in the
          payment, vesting, or acceleration of any bonus, stock option or other
          equity-based award, retirement, severance, job security or similar benefit or
          any enhanced benefit to any Person.  

    (l)        Except
as set forth in Section 3.19(l) of the Disclosure Schedule, neither the           Company
nor any of its Subsidiaries has any Benefit Plan in which non-United           States
employees (or their beneficiaries) participate and is not required to           maintain
any such plan.  

    (m)        Since
the Company’s formation, no Person is or has been a Person which is           (or at
any relevant time was) a member of a “controlled group of           corporations” with,
under “common control” with, or a member of           an “affiliated
service group” with the Company as such terms are           defined in Section
414(b), (c), (m) or (o) of the Code (an “ERISA           Affiliate”).  

    (n)        No
event has occurred or circumstances exist that may result in (i) a material
          increase in premium costs of Benefit Plans that are insured, or (ii) a material
          increase in benefit or administrative costs of Benefit Plans that are
          self-insured.  

    (o)        Neither
the Company nor any of its Subsidiaries has taken any action that, by           itself or
in conjunction with any action of equal magnitude that may be taken           after the
Effective Time, will require any compliance with the Worker Adjustment           and
Retraining Notification Act of 1991 or any other similar or comparable
          applicable Law.  

22

    (p)        Neither
the Company nor any Affiliate thereof has a formal plan, commitment, or
          proposal, whether legally binding or not, or has made a commitment to any
          individual to create any additional Benefit Plan or modify or change any
          existing Benefit Plan that would affect any current employee, director or
          consultant, or former employee, of the Company or any of its Subsidiaries, or
          any beneficiary or alternate payee of such an individual. No events have
          occurred or are expected to occur with respect to any Benefit Plan that would
          cause a material change in the cost of providing the benefits under such plan
or           would cause a material change in the cost of providing for other liabilities
of           such plan.  

    (q)        All
assets of any Benefit Plan consist of cash, actively traded securities, or
          mutual funds registered under the Investment Company Act of 1940, as amended.  

    (r)        Any
Benefit Plan that is a “nonqualified deferred compensation plan”          within
the meaning of section 409A of the Code has been identified as such on           Section
3.19(r) of the Disclosure Schedule. Each such Benefit Plan has been           operated in
accordance with a good faith interpretation of the requirements of           section 409A
(including any associated guidance).  

    (s)        Neither
the execution and delivery of this Agreement nor the consummation of the
          transactions contemplated hereby will (i) result in any material payment
          (including severance, unemployment compensation, golden parachute or otherwise)
          becoming due under any Benefit Plan, (ii) materially increase any benefits
          otherwise payable under any Benefit Plan or (iii) result in the
          acceleration of the time of payment or vesting of any such benefits to any
          material extent. No benefit that is or may become payable by any Benefit Plan
as           a result of, or arising under, this Agreement shall constitute an “excess
          parachute payment” (as defined in section 280G(b)(1) of the Code) that is
          subject to the imposition of an excise tax under section 4999 of the Code or
          that would not be deductible by reason of section 280G of the Code.  

        Section
3.20. Employee and Labor Matters.  

    (a)        There
is not, and since January 1, 2001 there has not been, any labor strike,
          dispute, work stoppage, slowdown or lockout pending, or, to the Knowledge of
the           Company, threatened, against the Company or any of its Subsidiaries. To the
          Knowledge of the Company, no union organizational campaign or petition for
          certification is in progress with respect to the Company Personnel. Neither the
          Company nor any of its Subsidiaries is a party to any collective bargaining or
          other similar labor Contracts with respect to any Company Personnel. There are
          no pending, or, to the Knowledge of the Company, threatened, charges against
the           Company, any of its Subsidiaries or any Company Personnel before the Equal
          Employment Opportunity Commission or any other Governmental Entity responsible
          for the prevention of unlawful employment practices in any jurisdiction. Since
          January 1, 2001, neither the Company nor any of its Subsidiaries has received
          notice of the intent of any Governmental Entity responsible for the enforcement
          of labor or employment Laws to conduct an investigation of the Company or any
of           its Subsidiaries relating to unlawful employment practices and, to the
Knowledge           of the Company, no such investigation is in progress.  

    (b)        No
officer or director of the Company or any of its Subsidiaries is, and, to the
          Knowledge of the Company, no other employee of the Company or any of its
          Subsidiaries is, a party to or bound by any Contract, license, covenant or
          Contract of any nature, or subject to any judgment, decree or order of any
          Governmental Entity, that may interfere with the use of such Person’s
          efforts to promote the interests of the Company or any of its Subsidiaries,
          conflict with the business of the Company, any of its Subsidiaries or the
Merger           and the other transactions contemplated by this Agreement, or that could
          reasonably be expected to result in a Material Adverse Effect. To the Knowledge
          of the Company, no activity of any employee of the Company or any of its
          Subsidiaries as or while an employee of the Company or any of its Subsidiaries
          has caused a violation of any employment Contract, confidentiality agreement,
          patent disclosure agreement, or other Contract.  

23

    (c)        Section
3.20(c) of the Disclosure Schedule contains a true and complete list of           the
names, positions and rates of compensation of all officers, directors,
          employees and consultants of the Company and each of its Subsidiaries, as of
the           date hereof, showing each such person’s name, positions and annualized
          remuneration, bonuses and non-standard fringe benefitsfor 2005 and 2006.
          Except as indicated in Section 3.20(c) of the Disclosure Schedule, (i) all
          employees are employed on an “at-will” basis and their employment can
          be terminated at any time for any legal reason without any amounts being owed
to           such individual other than payments required by applicable Laws, (ii) the
          Company’s and each of its Subsidiaries’ relationships with all
          individuals who act on their own as contractors or other service providers to
          the Company or such Subsidiary can be terminated at any time for any reason
          without any amounts being owed to such individual other than with respect to
          compensation or payments accrued before the termination, and (iii) no employee
          is on leave of absence. The Company and each of its Subsidiaries have complied,
          in all material respects, with all Laws governing the employment of personnel
by           U.S. companies and the employment of non-U.S. nationals in the United
States,           including the Immigration and Nationality Act 8 U.S.C. Sections 1101 et
seq. and           its implementing regulations. The Company and each of its Subsidiaries
have not           sponsored any employee for, or otherwise engaged any employee working
pursuant           to, a non-immigrant visa.  

        Section
3.21. Environmental Matters. Each of the Company and its Subsidiaries has complied
at all times with all applicable Environmental Laws. No property (including soils,
groundwater, surface water, buildings or other structures) currently owned or operated by
the Company or any of its Subsidiaries has been contaminated with any Hazardous Material
as a result of the operations of the Company or any of its Subsidiaries, or, to the
Knowledge of the Company, has otherwise been contaminated with any Hazardous Material. To
the Knowledge of the Company, no property (including soils, groundwater, surface water,
buildings or other structures) formerly owned or operated by the Company or any of its
Subsidiaries was contaminated with any Hazardous Material on or prior to such period of
ownership or operation. Neither the Company nor any of its Subsidiaries is subject to any
liability for Hazardous Material disposal or contamination on any third party property.
Each of the Company and its Subsidiaries has complied at all times with all applicable
Environmental Laws relating to the collection, recovery and recycling of waste from their
marketed products and packaging. To the Knowledge of the Company, none of the properties
of the Company or any of its Subsidiaries contains any underground storage tanks,
asbestos-containing material, lead products, or polychlorinated biphenyls. There are no
circumstances involving the Company or any of its Subsidiaries that could reasonably be
expected to result in any material claims, liability, investigations, costs or
restrictions on the ownership, use or transfer of any property in connection with any
Environmental Law. Copies of all environmental reports, studies, assessments, sampling
data and other environmental information in the possession of the Company or any of its
Subsidiaries relating to the Company or such Subsidiary have been made available to
Parent. Neither the Company nor any of its Subsidiaries has received any written notice,
demand, letter, claim or request for information from any Governmental Entity or other
Person indicating that it may be in violation of or subject to liability under any
Environmental Law or regarding any actual, alleged, possible or potential liability
arising from or relating to the presence, generation, manufacture, production,
transportation, importation, use, treatment, refinement, processing, handling, storage,
discharge, release, emission or disposal of any Hazardous Material used by the Company or
any of its Subsidiaries. No Lien or “superlien” has been placed on any site
owned or, to the Knowledge of the Company, operated by the Company or any of its
Subsidiaries pursuant to the Federal Comprehensive, Environmental Response, Compensation,
and Liability Act of 1980 or any similar Law. To the Knowledge of the Company, all of the
products marketed by the Company and its Subsidiaries are in full compliance with the
applicable Environmental Laws on chemical composition, environmental design and energy
efficiency. Neither the Company nor any of its Subsidiaries is subject to any order,
decree, injunction or other arrangement with any Governmental Entity relating to
liability under any Environmental Law. Each of the Company and its Subsidiaries has taken
appropriate steps to ensure that its marketed products will be in full and timely
compliance with Directive 2002/95/EC on the restriction of the use of hazardous
substances in electrical and electronic equipment. The Company has provided to Parent a
written plan setting forth the procedures that the Company has put in place to comply
with this Directive and the estimated costs of compliance. The representations and
warranties contained in this Section 3.21 are the only representations and warranties
being made by the Company with respect to any Environmental Liabilities or the compliance
of the Company with Environmental Laws and Environmental Permits, and no other
representation or warranty, express or implied, is being made by the Company with respect
thereto.  

24

        Section
3.22. Transactions with Affiliates.  Section 3.22 of the Disclosure
Schedule describes any material transaction, since January 1, 2003, between the Company,
on the one hand, and any Seller or Affiliate (other than the Company) of any Seller, on
the other hand, other than any employment Contract, Contract not to compete with the
Company, Contract to maintain the confidential information of the Company, or Contract
assigning Intellectual Property Rights to the Company, in each case listed in Section
3.14(a) of the Disclosure Schedule. Except as set forth in Section 3.22 of the Disclosure
Schedule, no Affiliate of the Company (i) owns or has any interest in any property (real
or personal, tangible or intangible), Intellectual Property Rights or Contract used in or
pertaining to the business of, the Company, (ii) has any claim or cause of action against
the Company, (iii) owes any money to, or is owed any money by, the Company, (iv) has any
other rights with respect to the Company other than rights as an equity holder similar to
the rights of all other holders of the same equity, or (v) to the Knowledge of the
Company, is a party to any agreement or understanding, oral or written, with any other
Affiliate or any employee of the Company relating to the approval or performance of any
provisions of the Merger Agreement, including without limitation with respect to any
actions to be taken or to be refrained from being taken by such Affiliate or employee
with respect to achieving the Earn Out Amount.  

        Section
3.23. Accounts; Officers and Directors. Section 3.23 of the Disclosure Schedule
sets forth (i) a true and complete list of all bank and savings accounts of the
Company and each of its Subsidiaries, identifying with respect to each any Person
authorized to sign thereon and (ii) a true and complete list of all officers and
directors of the Company and each of its Subsidiaries.  

        Section
3.24. Brokers.  No broker, finder, financial advisor, investment banker
or other Person is or will be entitled to any brokerage, finder’s, financial advisor’s
or other similar fee or commission in connection with the Merger based upon arrangements
made by or on behalf of any Seller, for which the Company could be liable, or by or on
behalf of the Company.  

25

        Section
3.25. Certain Business Practices. Neither the Company, any of its Subsidiaries nor
any of their respective directors, officers, agents or employees, has (i) used any funds
for unlawful contributions, gifts, entertainment or other unlawful expenses related to
political activity; (ii) made any unlawful payment to foreign or domestic government
officials or employees or to foreign or domestic political parties or campaigns or
violated any provision of the Foreign Corrupt Practices Act of 1977 or (iii) made any
payment in the nature of criminal bribery.  

        Section
3.26. Corporate Books and Records. The Company has made available to Parent and
its Representatives true and complete copies of the stock certificate and transfer books
and the minute books of the Company and each of its Subsidiaries, and all such records
are true and complete in all material respects.  

        Section
3.27. No Former Business. Neither the Company nor any of its Subsidiaries has,
alone or with any other Person, owned or operated any business other than its current
business.  

        Section
3.28. Customers. Section 3.28 of the Disclosure Schedule sets forth the name of
the top twenty (20) customers of the Company and its Subsidiaries as a whole for last two
fiscal years (the “Customers”). SinceJanuary 1, 2005, no Customer
has cancelled or otherwise terminated its relationship with the Company or any
Subsidiary. No Customer has provided any written notification to the Company or any of
its Subsidiaries specifically indicating its intent to terminate, cancel or otherwise
materially and adversely modify its relationship with the Company or any Subsidiary or to
decrease materially or limit its usage, purchase or distribution of the products and
services of the Company and its Subsidiaries.  

        Section
3.29. Suppliers. Section 3.29 of the Disclosure Schedule sets forth the name of
the top fifteen (15) suppliers of the Company and its Subsidiaries as a whole for the
last two fiscal years (the “Suppliers”). None of the Suppliers
represents the sole source of available supply for the products or services it provides
to the Company or any of its Subsidiaries. Since January 1, 2005, no Supplier has
cancelled or otherwise terminated its relationship with the Company or any of its
Subsidiaries. No Supplier has provided any written notification to the Company or any of
its Subsidiaries specifically indicating its intent to terminate, cancel or otherwise
materially and adversely modify its relationship with the Company or any of its
Subsidiaries.  

ARTICLE 4 

REPRESENTATIONS AND
WARRANTIES OF PARENT AND MERGER SUB 

        AudioCodes,
Parent and Merger Sub make the representations and warranties set forth in Article 4 as of
the date of this Agreement and as of the Closing: 

        Section
4.1. Organization and Standing.  Each of AudioCodes, Parent and Merger
Sub is a corporation duly organized, validly existing and, as applicable, in good
standing under the Laws of its jurisdiction of incorporation. Each of AudioCodes and
Parent has all requisite corporate power and authority to carry on its business as now
being conducted.  

26

        Section
4.2. Power and Authority; Binding Agreement. Each of AudioCodes, Parent and Merger
Sub has all requisite corporate power and authority to execute and deliver this
Agreement, to consummate the Merger and the other transactions contemplated hereby and to
perform its obligations hereunder. The execution and delivery by AudioCodes, Parent and
Merger Sub of this Agreement and the consummation by AudioCodes, Parent and Merger Sub of
the Merger and the other transactions contemplated hereby, have been duly authorized by
all necessary corporate action on the part of AudioCodes, Parent and Merger Sub. This
Agreement has been duly executed and delivered by AudioCodes, Parent and Merger Sub and,
assuming the due execution and delivery of this Agreement by the Company constitutes a
legal, valid and binding obligation of AudioCodes, Parent and Merger Sub, enforceable
against AudioCodes, Parent and Merger Sub in accordance with its terms except as such
enforceability may be limited by bankruptcy, insolvency or other similar laws affecting
creditors’ rights generally.  

        Section
4.3. Noncontravention.  

    (a)        The
execution and delivery by AudioCodes, Parent and Merger Sub of this           Agreement,
the other Transaction Agreements to which it is a party, the           consummation of
the Merger and the other transactions contemplated hereby and           thereby and the
compliance by AudioCodes, Parent and Merger Sub with the           provisions hereof and
thereof do not and will not conflict with, or result in           any violation or
default (with or without notice or lapse of time or both)           under, or give rise
to a right of, or result in, termination, cancellation or           acceleration of any
obligation or to a loss of a material benefit under, or           result in the creation
of any Lien in or upon any of the properties or assets of           AudioCodes, Parent or
Merger Sub under, or give rise to any increased,           additional, accelerated or
guaranteed rights or entitlements under, any           provision of (i) the Constitutive
Documents of AudioCodes, Parent or Merger Sub,           (ii) any Contract to which
AudioCodes, Parent or Merger Sub is a party or bound           by or their respective
properties or assets are bound by or subject to or           otherwise under which
AudioCodes, Parent or Merger Sub has rights or benefits or           (iii) subject to the
governmental filings and other matters referred to in           Section 4.3(b), any Law
or Judgment, in each case, applicable to AudioCodes,           Parent or Merger Sub or
their respective properties or assets, other than, in           the case of clauses (ii)
and (iii), any such conflicts, violations, breaches,           defaults, rights, losses,
Liens or entitlements that individually or in the           aggregate are not likely to
impair in any material respect the ability of each           of AudioCodes, Parent and
Merger Sub to perform its obligations under this           Agreement, or prevent or
materially impede or delay the consummation of the           Merger or any of the other
transactions contemplated hereby.  

    (b)        No
consent, approval, license, permit, order or authorization of, registration,
          declaration or filing with, or notice to, any Governmental Entity is required
by           or with respect to AudioCodes, Parent or Merger Sub in connection with the
          execution and delivery by AudioCodes, Parent and Merger Sub of this Agreement,
          the other Transaction Agreements, the consummation by AudioCodes, Parent and
          Merger Sub of the Merger and the other transactions contemplated hereby or
          thereby or the compliance by AudioCodes, Parent and Merger Sub with the
          provisions hereof or thereof, except for (i) filings required under, and
          compliance with other applicable requirements of, the HSR Act and filings
          required under, and compliance with other applicable requirements of, Foreign
          Antitrust Laws, (ii) filings pursuant to, and compliance with other applicable
          requirements of, the Exon-Florio Act, (iii) the filing of the Certificate of
          Merger with the Delaware Secretary of State and appropriate documents with the
          relevant authorities of other states in which the Company is qualified to do
          business and (iv) such other consents, approvals, orders, authorizations,
          registrations, declarations, filings and notices, the failure of which to be
          obtained or made individually or in the aggregate would not impair in any
          material respect the ability of each of AudioCodes, Parent and Merger Sub to
          perform its obligations under this Agreement, or prevent or materially impede
or           delay the consummation of the Merger or any of the other transactions
          contemplated hereby.  

27

        Section
4.4. Brokers. No broker, finder, financial advisor, investment banker or other
Person is or will be entitled to any brokerage, finder’s, financial advisor’s
or other similar fee or commission in connection with the Merger based upon arrangements
made by or on behalf of AudioCodes, Parent or Merger Sub, for which the Company could be
liable.  

        Section
4.5. Availability of Funds. AudioCodes and Parent have, and will have available to
them at the Closing, collectively sufficient funds to consummate the transactions
contemplated by this Agreement.  

        Section
4.6. Merger Sub. Merger Sub was formed solely for the purpose of engaging in the
transactions contemplated by this Agreement, has engaged in no other business activities
and has conducted its operations only as contemplated by this Agreement.  

        Section
4.7. Ownership. AudioCodes owns 100% of the issued and outstanding equity
interests in Parent. Parent owns 100% of the issued and outstanding equity interests in
Merger Sub.  

ARTICLE 5 

CERTAIN COVENANTS  

        Section
5.1. Conduct of Business.  Except with the prior written consent of
Parent (which will not be unreasonably withheld) or as expressly permitted by the terms
of this Agreement, from the date hereof to the Effective Time, the Company shall, and
shall cause each of its Subsidiaries to, (i) conduct its businesses in the Ordinary
Course of Business and in accordance with all applicable Laws and (ii) use
commercially reasonable efforts to preserve intact its current business organization,
keep its physical assets in good working condition, preserve, maintain the value of,
renew, extend and keep in full force and effect all Intellectual Property Rights, keep
available the services of its current officers and employees and preserve its
relationships with customers, suppliers, licensors, licensees, distributors and others
having business dealings with it. Without limiting the generality of the foregoing,
except as expressly permitted by the terms of this Agreement, the Company shall not and
shall not cause any of its Subsidiaries to, without the prior written consent of Parent
(which will not be unreasonably withheld):  

		    (a)       amend
its Constitutive Documents;  

		    (b)       (i)
declare, set aside or pay any dividend on, or make any other distribution
          (whether in cash, stock or property) in respect of, any of its Capital Stock;
          (ii) split, combine or reclassify any of its Capital Stock, or issue or
          authorize the issuance of any other securities in respect of, in lieu of or in
          substitution for shares of its Capital Stock; or (iii) purchase, redeem or
          otherwise acquire any shares of its Capital Stock, or any option, warrant, call
          or right relating to such shares, interests or other securities (including any
          Options);  

28

		    (c)       issue,
deliver, sell or grant (i) any shares of its Capital Stock, (ii) any           Voting
Company Debt or other voting securities, (iii) any securities convertible           into
or exchangeable for, or any options, warrants or rights to acquire, any           such
shares, Voting Company Debt, voting securities or convertible or           exchangeable
securities or (iv) any “phantom” stock,           “phantom” stock
rights, stock appreciation rights or stock-based           performance units, other than
the issuance of shares of Company Common Stock           upon the exercise of Options or
the conversion of Preferred Stock, in each case           outstanding on the date of this
Agreement and in accordance with the terms of           such Options or Preferred Stock
on the date of this Agreement;  

		    (d)       repurchase,
prepay, create, incur, assume or modify any terms of any           Indebtedness of the
Company or any of its Subsidiaries, issue or sell any           warrants or other rights
to acquire any Indebtedness of the Company or any of           its Subsidiaries, make any
loans, advances or capital contributions to, or           investments in, any Person,
enter into any Contract to maintain any financial           statement condition of
another Person or enter into any Contract having the           economic effect of any of
the foregoing;  

		    (e)       sell,
lease (as lessor), license or otherwise dispose of or subject to any Lien           any
properties or assets that are material, individually or in the aggregate, to
          the Company or any of its Subsidiaries, except sales of inventory in the
          Ordinary Course of Business;  

		    (f)       enter
into any lease or sublease of real property (whether as a lessor,           sublessor,
lessee or sublessee) or modify, amend, terminate or fail to exercise           any right
to renew any lease or sublease of real property;  

		    (g)       acquire
or agree to acquire (i) by merging or consolidating with, or by           purchasing a
substantial portion of the assets of, or by any other manner, any           equity
interest in or business of any Person or (ii) any assets that are           material,
individually or in the aggregate, to the Company or any of its           Subsidiaries,
except purchases of inventory in the Ordinary Course of Business;  

		    (h)       change
its fiscal year, revalue any of its material assets or make any changes           in
financial accounting methods, principles, practices or policies, except as
          required by GAAP or applicable Law;  

		    (i)       make
or change any Tax election; change any Tax accounting period or method;           file
any amended Tax Return; enter into any closing agreement with respect to           Taxes;
settle any Tax claim or assessment; surrender any right to claim a refund           of
Taxes; consent to any extension or waiver of the limitations period for the
          assessment of any Tax; take any action outside the Ordinary Course of Business
          whose effect would be to increase the Company’s or any of its
          Subsidiaries’ present or future Tax liability or to decrease the
          Company’s or any of its Subsidiaries’ present or future Tax assets;  

29

		    (j)       (i) grant
any awards under any Benefit Plan (including the grant of stock           options, stock
appreciation rights, stock based or stock related awards,           performance units or
restricted stock or the removal of existing restrictions in           any Contract,
Benefit Plan or Benefit Agreement or awards made thereunder),           (ii) pay or
provide to any Company Personnel any bonus, other amount or           other benefit, or
make any advance or loan to any Company Personnel, not           provided for under any
Contract, Benefit Plan or Benefit Agreement in effect on           the date of this
Agreement other than the payment of bonus amounts which, in the           aggregate, do
not constitute Excess Bonus Costs, or the payment of base           compensation or
advances for business expenses in the Ordinary Course of           Business, (iii) grant
to any Company Personnel any increase in compensation           (including any increase
in severance or termination pay) except to the extent           required under existing
employment agreements, (iv) enter into any           employment, consulting,
indemnification, severance or termination agreement with           any Company Personnel
(v) establish, adopt, enter into or amend in any material           respect any
collective bargaining agreement, other Benefit Agreement or Benefit           Plan or (vi) take
any action to accelerate the vesting or payment of any           compensation or benefit
under any Contract, Benefit Plan or Benefit Agreement or           to fund or in any
other way secure the payment of compensation or benefits under           any Contract,
Benefit Plan or Benefit Agreement or make any material           determinations not in
the Ordinary Course of Business under any Benefit           Agreement or Benefit Plan;  

		    (k)       incur
or commit to incur any capital expenditure (or any obligation or liability           in
connection therewith), in an amount greater than $100,000 individually or
          $500,000 in the aggregate;  

		    (l)       enter
into any Contract (or any substantially related Contracts, taken together)           (i)
that would constitute a Material Contract, other than Contracts with           customers,
suppliers and vendors that are entered into in the Ordinary Course of           Business,
(ii) that, if consummation of the Merger or any of the other           transactions
contemplated hereby or compliance by the Company with the           provisions of this
Agreement will conflict with, or result in any violation or           breach of, or
default (with or without notice or lapse of time or both) under,           or give rise
to a right of, or result in, termination, cancellation or           acceleration of any
obligation or to a loss of a benefit under, or result in the           creation of any
Lien in or upon any of the properties or assets of the Company           or Parent or any
of Parent’s Subsidiaries under, or give rise to any           increased, additional,
accelerated or guaranteed rights or entitlements under,           any provision of such
Contract, or (iii) containing any restriction on the           ability of the Company or
any of its Subsidiaries to assign all or any portion           of its rights, interests
or obligations thereunder, unless such restriction           expressly permits any
assignment to Parent and Parent’s Subsidiaries in           connection with or
following the consummation of the Merger and the other           transactions
contemplated hereby;  

		    (m)       pay,
discharge, settle or satisfy any material Lien or material claims           (including
claims of stockholders and any stockholder litigation relating to the           Merger or
any other transaction contemplated hereby), liabilities or obligations           (whether
absolute, accrued, asserted or unasserted, contingent or otherwise),           other than
the payment, discharge or satisfaction, in the Ordinary Course of           Business or
in accordance with their terms, of liabilities reflected or reserved           against in
the Most Recent Balance Sheet or incurred since the Most Recent           Balance Sheet
Date in the Ordinary Course of Business (and all such liabilities           incurred in
the Ordinary Course of Business shall be paid or otherwise satisfied           in the
manner and time period consistent with past practice in the normal course           of
business); waive, release or assign any material rights or material claims
          under, fail to take a required action under, permit the lapse of or default
          under, or modify, amend or terminate any Material Contract; or cancel any
          material Indebtedness of another Person;  

30

		    (n)       collect
its accounts receivable in any manner or over any time period that is
          inconsistent with past practices of the Company and its Subsidiaries in the
          normal course of business;  

		    (o)       create
or dissolve any Subsidiary of the Company; or  

		    (p)       authorize
any of, or commit, resolve or agree, to take any of the foregoing           actions.  

        Section
5.2. Access. The Company shall, during normal business hours or such other times
reasonably requested by Parent or AudioCodes (i) make available for inspection by
Parent, AudioCodes and their Representatives all of the Company’s and each of its
Subsidiaries’properties, assets, books, records (including the work papers of the
Company’s external accountants to the extent such materials are in the Company’s
possession or can be obtained by the Company or its Subsidiaries under their respective
rights granted pursuant to applicable contracts or agreements with such accountants) and
Contracts and any other materials reasonably requested by any of them relating to the
Company or any of its Subsidiaries at such times as Parent or AudioCodes may reasonably
request; (ii) make available to Parent, AudioCodes and their Representatives the
officers, other senior management and Representatives of the Company and its Subsidiaries
for interviews, at such times as Parent, AudioCodes and their Representatives may
reasonably request, to discuss the information furnished to Parent, AudioCodes and their
Representatives and otherwise discuss the Company’s and each of its Subsidiaries’ existing
and prospective businesses and assets and liabilities; (iii) use its commercially
reasonable efforts to assist in gaining reasonable access for Parent, at such times as
the Parties mutually agree, to the Company’s and each of its Subsidiaries’ lenders,
creditors, lessors, lessees, licensors, licensees, officers, employees, developers,
contractors, distributors, vendors, clients, customers, suppliers, Affiliates or other
Persons having a material business relationship with the Company or any of its
Subsidiaries; and (iv)  make available to Parent, AudioCodes and their
Representatives such information and materials relating to the Company and its
Subsidiaries as are necessary or appropriate in order to prepare and file reports and
registration statements with the Securities and Exchange Commission under the Securities
Act of 1933, as amended (the “Securities Act”) and under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), including using
commercially reasonable efforts to assist Parent and AudioCodes in obtaining any consents
required from the Company’s independent public accountants in order to file such
reports and registration statements. Any and all such investigations shall be conducted
in a manner that does not unreasonably interfere with the conduct of the business of the
Company or any of its Subsidiaries and minimizes any disruption to the conduct of such
business. Any information that is provided by the Company to Parent, AudioCodes or their
Representatives in connection with the transactions contemplated by this Agreement shall
constitute “Confidential Information” as such term is defined, and subject to
the exceptions set forth, in the Confidentiality Agreement dated as of August 18, 2005,
between Parent and the Company (the “Confidentiality Agreement”).  

        Section
5.3. Tax Matters.  

31

    (a)        The
Company shall timely prepare and file any Tax Return required to be filed by
          the Company on or before the Closing Date (a “Pre-Closing Tax
          Return”), and timely pay any Tax reflected thereon. In addition, the
          Company shall submit any Pre-Closing Tax Returns that are to be filed after the
          date hereof to Parent for approval prior to filing, such approval shall not be
          unreasonably delayed or withheld. Except as may be required by applicable Law,
          the Company will not take any position on such Tax Returns that is materially
          inconsistent with past custom and practice.  

    (b)        All
stamp, transfer, documentary, sales, use, registration and other such Taxes
          (including all applicable real estate transfer or gains Taxes) and related fees
          (including any penalties, interest and additions to Tax) incurred in connection
          with the Merger and the other transactions contemplated hereby shall be paid
          one-half by the Sellers, on the one hand, and one-half by Parent and
AudioCodes,           on the other hand, and the Sellers’ Representative and Parent
shall           cooperate in timely filing all Tax Returns as may be required to comply
with the           provisions of such Tax Laws. Parent, AudioCodes and the Sellers’          Representative
will reasonably cooperate with each other to lawfully minimize           any such Taxes.
Promptly upon Parent’s request, the Sellers’          Representative shall
provide Parent with any information that is required with           respect to any
statement to be furnished to the Company’s stockholders or           reporting
requirements under Sections 6043 and 6043A of the Code, the           regulations
promulgated thereunder or forms prescribed by the United States           Secretary of
the Treasury.  

    (c)        The
Company shall cause the provisions of any Tax allocation, indemnity or           sharing
Contract between the Sellers, or any of their respective Affiliates           (other than
the Company) or any third party, on the one hand, and the Company,           on the other
hand, to be terminated on or before the Closing Date.  

    (d)        From
the date hereof through the Closing Date, the Company shall not effect any
          extraordinary transactions (other than any such transactions expressly required
          by applicable Law or by this Agreement) that could result in Tax liability to
          the Company in excess of Tax liability associated with the conduct of its
          business in the ordinary course.  

        Section
5.4. Notice of Certain Events.  

    (a)        The
Company shall promptly notify Parent of, and furnish Parent with any
          information it may reasonably request with respect to, the occurrence of any
          event or condition or the existence of any fact that causes or is reasonably
          likely to cause any of the Company’s representations and warranties in
          Article 3 hereof to no longer be true or correct or results in a failure of any
          of the conditions to the obligation of Parent to consummate the Merger set
forth           in Section 7.2. If any such event, condition or fact that is
required to be           disclosed pursuant to the preceding sentence requires any change
in the           Disclosure Schedule, or if any such event, condition, fact or
circumstance would           require such a change assuming the Disclosure Schedule were
dated as of the date           of the occurrence, existence or discovery of such event,
condition or fact, then           the Company shall promptly deliver to Parent an update
to the Disclosure           Schedule specifying such change. Such an update shall be
deemed to supplement           and amend the Disclosure Schedule (i) for the purposes of
determining the           accuracy of any of the representations and warranties made by
the Company in           this Agreement for the purposes of indemnification under Section
8 hereof, but           (ii) not for purposes of determining whether any of the
conditions set forth in           Section 7.2 have been satisfied.  

32

    (b)        AudioCodes
or Parent shall notify the Company within five (5) Business Days of           the receipt
of any update of the Disclosure Schedule if it considers such           updated
information to impact, in any material respect, the value of the Company           and
its Subsidiaries, taken as a whole. If AudioCodes or Parent provides such a
          notice, the parties agree to negotiate in good faith, for a period of five (5)
          Business Days, to determine whether any adjustment to the Purchase Price or
          other amendment of this Agreement is appropriate. If the parties agree to
adjust           the Purchase Price or amend any other terms or conditions, the parties
will           promptly execute any amendment to this Agreement or such other documents
          necessary to effect such adjustment or amendment. Nothing in this Section
5.4(b)           shall affect AudioCodes’ or Parent’s rights under Section 7.2
of this           Agreement.  

    (c)        Parent
and AudioCodes shall promptly notify the Company of, and furnish the           Company
with any information it may reasonably request with respect to, the           occurrence
of any event or condition or the existence of any fact that causes           any of Parent’s
or AudioCodes’ representations and warranties in           Section 4 hereof to no
longer be true or correct or results in a failure of any           of the conditions to
the obligation of the Company to consummate the Merger set           forth in Section 7.3.  

        Section
5.5. Insurance.  The Company shall use its commercially reasonable
efforts to keep all insurance policies set forth in Section 3.18 of the Disclosure
Schedule, or comparable replacements therefor, in full force and effect through the
Effective Time.  

        Section
5.6. Exclusivity.  

    (a)        From
the date of this Agreement through the Closing, the Company shall not,           directly
or indirectly through any of its officers, directors, stockholders,           Affiliates
of stockholders, Representatives, or any Representative of any of the
          foregoing, encourage, solicit, initiate, participate or otherwise facilitate
any           inquiry, proposal, offer, discussion or negotiation with, or provide any
          information or assistance to, any Person or group (other than Parent and its
          Representatives in their capacities as Representatives of Parent) concerning
any           (i) merger, reorganization, share exchange, consolidation, business
combination,           joint venture, strategic alliance, recapitalization, liquidation,
dissolution,           sale of any securities or sale of material assets involving the
Company, (ii)           license or grant of rights to any third party for any of the
Intellectual           Property Rights or (iii) similar transaction involving the
Company.  

    (b)        The
Company shall notify AudioCodes of any inquiry, proposal or offer of the           nature
described in Section 5.6(a) within one Business Day of its officers and
          directors receiving such inquiry, proposal or offer or within one Business Day
          of it obtaining Knowledge that any of its stockholders, Affiliates of
          stockholders, Representatives or any Representatives of any of the foregoing
          received such inquiry, proposal or offer. In such notice to AudioCodes, the
          Company shall inform AudioCodes of the name of the Person making such inquiry,
          proposal or offer and the material terms, conditions and other aspects of such
          inquiry, proposal or offer.  

        Section
5.7. Stockholder Approval; Notices to Stockholders.  

33

    (a)        The
Company shall set the date hereof as the record date for action to be taken           by
written consent by the holders of Capital Stock of the Company to adopt this
          Agreement. As soon as practicable but in any case prior to the Closing, the
          Company shall deliver to the holders of Capital Stock of the Company a notice
          and disclosure statement (the “Disclosure Statement”) pursuant
          to Sections 228 and 262(d) of the DGCL, which shall comply with applicable
          Law and shall include (i) a summary of this Agreement and the transactions
          contemplated hereby and such other matters as are appropriate for such a
          disclosure document, (ii) a statement that appraisal rights are available
          for the shares of Capital Stock of the Company pursuant to the Appraisal
Statute           and a copy of the Appraisal Statute and (iii) except in the case of the
          Disclosure Statement given to stockholders executing a Written Consent, notice
          that the Stockholder Approval has been obtained following execution and
delivery           of this Agreement. The Company, acting through its Board of Directors,
shall           solicit the written consent of each such holder in favor of adopting the
Merger           Agreement and shall include in the Disclosure Statement the
recommendation of           its Board of Directors that the holders of the Company’s
Capital Stock vote           in favor of the adoption of the Merger Agreement. The
Company agrees not to           distribute the Disclosure Statement until Parent has had
a reasonable           opportunity to review and comment on the Disclosure Statement. The
Company shall           reflect all reasonable comments in the Disclosure Statement. The
Company shall           ensure that all holders of Capital Stock who approve the Merger
Agreement by           written consent under Section 228 of the DGCL shall have done
so by           executing and delivering a Written Consent.  

    (b)        The
Company will insure that the information in the Disclosure Statement will           not,
at the time the Disclosure Statement is provided to the holders of the           Company’s
Capital Stock, contain any statement that is false or misleading           with respect
to any material fact, or omit to state any material fact necessary           in order to
make the statements made therein, in light of the circumstances           under which
they are made, not false or misleading. If at any time prior to the           Effective
Time any event or information should be discovered by the Company that           should
be set forth in an amendment to the Disclosure Statement, the Company           shall
promptly inform Parent and shall communicate such information to the           holders of
the Company’s Capital Stock as necessary and in an appropriate           manner. The
Company shall use its commercially reasonable efforts to cause each           Selling
Stockholder to vote in favor of the Merger and shall comply with all           applicable
Laws in connection therewith.  

        Section
5.8. Additional Deliveries Prior to Closing.  

    (a)       The
Company shall deliver the following to Parent no later than ten (10)           Business
Days prior to the proposed Closing Date, determined in accordance with           Section
1.2:  

		    (i)       the
audited consolidated balance sheets of the Company and its Subsidiaries as           of
March 25, 2006 and the related audited consolidated statements of income and
          cash flows of the Company and its Subsidiaries for the fiscal year ended March
          25, 2006, together with the notes to such financial statements, with the report
          thereon by Peterson & Co., LLP for the fiscal year ended March 25, 2006,
          which shall comply as to form and substance with the requirements of the
          Securities Act and the Exchange Act and the rules and regulations thereunder.  

		    (ii)       a
statement (the “Pre-Closing Statement”) prepared by the chief
          financial officer of the Company setting forth the following calculations,
          together with a summary of the basis therefor: (i) the Banking Fees to be
          incurred and paid by the Company; (ii) the estimated amount of cash and cash
          equivalents of the Company and its Subsidiaries as of the Closing Date; (iii)
          the amount of any Indebtedness expected to be outstanding at the Closing; and
          (iv) the calculation of the Purchase Price, in accordance with this Agreement,
          indicating the extent to which the Purchase Price is to be adjusted based on
the           foregoing calculations.  

34

    (b)       Parent
shall notify the Company, at least two (2) Business Days prior to the           Closing,
as to whether it agrees with the calculations set forth in the           Pre-Closing
Statement and, if Parent does not agree with all such calculations,           setting
forth in reasonable detail Parent’s objections to the Pre-Closing
          Statement and its determination of any such adjustments to the Purchase Price.
          If the parties are not able to reach agreement as to the amount of any
          adjustment to the Purchase Price, the Closing shall be postponed for a period
of           up to ten (10) Business Days while Parent and the Company use commercially
          reasonable efforts to resolve the dispute as to any such adjustments. If Parent
          and the Company are unable to reach agreement during such additional period,
          then the items in dispute shall be submitted immediately to the Accounting
Firm,           which shall be required to render a determination of the applicable
dispute           within fifteen (15) Business Days after referral of the matter to the
Accounting           Firm. The determination by the Accounting Firm must be in writing
and must set           forth, in reasonable detail, the basis therefor. Such
determination shall be           conclusive and binding upon the Company and Parent.  

    (c)       Within
five (5) Business Days after the date of this Agreement, the Company           shall
propose to AudioCodes for its approval an amount of retention bonus
          compensation payable to each of the employees of the Company listed on Schedule
          5.8(c), up to the maximum aggregate amount of bonus compensation for all such
          employees as is set forth on Schedule 5.8(c). Following the approval by
          AudioCodes of the allocation of retention bonus compensation among such
          employees, the Company shall promptly execute and deliver to each such
          employee, and shall use its commercially reasonable efforts to cause
each           such employee to execute and deliver to the Company, a retention bonus
agreement           in substantially the form attached hereto as Exhibit D. 

        Section
5.9. Delivery of Interim Financial Statements. As promptly as possible following
the last day of each month after the date of this Agreement and until the Closing Date,
and in any event within thirty (30) days after the end of each such month, the Company
shall deliver to Parent the consolidated balance sheet of the Company and its
Subsidiaries and the related consolidated statements of income and cash flows for the
one-month period then ended and for the period from the beginning of the fiscal year
through the end of such month. Such interim financial statements will be prepared in
accordance with GAAP, provided that such interim financial statements will not have notes
and will be subject to normal year-end adjustments, on a basis consistent with the
Financial Statements and fairly present the financial condition and results of operations
of the Company and its Subsidiaries as of the date thereof and for the period covered
thereby (collectively, the “Interim Financial Statements”).  

        Section
5.10. Satisfaction of Conditions Including Consents. The Company will use
commercially reasonable efforts to obtain the satisfaction of the conditions set forth in
Section 7.2 of this Agreement, including without limitation, obtaining all consents
required as specified in Section 3.6(a)(ii) of the Disclosure Schedule.  

        Section
5.11. Benefits for Continuing Employees. Parent will, at its election, (A)
continue existing employee welfare benefit plans, programs or policies currently offered
by the Company or any of its Subsidiaries to continuing employees, and, as applicable,
their eligible dependents or (B) permit continuing employees, and, as applicable, their
eligible dependents, to participate in employee welfare benefit plans, programs or
policies (including, without limitation, any vacation, sick, or personal time off plans
or programs) of Parent and any plan of Parent intended to qualify within the meaning of
Section 401(a) of the Code on terms no less favorable than those provided to similarly
situated employees of Parent or its Subsidiaries; provided however, that (i) each such
continuing employee will receive credit for purposes of eligibility to participate under
such for years of service with the Company or any of its Subsidiaries prior to the
Closing, and (ii) Parent will cause any and all pre-existing condition limitations,
eligibility waiting periods and evidence of insurability requirements under any group
health plans of Parent in which such employees and their eligible dependents will
participate to be waived, to the extent permitted by the applicable plan documents or
required by applicable Law.  

35

        Section
5.12. Indemnification.  

    (a)        For
a period of six years after the Effective Time, Parent and AudioCodes will
          cause the Surviving Corporation to fulfill and honor all rights to
          indemnification pursuant to agreements listed on Section 5.12 of the Disclosure
          Schedule in favor of each Person who is now, or has been at any time prior to
          the date of this Agreement or who becomes prior to the Effective Time, an
          officer of director of the Company or any of its Subsidiaries (the
          “Company Indemnified Parties”). For six (6) years after the
          Effective Time, Parent and AudioCodes will cause the Certificate of
          Incorporation and Bylaws of the Surviving Corporation to contain provisions
with           respect to exculpation and indemnification that are at least as favorable
to the           Company Indemnified Parties as those contained in the Constitutive
Documents of           the Company as in effect on the date hereof, and Parent and
AudioCodes will           cause such provisions to not be amended, repealed or otherwise
modified in any           manner that would adversely affect the rights thereunder of the
Company           Indemnified Parties, unless such modification is required by applicable
Law.  

    (b)        For
six (6) years after the Effective Time, Parent and AudioCodes will, or will
          cause the Surviving Corporation to, maintain directors’ and officers’          liability
insurance covering those Persons who are covered by the Company’s           directors’ and
officers’ liability insurance policy as of the date           hereof in an amount
and on terms no less favorable than those applicable to the           current directors
and officers of the Company.  

	    (c)        The
provisions of this Section 5.12 are intended to be for the benefit of, and
          shall be enforceable by the Company Indemnified Parties and their heirs and
          personal representatives and shall be binding on Parent, AudioCodes and/or the
          Surviving Corporation, and their respective successors and assigns. In the
event           Parent, AudioCodes or the Surviving Corporation or any successor or
assign (A)           consolidates with or merges into any other Person and shall not be
the           continuing or surviving corporation or entity in such consolidation or
merger or           (B) transfers all or substantially all of its properties and assets
to any           Person, then in each such case proper provision shall be made so that
the           successor or assign of Parent or the Surviving Corporation, as the case may
be,           honors the obligations set forth with respect to Parent and/or the
Surviving           Corporation, as the case may be, in this Section 5.12.  

ARTICLE 6 

MUTUAL COVENANTS 

        Section
6.1. Commercially Reasonable Efforts.  From the date of this Agreement
to the Closing and upon the terms and subject to the conditions set forth in this
Agreement, each of the Parties shall use all commercially reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to assist and
cooperate with the other Parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable, the Merger and
the other transactions contemplated hereby, including (i) the obtaining of all necessary
actions or nonactions, waivers, consents and approvals from Governmental Entities and the
making of all necessary registrations and filings and the taking of all reasonable steps
as may be necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Entity, (ii) the obtaining of all necessary consents,
approvals, estoppels or waivers from third parties, (iii) the defending of any lawsuits
or other legal proceedings, whether judicial or administrative, challenging this
Agreement or the consummation of the Merger, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity vacated or
reversed, (iv) the execution and delivery of any additional instruments necessary to
consummate the Merger and the other transactions contemplated hereby and to fully carry
out the purposes of the Transaction Agreements and (v) ensuring that its representations
and warranties remain true and correct in all material respects through the Closing Date
and that the conditions to the obligations of the other Parties to consummate the Merger
are satisfied.  

36

        Section
6.2. Publicity.  No party to this Agreement (a “Party”)
shall issue a press release or public announcement or otherwise make any public
disclosure concerning the subject matter of this Agreement without the prior written
approval of the other Parties; provided, however, that the Parties shall be
permitted to issue a press release in agreed form on the date hereof; provided further that
any Party may make any public disclosure it believes in good faith is required by
applicable Law, court process or by Nasdaq or national securities exchange rule (a “Required
Disclosure”). Any Party making a Required Disclosure will give the other Parties
sufficient prior notice of the Required Disclosure before such disclosure is made to
allow the other Parties to review and comment on the Required Disclosure.  

        Section
6.3. Antitrust Notification.  

    (a)        Each
of the Parties shall, as promptly as practicable (but in no event later           than
ten Business Days) following the date hereof, (i) file with the Federal           Trade
Commission (the “FTC”) and the United States Department           of
Justice (the “DOJ”) all materials initially required to be
          filed under the HSR Act in connection with the Merger and (ii) make all other
          filings necessary or appropriate under any Foreign Antitrust Laws in connection
          with the Merger and the other transactions contemplated hereby. To the extent
          permitted by applicable Law, the Parties shall work together and shall furnish
          to one another such necessary information and reasonable assistance as the
other           may require in connection with its preparation of any filing or
submission under           the HSR Act or Foreign Antitrust Law. The Parties shall keep
one another           apprised of the status of any communications with, and any
inquiries or requests           for additional information from, the FTC, the DOJ or any
other applicable           Governmental Entity, and shall comply promptly with any such
reasonable inquiry           or request.  

    (b)        The
Parties shall use commercially reasonable efforts to obtain any clearance
          required under the HSR Act or Foreign Antitrust Law for the Merger and the
other           transactions contemplated hereby. For purposes of this Section 6.3(b) and
of           Section 6.1, the “commercially reasonable efforts” of AudioCodes,
          Parent and Merger Sub shall not require AudioCodes, Parent or Merger Sub to
          agree to any prohibition, limitation or other requirement of the type set forth
          in clauses (ii) through (iv) of Section 7.2(c).  

    Section        6.4.
Expenses. Whether or not the Merger and the other transactions contemplated hereby
are consummated, each of the Parties shall bear its own fees and expenses incurred or
owed in connection with the Merger, this Agreement and the other transactions
contemplated hereby except (a) as otherwise set forth in Article 8 and the Escrow
Agreement; (b) as otherwise set forth in the Expenses Escrow Agreement; and (c) any
filing fee under the HSR Act shall be paid by AudioCodes or Parent, provided that
the Purchase Price will be reduced by an amount equal to one-half of the initial filing
fee as set forth in the definition of Purchase Price herein.  

37

ARTICLE 7 

CONDITIONS PRECEDENT 

        Section
7.1. Conditions to Each Party’s Obligation. The respective obligation of each
Party to effect the Merger is subject to the satisfaction (or express written waiver by
Parent and the Company) on or prior to the Closing Date of the following conditions:  

		    (a)       Stockholder
Approval and Related Notices. The Stockholder Approval shall           have been duly
obtained and (i) the holders of the Preferred Stock and the           Warrants shall have
been given any requisite notice of the Merger (and related           matters) to which
they are entitled under the Company’s Constitutive           Documents and Contracts
or other document under which the Warrants were granted,           as the case may be, or
(ii) each of such holders shall have waived such notice           (and copies of such
waivers shall have been provided to Parent).  

		    (b)       Regulatory.
All waiting periods (and extensions thereof) applicable to           the Merger or other
transactions contemplated hereby under the HSR Act and all           review periods under
the Exon-Florio Act applicable to the Merger or other           transaction contemplated
hereby shall have been terminated or shall have           expired; and the applicable
filings, approvals or expiration or termination of           any and all applicable
waiting periods under Foreign Antitrust Laws shall have           expired or shall have
been terminated.  

		    (c)       No
Injunction or Restraint. No temporary restraining order, preliminary           or
permanent injunction or other order or decree issued by any court of           competent
jurisdiction or other legal restraint or prohibition preventing the
          consummation of the Merger shall be in effect; provided, however,
          that prior to asserting this condition, subject to Section 6.1, each of the
          Parties shall have used all commercially reasonable efforts to prevent the
entry           of any such injunction or other order and to appeal as promptly as
possible any           such injunction or other order that may be entered.  

        Section
7.2. Conditions to AudioCodes’ and Parent’s Obligations.  The
obligations of AudioCodes, Parent and Merger Sub to effect the Merger are further subject
to the satisfaction (or express written waiver by Parent) on or prior to the Closing Date
of the following conditions:  

		    (a)        Representations,
Warranties and Covenants of the Company.  The
               representations and warranties of the Company set forth in this Agreement
that                are qualified as to materiality (including in the definition of
Material Adverse                Effect) shall be true and correct, and all other
representations and warranties                of the Company set forth in this Agreement
that are not so qualified shall be                true and correct in all material
respects as of the Closing Date with the same                effect as though made as of
the Closing Date, except that the accuracy of                representations and
warranties that by their terms speak as of a specified date                will be
determined as of such date. The Company shall have performed or complied
               with in all material respects all covenants, agreements and
obligations                required by this Agreement to be performed or complied with by
the Company on or                before the Closing Date, including without limitation
the expiration of any                notice or dispute resolution period provided for in
Section 5.4 and 5.8 of this                Agreement. The Company shall have delivered to
Parent a certificate, dated the                Closing Date and signed by the chief
executive officer and chief financial                officer of the Company, confirming
the foregoing.  

38

		    (b)        No
Material Adverse Effect. Since March 25, 2006, there shall not have
               been a Material Adverse Effect.  

		    (c)        No
Injunction. There shall not be pending or threatened by any
               Governmental Entity any Legal Proceeding (or by any other Person any Legal
               Proceeding which has a reasonable likelihood of success), (i) challenging
               or seeking to restrain or prohibit the Merger or any of the other
transactions                contemplated by this Agreement or seeking to obtain from
Parent or any of its                Subsidiaries in connection with the Merger any
damages that are material in                relation to the Company, (ii) seeking to
prohibit or limit the ownership or                operation by Parent, its Subsidiaries
or the Company of any material portion of                the business or assets of
Parent, its Subsidiaries or the Company and its                Subsidiaries, or to compel
Parent, its Subsidiaries or the Company to dispose                of, hold separate or
license any material portion of the business or assets of                Parent, its
Subsidiaries or the Company and its Subsidiaries, as a result of the
               Merger or any of the other transactions contemplated by this Agreement,
               (iii) seeking to impose limitations on the ability of Parent or any
of its                Subsidiaries to acquire or hold, or exercise full rights of
ownership of, any                shares of Capital Stock of the Company, including the
right to vote such shares                on all matters properly presented to the
stockholders of the Company or                (iv) seeking to prohibit Parent or any
of its Subsidiaries from effectively                controlling in any material respect
the business or operations of the Company.  

		    (d)        Consents
and Approvals.  Parent shall have received evidence,                in form
and substance reasonably satisfactory to it, that all consents and
               approvals of third parties set forth in Section 3.6(a)(ii) of the
Disclosure                Schedule in connection with the Merger, this Agreement and the
other                transactions contemplated hereby, have been obtained and are in full
force and                effect.  

		    (e)        Appraisal
Shares. The time during which a holder of Capital Stock is                permitted
to demand appraisal rights under the DGCL shall have expired and                holders
of not more than five percent of the shares of the Company’s Common
               Stock issued and outstanding immediately prior to the Effective Time,
shall have                asserted or be seeking to assert their appraisal rights under
Section 262 of the                DGCL and the Company shall have delivered to Parent a
certificate, signed on                behalf of the Company by the Chief Executive
Officer of the Company, certifying                the foregoing and the date on which the
Disclosure Statement was first mailed to                the holders of the Capital Stock
of the Company; provided, however that                if no such holders of the
shares of the Company Common Stock have asserted or                are seeking to assert
their appraisal rights under Section 262 of the DGCL, such                certificate
shall indicate such.  

		    (f)        Agreements
with Sellers. At or prior to the Closing, the agreements                listed in
Section 3.22 of the Disclosure Schedule and any other Contract between                any
Seller or Affiliate thereof, on one hand, and the Company, on the other hand
               (other than (i) any confidentiality, noncompetition and
nonsolicitation                provisions, or provisions assigning or to assign
inventions or other                Intellectual Property or waiving to or waive any
appraisal rights, contained                therein inuring to the Company’s benefit,
(ii) the Contracts listed in                Section 7.2(f) of the Disclosure
Schedule and (iii) any other agreements                contemplated by this
Agreement to be entered into in connection with this                Agreement (including
the agreements required by this Agreement to terminate                other agreements)),
shall have been terminated pursuant to written agreements in                form and
substance reasonably satisfactory to Parent, and there shall be no
               obligations or liabilities of the Company with respect thereto.  

39

		    (g)        Audited
Financial Statements. The audited financial statements delivered                in
accordance with Section 5.8(a) shall not differ in any material respects from
               the Financial Statements initially delivered pursuant to Section 3.9(a).  

		    (h)        Agreement
with Company Auditors. Peterson & Co., LLP shall have                provided (i)
assurances, reasonably satisfactory to Parent, that it will execute                and
deliver, at such time or times as Parent shall request, its consent to the
               inclusion or incorporation by reference of its report as independent
auditor,                with respect to any Financial Statements for which it served as
the independent                auditor, in any report, registration statement or other
filing to be made by                AudioCodes within one year of the Closing Date with
the Securities and Exchange                Commission pursuant to the Securities Act or
the Exchange Act in which such                Financial Statements and report thereon are
required to be included; and (ii)                evidence reasonably satisfactory to
AudioCodes, of its independence under the                Securities Act and the Exchange
Act and the rules and regulations thereunder.  

		    (i)        Other
Documentation.  Parent shall have received:  

		    (i)        from
DLA Piper Rudnick Gray Cary US LLP, counsel to the Company, an opinion
               letter containing specific opinions in substantially the form of Exhibit
E                (subject to customary qualifications and assumptions), addressed to
               AudioCodes and Parent and dated as of the Closing Date;  

		    (ii)        a
certificate, issued by the Company pursuant to Treasury Regulation Section
               1.897-2(h) (as described in Treasury Regulation Section 1.1445-2(c)(3)),
that                the Company is not, and within the five year period ending on the
Closing Date                has not been, a U.S. real property holding corporation, as
defined in Section                897 of the Code;  

		    (iii)        written
resignations, effective as of the Closing, of each director of the
               Company;  

		    (iv)        counterparts
of the Escrow Agreement and the Expenses Escrow Agreement executed                and
delivered by the Sellers’ Representative and the Escrow Agent;  

		    (v)        a
certificate (the “Consideration Certificate”) of the Company,
               dated the Closing Date and signed by the chief financial officer of the
Company,                setting forth, with back-up calculations in reasonable detail,
the amount of the                Closing Merger Consideration to be paid to each holder
of Company Common Stock                and Preferred Stock, the Option Consideration to
be paid to each holder of an                Option pursuant to Section 2.2(a) and the
Warrant Consideration to be paid to                each holder of a Warrant pursuant to
Section 2.2(a);  

40

		    (vi)        copies
of the resolutions adopted by the board of directors of the Company
               authorizing the execution, delivery and performance of this Agreement and
the                other transactions contemplated hereby and copies of the Constitutive
Documents                of the Company, in each case certified by the secretary of the
Company as being                in effect as of the Closing Date;  

		    (vii)        a
certificate of the Company, dated the Closing Date and signed by the secretary
               of the Company, certifying as to the incumbency and signatures of the
officers                executing this Agreement and the other documents delivered by the
Company under                this Agreement; and  

		    (viii)        copies
of (A) the Constitutive Documents of the Company and each of its
               Subsidiaries, certified as of a recent date by the Secretary of State of
the                State of Delaware or such other applicable Governmental Authority
where such                Subsidiary is organized, (B) good standing certificates or
equivalent                certificates, dated as of a recent date, of the Company and
each of it                Subsidiaries from the Secretary of State of the State of
Delaware or such other                applicable Governmental Authority where such
Subsidiary is organized and (C)                certificates, dated as of a recent date,
of the Company and each of its                Subsidiaries from the Secretary of State or
other applicable Governmental Entity                in the United States, stating that,
with respect to each of the Company and its                Subsidiaries that is required
to qualified as a foreign corporation or entity in                such jurisdiction, each
such Person is duly qualified and in good standing as a                foreign
corporation or entity in such jurisdiction.  

        Section
7.3. Conditions to the Company’s Obligation.  The obligation of the
Company to effect the Merger is subject to the satisfaction (or express written waiver by
the Company) on or prior to the Closing Date of the following conditions:  

		    (a)       Representations
and Warranties.  The representations and           warranties of
AudioCodes, Parent and Merger Sub set forth in this Agreement that           are
qualified as to materiality (including in the definition of Material Adverse
          Effect) shall be true and correct, and all other representations and warranties
          of AudioCodes, Parent and Merger Sub set forth in this Agreement that are not
so           qualified shall be true and correct in all material respects, in each case
as of           the date of this Agreement and as of the Closing Date with the same
effect as           though made as of the Closing Date, except that the accuracy of
representations           and warranties that by their terms speak as of a specified date
will be           determined as of such date. The Company shall have received a
certificate, dated           the Closing Date and signed on behalf of Parent by an
authorized signatory of           Parent, confirming the foregoing.  

		    (b)       Covenants
and Agreements.  Parent and Merger Sub shall have           performed or
complied with in all materialrespects all covenants,           agreements and
obligations required by this Agreement to be performed or           complied with by them
on or before the Closing Date. The Company shall have           received a certificate,
dated the Closing Date and signed on behalf of Parent by           an authorized
signatory of Parent, confirming the foregoing.  

		    (c)       No
Injunction.  There shall not be pending or threatened by any
          Governmental Entity any Legal Proceeding (or by any other Person any Legal
          Proceeding which has a reasonable likelihood of success), challenging or
seeking           to restrain or prohibit the Merger or any of the other transactions
contemplated           by this Agreement.  

41

		    (d)       Governmental
Consents and Approvals.  The Company shall have           received
evidence, in form and substance reasonably satisfactory to it, that all
          consents of Governmental Entities required in connection with the Merger, this
          Agreement and the other transactions contemplated hereby, have been obtained
and           are in full force and effect.  

		    (e)       Escrow
Agreements. The Company and the Seller’s Representative shall           have
received counterparts of the Escrow Agreement executed and delivered by           Parent
and the Escrow Agent and the Expenses Escrow Agreement executed and           delivered
by the Escrow Agent.  

ARTICLE 8 

INDEMNIFICATION 

        Section
8.1. Indemnification of Parent.  From and after the Closing, each of
AudioCodes, Parent and their Affiliates (including, from and after the Closing, the
Surviving Corporation) (each, a “Parent Indemnified Party”) shall be
entitled to be indemnified and held harmless from the Escrow Fund (as defined in the
Escrow Agreement, the “Escrow Fund”) against any and all Losses suffered
or incurred by such Parent Indemnified Party, arising from, relating to or otherwise in
connection with:  

		    (a)       any
breach, as of the date of this Agreement or as of the Closing Date, of any
          representation or warranty of the Company contained in this Agreement or in any
          of the certificates furnished by the Company pursuant to this Agreement;  

		    (b)       any
breach or failure to perform any covenant or agreement of the Company           contained
in this Agreement;  

		    (c)       any
failure of any Selling Stockholder to have good, valid and marketable title,
          free and clear of all Liens, to the Capital Stock of the Company issued in the
          name of such Selling Stockholder and issued and outstanding immediately prior
to           the Effective Time;  

		    (d)       any
claim by a stockholder or former stockholder of the Company, or by any other
          Person, seeking to assert, or based upon: (i) ownership or rights to
          ownership of any shares of stock of the Company; (ii) any right of a
          stockholder of the Company (other than the right to receive the Closing Merger
          Consideration), including any option, preemptive right or right to notice or to
          vote; (iii) any right under the Certificate of Incorporation or By-laws of
          the Company; or (iv) any claim that its shares were wrongfully repurchased
          by the Company;  

		    (e)       the
following payments: (i) the excess of the sum of (A) the Banking Fees and
          Excess Employee Severance Costs over (B) $1,400,000; and (ii) the amount of any
          Excess Bonus Costs; provided, that no indemnification shall be available to the
          extent such excess or amount, or any portion thereof, has previously resulted
in           a reduction of the Purchase Price;  

		    (f)       any
Losses incurred by the Company or any of its Subsidiaries, other than the
          Subsidiary referenced in Section 3.16(iv) of the Disclosure Schedule, in excess
          of $200,000, resulting from or relating to the legal proceedings described in
          Section 3.16(iv) of the Disclosure Schedule;  

42

		    (g)       any
Losses incurred by the Company or any of its Subsidiaries, in excess of
          $200,000, resulting from or relating to the matter referenced in Section
          3.16(iii) of the Disclosure Schedule;  

		    (h)       any
Losses incurred by the Company or any of its Subsidiaries resulting from or
          relating to the matter referenced in Section 3.16(i) of the Disclosure
Schedule;  

		    (i)       any
Losses incurred by the Company or any of its Subsidiaries resulting from or
          relating to the claims referenced in Section 3.16(ii) of the Disclosure
          Schedule; and  

		    (j)       any
Losses incurred by the Company or any of its Subsidiaries resulting from or
          relating to the matter referenced in Section 3.16(vi) of the Disclosure
          Schedule;  

	 	
provided,
however, that no Parent Indemnified Party shall be entitled to be indemnified
pursuant to clauses (a), (c) and (d) above unless the aggregate of all Losses for which
Parent Indemnified Parties would, but for this proviso, be liable exceeds on a cumulative
basis $450,000 (the “Seller Indemnity Threshold”), at which point each
Parent Indemnified Party shall be entitled to be indemnified for the aggregate Losses and
not just amounts in excess of the Seller Indemnity Threshold (except that the foregoing
proviso shall not apply to any breach of the representations and warranties set forth in
Sections 3.17 and 3.24, the Consideration Certificate or to any act of fraud). Other than
the involvement of the Sellers’ Representative pursuant to the Escrow Agreement, the
consent of any particular Seller shall not be required in order for Parent to be
indemnified under this Article 8. 

        Section
8.2. Indemnification of Seller Indemnified Parties.   From and after the
Closing, AudioCodes and Parent shall indemnify the Sellers and their Affiliates (each a
“Seller Indemnified Party”) against and hold each Seller Indemnified
Party harmless from any and all Losses suffered or incurred by any such Seller
Indemnified Party arising from, relating to or otherwise in connection with:  

		    (a)       any
breach, as of the date of this Agreement or as of the Closing Date, of any
          representation or warranty of AudioCodes, Parent or Merger Sub contained in
this           Agreement or in the certificate furnished by Parent pursuant to this
Agreement;           or  

		    (b)       any
failure to perform any covenant or agreement of AudioCodes, Parent or Merger
          Sub contained in this Agreement;  

	 	
provided,
however, that AudioCodes and Parent’s collective liability under this Section
8.2 shall be limited to an amount equal to the initial Escrow Amount, provided,
further, that the affirmative payment obligations of AudioCodes and Parent
specifically set forth in this Agreement shall not be subject to, or counted against, the
foregoing limitation of liability.  

        Section
8.3. Indemnification Claims.  

43

    (a)        In
order for an Indemnified Party to be entitled to any indemnification provided
          for under Section 8.1 or 8.2 in respect of, arising out of or involving a Third
          Party Claim, such Indemnified Party must notify the Indemnifying Party in
          writing of the Third Party Claim (including in such notice a brief description
          of the applicable claim(s), including damages sought or estimated, to the
extent           actually known by Parent) within 20 Business Days after receipt by such
          Indemnified Party of notice of the Third Party Claim; provided, however,
that failure to give such notification shall not affect the           indemnification
provided under Section 8.1 or 8.2 except to the extent the           Indemnifying Party
has been actually prejudiced as a result of such failure.           Thereafter, the
Indemnified Party shall deliver to the Indemnifying Party,           within ten Business
Days after the Indemnified Party’s receipt           thereof, copies of all notices
and documents received by the Indemnified Party           relating to the Third Party
Claim. The Indemnifying Party shall conduct and           control the defense of such
Third Party Claim and the Indemnified Party shall be           entitled to participate in
the defense or settlement of such matter at its           expense (including any fees for
separate counsel); provided that the           Indemnified Party shall not be
entitled to be indemnified or held harmless under           Section 8.1 or 8.2 for such
Third Party Claim if it shall settle such Third           Party Claim without the prior
written consent of the Indemnifying Party, unless           the Indemnified Party has
sought such consent and such consent has been           unreasonably withheld or delayed,
it being agreed that the Indemnifying Party           shall not unreasonably withhold or
delay such consent. If the Indemnifying Party           fails to assume the defense of
any such Third Party Claim within ten (10)           Business Days of notice to the
Indemnifying Party of such Third Party Claim, the           Indemnified Party may defend
against such Third Party Claim in any manner it           reasonably may deem
appropriate. The Indemnifying Party shall not consent to the           entry of any
judgment or settle any such Third Party Claim (i) without the           written consent
of the Indemnified Party (which consent shall not be           unreasonably withheld or
delayed) if any relief, other than the payment of money           damages, would be
granted by such settlement or if the Indemnified Party would           be liable to the
third party for the amount of such settlement, and (ii) unless           the Indemnified
Party is granted a full release of claims.  

    (b)        In
order for an Indemnified Party to be entitled to any indemnification provided
          for under this Agreement other than in respect of, arising out of or involving
a           Third Party Claim, such Indemnified Party shall deliver notice of such claim
          with reasonable promptness to the Indemnifying Party (including in such notice
a           brief description of the applicable claim(s), including damages sought or
          estimated, to the extent actually known by Parent); provided, however,
that failure to give such notification shall not affect the           indemnification
provided under Section 8.1 or 8.2 except to the extent the           Indemnifying Party
has been actually prejudiced as a result of such failure. If           the Indemnifying
Party does not notify the Indemnified Party within 20 Business           Days following
its receipt of such notice that the Indemnifying Party disputes           the indemnity
claimed by the Indemnified Party under Section 8.1 or 8.2, such           indemnity claim
specified by the Indemnified Party in such notice shall be           conclusively deemed
a liability to be indemnified under Section 8.1 or 8.2 and           the Indemnified
Party shall be indemnified for the amount of the Losses stated           in such notice
to the Indemnified Party on demand or, in the case of any notice           in which the
Losses (or any portion thereof) are estimated, on such later date           when the
amount of such Losses (or such portion thereof) becomes finally           determined.  

    (c)        Except
with respect to fraud, from and after the Closing, the Escrow Agreement           shall
be the sole and exclusive means by which AudioCodes and Parent may collect           any
Losses for which it is entitled to indemnification under this Agreement.
          Notwithstanding the foregoing, nothing in this Article 8 shall limit
          Parent’s or AudioCodes’s recourse against any Seller pursuant to the
          terms of any document to which such Seller is a party, such as a Letter of
          Transmittal.  

44

    (d)        With
respect to any claim for indemnification pursuant to Section 8.1,           references in
this Agreement to the “Indemnifying Party” with respect           to any right
to give or receive notice or consent shall be deemed to refer to           the Sellers’ Representative.
Should the Sellers’ Representative resign           or be unable to serve, a new
Sellers’ Representative will be selected           jointly by a vote of Sellers who,
at Closing, held at least a majority of the           Common Stock (on an as-converted
basis), whose appointment shall be effective           upon execution by such successor
of a joinder agreement providing for such           successor to become a party to the
Escrow Agreement as the Sellers’          Representative, in which case such
successor shall for all purposes of this           Agreement and the Escrow Agreement be
the Sellers’ Representative (and the           prior acts taken by the succeeded
Sellers’ Representative shall remain           valid for purposes of this Agreement
and the Escrow Agreement).  

        Section
8.4. Termination of Indemnification. All representations, warranties and covenants
that are covered by the indemnification agreements in this Article 8 shall survive the
Closing solely for purposes of this Article 8 and shall expire, and the right to be
indemnified and held harmless shall terminate, on the date one year following the Closing
Date (the “Expiration Date”); provided, however, that in
accordance with the terms of the Escrow Agreement, such obligations to indemnify and hold
harmless shall not terminate with respect to any Losses as to which the Indemnified Party
shall have, on or prior to such date, previously made a claim by delivering a notice of
such claim to the Indemnifying Party. The Expenses Escrow Fund shall terminate upon the
Expiration Date; provided, however, that a portion of the Expenses Escrow Fund
(the “Required Portion”) that, in the reasonable judgment of the Sellers’ Representative
is necessary to remain available in order to fulfill the purposes of the Expenses Escrow
Fund shall remain in the Expenses Escrow Fund. If there is any cash in the Expenses
Escrow Fund in excess of the Required Portion on the Expiration Date, the Escrow Agent
shall promptly release from escrow to the holders of Company Capital Stock their pro rata
share of the Expenses Escrow Fund less the Required Portion, if any. Any funds remaining
from the Required Portion at such time as the Sellers’ Representative determines
that such funds are no longer necessary shall be released to the holders of Company
Capital Stock according to their pro rata share of such funds promptly after such
determination.  

        Section
8.5. No Right of Contribution. No Seller shall have any right of contribution
against the Company or the Surviving Corporation with respect to any breach by the
Company of any of its representations, warranties, covenants or agreements.  

ARTICLE 9 

TERMINATION 

        Section
9.1. Termination. This Agreement may be terminated, and the Merger contemplated
hereby may be abandoned, at any time prior to the Effective Time whether before or after
receipt of the Stockholder Approval:  

		    (a)       by
mutual written consent of AudioCodes, Parent, Merger Sub and the Company;  

		    (b)       by
either Parent or the Company:  

		    (i)       if
the Merger is not consummated on or before October 31, 2006 (the           “Outside
Date”), unless the failure to consummate the Merger is           the result of a
material breach of this Agreement by the Party seeking to           terminate this
Agreement;  

45

		    (ii)       if
any Governmental Entity issues an order, decree or ruling or taken any other
          action permanently enjoining, restraining or otherwise prohibiting the Merger
          and such order, decree, ruling or other action shall have become final and
          nonappealable; or  

		    (iii)       if
any condition to the obligation of such Party to consummate the Merger set
          forth in Section 7.2 (in the case of Parent) or 7.3 (in the case of the
Company)           becomes incapable of satisfaction prior to the Outside Date;  

		    (c)       by
Parent, if the Company breaches or fails to perform in any material respect           any
of its representations, warranties or covenants contained in this Agreement,
          which breach or failure to perform (i) would give rise to the failure of a
          condition set forth in Section 7.2(a) and (ii) cannot be or has not been
          cured within ten (10) Business Days after the giving of written notice to the
          Company of such breach;  

		    (d)       by
the Company, if AudioCodes or Parent breaches or fails to perform in any
          material respect of any of their respective representations, warranties or
          covenants contained in this Agreement, which breach or failure to perform (i)
          would give rise to the failure of a condition set forth in Section 7.3(a)
          or 7.3(b) and (ii) cannot be or has not been cured within ten (10) Business
Days           after the giving of written notice to Parent or AudioCodes of such breach;
or  

		    (e)       by
Parent if, within one hour after of the execution and delivery of this
          Agreement, the holders of Capital Stock of the Company set forth in Section
          9.1(e) of the Disclosure Schedule shall not have executed and delivered the
          written consent of stockholders and notice to the Company attached as Exhibit
          F hereto (the “Written Consent”), duly adopting the
          resolutions contained therein, or the Stockholder Approval shall not have been
          duly obtained.  

        Section
9.2. Effect of Termination. If this Agreement is terminated and the Merger and the
other transactions contemplated hereby are abandoned as described in this Article 9,
this Agreement shall forthwith become void and of no further force or effect, except for
the provisions of Sections 6.2, 6.4 and this Section 9.2; provided that nothing in
this Section 9.2 shall be deemed to release any Party from any liability for any breach
by such Party of the terms and provisions of this Agreement.  

ARTICLE 10 

GENERAL PROVISIONS 

        Section
10.1. Notices.  All notices, requests, claims, demands, waivers and
other communications under this Agreement shall be in writing and shall be by email, in
the case of AudioCodes, and, in addition, shall be by facsimile, courier services or
personal delivery to all parties, including AudioCodes, to the following addresses, or to
such other addresses as shall be designated from time to time by a Party in accordance
with this Section 10.1:  

    (a)        if
to AudioCodes  

	 	
AudioCodes Ltd. 

1 Hayarden Street, Airport City Lod, 70151 

P.O. Box 255, Ben Gurion Airport , Israel 70100 

Attention: Itamar Rosen 

Facsimile No.: 972-3-976-4040 

e-mail: notices@audiocodes.com 

46

	 	
with a copy to: 

Covington & Burling 

1330 Avenue of the Americas 

New York, New York 10019 

Attention: Ellen Corenswet 

Facsimile No.: (212) 841-1010 

    (b)        if
to Parent or Merger Sub:  

	 	
AudioCodes Ltd. 

1 Hayarden Street, Airport City Lod, 70151 

P.O. Box 255, Ben Gurion Airport , Israel 70100 

Attention: Itamar Rosen 

Facsimile No.: 972-3-976-4040

	 	
and 

	 	AudioCodes, Inc. 

2099 Gateway Place, Suite 500

San Jose, California 95110

Attention: Chief Financial Officer

Facsimile No: (408) 451-9520
 

	 	with
a copy to: 

Covington & Burling 

1330 Avenue of the Americas 

New York, New York 10019 

Attention: Ellen Corenswet 

Facsimile No.: (212) 841-1010 

    (c)        if
to the Company:  

	 	
Nuera Communications, Inc.

10445 Pacific Center Court

San Diego, CA 92121-1761

Attention: President and Chief Executive Officer

Facsimile No.: (858) 624-2422
 

	 	
with a copy prior to the Closing to: 

DLA Piper Rudnick Gray Cary US LLP 

4365 Executive Drive, Suite 1100 

San Diego, California 92121 

Attention: Jim Cartoni 

Facsimile No.: (858) 677-1401 

47

	 	
and with copies after the Closing to:  

	 	 AudioCodes
Ltd. 

1 Hayarden Street, Airport City Lod, 70151 

P.O. Box 255, Ben Gurion Airport, Israel 70100 

Attention: Itamar Rosen 

Facsimile No.: 972-3-976-4040 

	 	AudioCodes, Inc. 

2099 Gateway Place, Suite 500

San Jose, California 95110 

Attention: Chief Financial Officer 

Facsimile No: (408) 451-9520
 

	 	
and 

	 	Covington & Burling 

1330 Avenue of the Americas 

New York, New York 10019 

Attention: Ellen Corenswet 

Facsimile No.: (212) 841-1010
 

    (d)        if
to the Sellers’ Representative to:  

	 	Robert Wadsworth 

c/o HarbourVest Partners LLC 

1 Financial Center 

Boston, MA 02111 

Facsimile No.: (617) 348-3715
 

	 	with
a copy to: 

Debevoise & Plimpton 

919 Third Avenue 

New York, NY 10022 

Attention: David J. Schwartz 

Facsimile No.: (212) 909-6836 

All notices and communications under
this Agreement shall be deemed to have been duly given (w) when delivered by hand, if
personally delivered, (x) one Business Day after when delivered to a courier, if delivered
by commercial one-day overnight courier service, (y) when sent, if sent by facsimile, with
an acknowledgment of sending being produced by the sending facsimile machine or (z) upon
confirmation by telephone or an email response from the recipient, in the case of email. 

        Section
10.2. Definitions. The following capitalized terms have the following meanings:  

48

        “Affiliate”
means, with respect to any Person, a Person who is an “affiliate” of such first
Person within the meaning of Rule 405 under the Securities Act of 1933. 

        “Banking
Fees” means, the fees and expenses of Goldman Sachs & Co., financial advisor
to the Company, incurred in connection with the negotiation, entering into and
consummation of this Agreement, the other Transaction Agreements, the Merger and the other
transactions contemplated hereby and thereby. 

        “Benefit
Agreement” means any employment, deferred compensation, severance, termination,
retention, change in control, employee benefit, loan, indemnification, stock repurchase,
consulting or similar agreement between the Company or any of its Subsidiaries and any
Company Personnel, or any agreement between the Company or any of its Subsidiaries and any
Company Personnel, the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving the Company or any of
its Subsidiaries of the nature contemplated by this Agreement. 

        “Benefit
Plan” means any Pension Plan or any bonus, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock appreciation, restricted
stock, stock repurchase rights, stock option (including the Company Stock Plans), phantom
stock, performance, retirement, vacation, severance or termination, disability, death
benefit, employment, supplemental unemployment benefit, consulting, independent
contractor, director, retention, hospitalization, fringe benefit, medical, dental, vision,
accident or other plan, program, policy, arrangement or Contract (whether or not subject
to the Laws of the United States or of another jurisdiction) established, maintained,
contributed to or required to be established, maintained or contributed to by the Company
or any ERISA Affiliate, in each case, providing benefits to any Company Personnel (or to
any other person for the benefit of any Company Personnel, such as a beneficiary,
alternate payee, or a dependent thereof), and in each case whether written or oral,
informal or formal, subject to ERISA or not. The term “Benefit Plan” shall also
include any plan, program, policy, arrangement or Contract with respect to which the
Company or any ERISA Affiliate may have liability (including potential, secondary or
contingent liability) under Title IV of ERISA or otherwise to any Person being and
including any liability by reason of any Person’s being or having been an ERISA
Affiliate. 

        “Business
Day” means any day other than (i) a Saturday or Sunday or (ii) a day on which
banking institutions located in New York City or Tel Aviv, Israel are permitted or
required by Law, executive order or decree of a Governmental Entity to remain closed. 

        “Capital
Stock” means any capital stock or share capital of, other voting securities of,
other equity interest in, or right to receive profits, losses or distributions of, any
Person. 

        “Closing
Common Merger Consideration” means, with respect to each share of Company Common
Stock, an amount equal the Common Merger Consideration multiplied by the
Closing Percentage. 

        “Closing
Percentage” means one minus a fraction equal to (i) $8,500,000 over (ii)
the Purchase Price (excluding any amounts that increase the Purchase Price pursuant to
clause (ii) of such definition). 

49

        “Closing
Preferred Merger Consideration” means, with respect to each share of Company
Preferred Stock, an amount equal to the Preferred Merger Consideration multiplied
by the Closing Percentage. 

        “Common
Merger Consideration” means the quotient of: 

          		    (i)       
               (A) the Purchase Price minus (B) the aggregate of the Preference Amounts
               for all shares of Preferred Stock outstanding immediately prior to the Effective
               Time and all shares of Preferred Stock subject to Warrants cancelled pursuant to
               Section 2.2(a), 

               

        divided
by 

          		    (ii)       
               the sum of (A) the number of shares of Company Common Stock outstanding
               immediately prior to the Effective Time plus (B) the number of shares of
               Company Common Stock subject to Options and Warrants cancelled pursuant to
               Section 2.2(a) (including, for Warrants exercisable for shares of Preferred
               Stock, the number of shares of Common Stock into which such shares are
               convertible immediately prior to the Effective Time) plus (C) the number
               of shares of Company Common Stock into which the issued and outstanding shares
               of Preferred Stock are convertible immediately prior to the Effective Time. 

               

        “Company
Knowledge Persons” means William Ingram, Michael Rinehart, Stephen Morley,
Harprit Chhatwal and Mike Creamer. 

        “Constitutive
Documents” means (i) with respect to a Person that is a corporation, such
Person’s certificate or articles of incorporation and by-laws, (ii) with respect
to a Person that is a limited liability company, such Person’s certificate of
formation and operating or limited liability company agreement, (iii) with respect to
a Person that is a partnership, such Person’s partnership agreement, (iv) with
respect to a Person that is a trust, such Person’s trust instrument or agreement, and
(v) with respect to a Person that is a legal entity (including one of the type
described in clauses (i) through (iv)), any constitutive document of such entity or
other document or Contract analogous to those described in clauses (i) through this
clause (v). 

        “Contract”
means any loan or credit agreement, bond, debenture, note, mortgage, indenture, guarantee,
lease or other contract, commitment, agreement, instrument, obligation, undertaking,
license, permit, concession, franchise or legally binding arrangement or understanding,
whether written or oral. 

        “Disclosure
Schedule” means a schedule of exceptions to the representations and warranties of
the Company set forth in Article 3 and other items as set forth herein, delivered
contemporaneously with this Agreement. 

        “Earn
Out Period” means the one-year period commencing on first day of the first
calendar month following the Closing Date. 

        “Earn
Out Per Share Amount” means the amount determined by dividing (i) the Earn Out
Amount; by (ii) the aggregate number of Earn Out Shares. 

50

        “Earn
Out Shares” means (A) the shares of Company Common Stock outstanding immediately
prior to the Effective Time, (B) the shares of Company Common Stock into which an issued
and outstanding share of Preferred Stock is convertible immediately prior to the Effective
Time, (C) the shares of Company Common Stock subject to Options cancelled pursuant to
Section 2.2(a), and (D) the shares of Company Common Stock or Company Preferred Stock (on
an as-converted basis), as applicable, subject to Warrants cancelled pursuant to Section
2.2(a). 

        “Environmental
Law” means any applicable Law (including but not limited to principles of common
law) and binding administrative or judicial interpretations thereof relating to (i) the
protection of the environment (including indoor and outdoor air, water vapor, surface
water, groundwater, wetlands, drinking water supply, surface or subsurface land), natural
resources and human health and safety as it relates to exposure to Hazardous Materials;
(ii) the exposure to, or the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, presence, or the release or threatened
release of, Hazardous Materials; (iii) the collection, recovery and recycling of waste
resulting from marketed products and their packaging; and (iv) the environmental design,
energy efficiency requirements or chemical composition of marketed products and their
packaging. 

        “Environmental
Liability” means any and all Losses relating to the Company or any its
Subsidiaries, their respective businesses, operations, assets, facilities, property
(including, without limitation, owned property and Leased Property) or marketed products,
arising from or relating to: (i) failure to comply with any requirement of an
Environmental Law; (ii) failure to obtain, maintain in effect or comply with any required
Environmental Permit; (iii) actual or alleged obligation to undertake environmental
investigation, risk assessment, monitoring, remediation or restoration; or (iv) harm or
injury, actual or alleged, to any real property, to any Person, to public health, or to
any natural resource as relating to Hazardous Materials. 

        “Environmental
Permits” means all permits, licenses, certificates, approvals or authorizations
held by the Company or any of its businesses or operations pursuant to an Environmental
Law. 

        “Excess
Bonus Costs” means the excess of (i) the aggregate amount of any bonuses, other
than the retention bonuses referred to in Section 5.8(c), paid or committed to be paid to
any employees of the Company on or before the Closing Date over (ii) $40,000. 

        “Excess
Employee Severance Costs” means the excess of (i) with respect to all Terminated
Employees other than persons at the level of Vice President or above, (A) the aggregate
amount of cash paid or payable, and the value of any benefits provided, to such Terminated
Employees (excluding base salary, bonuses, commissions and other amounts payable with
respect to their employment through and including their last day of actual employment),
over (B) the aggregate amount of the cash that would be paid to such Terminated
Employees if such Terminated Employees received two weeks of base salary for every year of
service to the Company, up to a maximum of eight weeks of base salary, and received no
other benefits (including without limitation COBRA payments), and (ii) with respect to all
Terminated Employees who are, at the time of termination, at the level of Vice President
or above, (A) the aggregate amount of cash paid or payable, and the value of any benefits
provided, to such Terminated Employees (excluding base salary, bonuses, commissions and
other amounts payable with respect to their employment through and including their last
day of actual employment), over (B) the cash that would be paid to such Terminated
Employees if such Terminated Employees received 12 weeks of base salary and received no
benefits other than COBRA payments for such 12-week period. 

51

        “Governmental
Entity” means any nation, state, province, county, city or political subdivision
and any official, agency, arbitrator, authority, court, department, commission, board,
bureau, instrumentality or other governmental or regulatory authority of any thereof,
whether domestic or foreign. 

        “Hazardous
Materials” means any and all materials (including without limitation substances,
chemicals, compounds, mixtures, products or byproducts, biologic agents, living or
genetically modified materials, wastes, pollutants and contaminants) that are (i) listed,
characterized or regulated pursuant to applicable Environmental Law; (ii) identified or
classified as “hazardous,” “toxic,” “dangerous,”
“pollutant,” “contaminant,” “explosive,”
“corrosive,” “flammable,” “radioactive,”
“reactive” or “special waste”; (iii) capable of causing harm or injury
to human health, natural resources or the environment; or (iv) oils, petroleum, petroleum
products, wastes or byproducts, asbestos or asbestos containing materials, lead-based
paint, polychlorinated biphenyls, urea formaldehyde, explosives, bacteria or fungi. 

        “Indebtedness”
of any Person means, without duplication, (i) all indebtedness of such Person for
borrowed money, with respect to deposits or advances of any kind or for the deferred
purchase price of property or services (other than current trade liabilities incurred in
the Ordinary Course of Business and payable in accordance with customary practices and not
more than 90 days past due), (ii) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (iii) all obligations of such Person upon
which interest charges are customarily paid, (iv) all obligations of such Person
under conditional sale or other title retention agreements relating to property or assets
purchased by such Person, (v) all Indebtedness of others secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise, to be secured
by) any Lien on property owned or acquired by such Person, whether or not the obligations
secured thereby have been assumed, (vi) all guarantees by such Person of Indebtedness
of others, (vii) all capital lease obligations of such Person, (viii) all
obligations of such Person in respect of interest rate protection agreements, foreign
currency exchange agreements, caps or collar agreements or other interest or exchange rate
hedging arrangements either generally or under specific contingencies, (ix) all
obligations of such Person as an account party in respect of letters of credit and
banker’s acceptances, (x) all obligations of such Person consisting of
overdrafts (e.g., cash float reflected as a negative on the cash line) and (xi) all
obligations of such Person pursuant to any deferred compensation agreements. 

        “Indemnified
Party” means either a Parent Indemnified Party or a Seller Indemnified Party. 

        “Indemnifying
Party” means (i) with respect to a claim for indemnification pursuant to Section
8.1, Sellers, in accordance with the Escrow Agreement, and (ii) with respect to a claim
for indemnification pursuant to Section 8.2, Parent. 

52

        “Intellectual
Property” of any Person means all intellectual property rights or any kind,
including intellectual property rights arising from or in respect of the following,
whether protected, created or arising under any Law, including: (i) all patents and
applications therefor, including continuations, divisionals, continuations-in-part, or
reissues of patent applications and patents issuing thereon (collectively,
“Patents”); (ii) all trademarks, service marks, trade names, service
names, brand names, trade dress rights, logos, Internet domain names and corporate names,
together with the goodwill associated with any of the foregoing, and all applications,
registrations and renewals thereof, (collectively, “Marks”);
(iii) copyrights and registrations and applications therefor, works of authorship and
mask work rights (collectively, “Copyrights”); (iv) discoveries, trade
secrets, concepts, ideas, research and development, know-how, formulae, algorithms,
inventions, compositions, manufacturing and production processes and techniques, technical
data, procedures, methods, programs, subroutines, tools, materials, processes, inventions
(whether patentable or unpatentable and whether or not reduce to practice), apparatus,
creations, improvements, works of authorship and other similar materials, all recordings,
graphs, designs, drawings, reports, analyses, and other writings, specifications,
databases and other proprietary and confidential information, including customer lists,
supplier lists, pricing and cost information, and business and marketing plans and
proposals and other tangible embodiments of the foregoing, in any form whether or note
specifically listed herein, and all related technology; and (v) all Software. 

        “Knowledge”
and “knowledge”, with respect to the Company, means the Company will have
knowledge of a particular fact or other matter if any of the Company Knowledge Persons are
actually aware of a particular fact or matter or if exercising reasonable care such
persons would be expected to discover or become aware of that fact or matter in the course
of carrying out their employment duties and responsibilities at the Company. 

        “Losses”
means any debts, obligations and other liabilities (whether known or unknown, absolute or
contingent, liquidated or unliquidated, due or to become due, accrued or not accrued,
asserted or unasserted or otherwise), losses, claims, damages, Taxes, diminutions in
value, interest obligations, deficiencies, Judgments, assessments, fines, fees, penalties
and expenses (including amounts paid in settlement, interest, court costs, fees and
expenses of attorneys, accountants, financial advisors, consultants, investigators and
other experts and other expenses of litigation). 

        “Material
Adverse Effect” means any change, circumstance, development, state of facts,
event or effect (i) that has had or could reasonably be expected to have a material
adverse change or effect (taken alone or in the aggregate with any other adverse change or
effect) in or with respect to the business, assets, condition (financial or otherwise) or
results of operations of the Company and its Subsidiaries, taken as a whole or (ii) that
could reasonably be expected to prevent or materially impede, interfere with, hinder or
delay the consummation by the Company of the Merger or the other transactions contemplated
by this Agreement; provided that a Material Adverse Effect shall not include any
effect attributable to general economic conditions or general changes in the industry in
which the Company is engaged so long as the Company and its Subsidiaries as a whole are
not disproportionately affected. 

53

        “Merger
Consideration” means (i) with respect to the Company Common Stock, the Common
Merger Consideration and (ii) with respect to the Preferred Stock, the Preferred Merger
Consideration. 

        “Net
Product Sales” shall be defined as the net amounts actually received by the
Company and its Subsidiaries from sales, made during the Earn Out Period, of the specified
products set forth on Schedule 2.3 (together with certain maintenance and service fees
related thereto as specified on Schedule 2.3) to the specified customers set forth on
Schedule 2.3 and such other customers as Parent may determine in it sole and absolute
discretion, after products are shipped and unreserved payment is received by the Company
for the product price, less payments for shipping charges, letter of credit and
banking charges, insurance, sales and withholding or other similar taxes (but not income
taxes), payment of third party commissions, product returns, refunds or credits;
provided, that, only amounts received from such sales on or before sixty (60) days
after the end of the Earn Out Period shall constitute Net Product Sales; and provided,
further, that no amounts received shall constitute Net Product Sales if a claim
against the Company or a Subsidiary is outstanding concerning such sale. Notwithstanding
the foregoing, if net amounts would constitute Net Product Sales but for the fact that
such amounts are not received during the 60 days following the end of the Earn Out Period,
then, solely for purposes of calculating the Earn Out Amount following the end of the Earn
Out Period (and not at any earlier date specified in Section 2.3(b) of this Agreement),
any such net amounts that are payable to the Company under one or more purchase orders
from the customers designated as “Special Customers” on Schedule 2.3 only
when and if the products subject to such purchase orders are “accepted” by such
customers (such amounts to be referred to as “Retained Amounts”) shall
also constitute Net Product Sales; provided, that, no portion of a Retained
Amount that exceeds 10% of the net amount payable for the product for which the Retained
Amount has been withheld shall be included in Net Product Sales. Revenue recognition of
product sales by the Company and its Subsidiaries, for purposes of determining Net Product
Sales, shall be in accordance with the Parent’s revenue recognition policy, GAAP and
the applicable rules of the Securities and Exchange Commission. 

        “Option”
means an option to purchase or acquire shares of Common Stock of the Company held by an
employee, director or consultant of the Company under a Company Stock Plan. 

        “Permitted
Liens” means the following, to the extent not securing Indebtedness:
(i) statutory Liens for Taxes not yet due or payable; (ii) Liens for assessments
and other governmental charges or Liens of landlords, carriers, warehousemen, mechanics
and repairmen incurred in the Ordinary Course of Business, in each case for sums not yet
due and payable or due but not delinquent or being contested in good faith by appropriate
proceedings; and (iii) Liens incurred in the Ordinary Course of Business in connection
with workers’ compensation, unemployment insurance and other types of social
security. 

        “Person”
means an individual, corporation, partnership, limited liability company, joint venture,
association, trust, unincorporated organization or other entity or any Governmental
Entity. 

54

        “Preference
Amount” means, for each share of Series A Preferred, the “Series A
Preference Liquidation Amount” for such share as defined in Section V.2(a) of the
Company’s Tenth Amended and Restated Certificate of Incorporation as filed with the
Delaware Secretary of State on April 9, 2003. 

        “Preferred
Merger Consideration” means, (i) for each share of Preferred Stock, the sum of
the Preference Amount for such share of Preferred Stock and the Common Merger
Consideration for the Company Common Stock into which such share of Preferred Stock is
convertible at the Closing and (ii) for each share of Preferred Stock into which the
Warrants cancelled pursuant to Section 2.2(a) are convertible, the sum of the Preference
Amount for such share and the Common Merger Consideration into which such share is
convertible at the Closing. 

        “Purchase
Price” means an amount equal to (i) $85,000,000, plus (ii) the aggregate
exercise prices of the Options and Warrants outstanding immediately prior to the Effective
Time which are cancelled pursuant to Section 2.2(a), minus (iii) the amount by
which the sum of the Banking Fees and Excess Severance Costs as of the Closing Date
exceeds $1,400,000, minus (iv) any outstanding Indebtedness, minus (v) an
amount equal to 50% of the initial fee paid by Parent in accordance with Section 6.4(c),
minus (vi) any Excess Bonus Costs; provided, that in no event shall clause
(ii) of this definition be deemed to imply that the aggregate Merger Consideration,
aggregate Option Consideration and aggregate Warrant Consideration may exceed $85,000,000
plus the Earn Out Amount, if any, and in no event shall such clause (ii) be deemed to
imply that the holders of Options or Warrants shall be required to exercise their Options
or Warrants for cash prior to the Effective Time, it being understood that such clause is
included in this definition only for purposes of calculating the applicable consideration
due to holders of Capital Stock, Options and Warrants. 

        “Representatives”
means, with respect to a Person, such Person’s legal, financial, internal and
independent accounting and other advisors and representatives. 

        “Restricted
Stock” means any Capital Stock of the Company that is subject to a right of
repurchase or redemption by the Company, subject to forfeiture back to the Company or
subject to transfer or lock-up restrictions. 

        “Sellers”
means the holders of Capital Stock of the Company and the holders of Options and Warrants,
in each case as of immediately prior to the Effective Time, other than the Company itself
in any case. 

        “Selling
Stockholders” means the holders of the Capital Stock of the Company. 

        “Software”
means any and all (i) computer programs, including any and all software
implementations of algorithms, models and methodologies, whether in source code or object
code, (ii) databases and compilations, including any and all data and collections of
data, whether machine readable or otherwise, (iii) descriptions, flow-charts and
other work product used to design, plan, organize and develop any of the foregoing,
screens, user interfaces, report formats, firmware, development tools, templates, menus,
buttons and icons, and (iv) documentation including user manuals and other training
documentation related to any of the foregoing. 

55

        “Subsidiary”
means, with respect to any Person, another Person (i) an amount of the voting securities,
other voting ownership or voting partnership interests, of which is sufficient to elect at
least a majority of its Board of Directors or other governing body (or, if there are no
such voting interests, 50% or more of the equity interests of which) is owned directly or
indirectly by such first Person or (ii) of which such first Person is a general partner. 

        “Tax”
means: (i) any United States federal, state, local and foreign income, profits, franchise,
license, capital, transfer, ad valorem, wage, severance, occupation, import,
custom, gross receipts, payroll, sales, employment, use, stamp, alternative or add-on
minimum, environmental, withholding and any other tax, duty, assessment or governmental
tax charge of any kind whatsoever, imposed or required to be withheld by any taxing
authority; (ii) any interest, additions to tax, or penalties applicable or related
thereto; and (iii) any amount described in clause (i) or (ii) for which a Person is liable
as a successor or transferee, or by Contract, indemnity or otherwise. 

        “Tax
Return” means any return, declaration, report, claim for refund, or information
return or statement or other form relating to Taxes filed or required to be filed with a
Governmental Entity, including any schedule or attachment thereto, and including any
amendment thereof. 

        “Terminated
Employees” means the individuals whose employment is terminated by the Company or
any Subsidiary during the sixty (60) day period following the Closing Date. 

        “Third
Party Claim” means any Legal Proceeding, claim or demand by a Person other than a
Person from which indemnification may be sought under Article 8. 

        “Transaction
Agreements” means, collectively, this Agreement, the Escrow Agreement and the
Expenses Escrow Agreement. 

        “Warrant”
means a warrant, option or other right to purchase or acquire Capital Stock of the Company
other than the Options. 

        Section
10.3. Descriptive Headings; Certain Interpretations. The table of contents and
headings contained in this Agreement are for reference purposes only and shall not
control or affect the meaning or construction of this Agreement. Except where expressly
stated otherwise in this Agreement, the following rules of interpretation apply to this
Agreement: (i) “or” is not exclusive and “include”, “includes” and
“including” are not limiting; (ii) “hereof”, “hereto”,
“hereby”, “herein” and “hereunder” and words of similar
import when used in this Agreement refer to this Agreement as a whole and not to any
particular provision of this Agreement; (iii) “date hereof” refers to the date
of this Agreement; (iv) “extent” in the phrase “to the extent” means
the degree to which a subject or other thing extends, and such phrase does not mean
simply “if”; (v) definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms; (vi) references to an agreement or
instrument mean such agreement or instrument as from time to time amended, modified or
supplemented; (vii) references to a Person are also to its permitted successors and
assigns; (viii) references to an “Article”, “Section”, “Subsection”,
“Exhibit” or “Schedule” refer to an Article of, a Section or
Subsection of, or an Exhibit or Schedule to, this Agreement; (ix) words importing the
masculine gender include the feminine or neuter and, in each case, vice versa; and (x)
references to a Law include any amendment or modification to such Law and any rules or
regulations issued thereunder, whether such amendment or modification is made, or
issuance of such rules or regulations occurs, before or after the date of this Agreement.  

56

        Section
10.4. Sellers' Representative.  

    (a)        The
Company designates Robert Wadsworth as the representative of Sellers and any
          other person who is or becomes, through the Effective Time, a holder of Capital
          Stock of the Company or a holder of Options (such person, the “Sellers’ Representative”).
The Seller’s           Representative hereby accepts its appointment as of the date
hereof. From and           after the date hereof, the Sellers’ Representative shall
serve as the sole           representative of such Persons with respect to this
Agreement, the Escrow           Agreement and the transactions contemplated hereby and
thereby.  

    (b)        The
Sellers’ Representative shall not be liable for any act done or omitted
          hereunder as Sellers’ Representative while acting in good faith and in the
          exercise of reasonable judgment and any act done or omitted pursuant to the
          advice of counsel shall be conclusive evidence of such good faith. The Selling
          Stockholders shall severally indemnify and hold the Sellers’ Representative
          harmless against any loss, liability or expense incurred without gross
          negligence or bad faith on the part of the Sellers’ Representative and
          arising out of or in connection with the acceptance or administration of his
          duties hereunder.  

    (c)        The
Sellers’ Representative shall serve in such capacity without           compensation
except that the Sellers’ Representative will be entitled to           reimbursement
for certain expenses as set forth in the Expenses Escrow           Agreement.
Notwithstanding anything to the contrary contained in this Agreement,           Sellers’ Representative
shall have no duties or responsibilities except           those expressly set forth
herein, and no implied covenants, functions,           responsibilities, duties,
obligations or liabilities on behalf of any Seller           shall otherwise exist
against Sellers’ Representative. Following           Parent’s payment to the
Sellers’ Representative of any amount pursuant           to this Agreement or the
Escrow Agreement, Parent shall have no liability to any           Seller for any such
amount, including for the Sellers’          Representative’s failure to
distribute such amount to Sellers in accordance           with their individual
arrangements with the Sellers’ Representative, and           each Seller’s sole
remedy shall be against the Sellers’ Representative           and not against
AudioCodes or Parent. The Sellers’ Representative shall           have reasonable
access to information about the Company and the Surviving           Corporation and the
reasonable assistance of the Company’s and Surviving           Corporation’s
officers and employees for purposes of performing his duties           and exercising his
rights hereunder, provided that the Sellers’          Representative shall treat
confidentially and not disclose any nonpublic           information from or about the
Company or the Surviving Corporation to anyone           (except on a need to know basis
to individuals who agree to treat such           information confidentially).  

        Section
10.5. Assignment.  Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned, in whole or in part, by operation
of Law or otherwise by any of the Parties without the prior written consent of the other
Parties, except that Merger Sub may assign, in its sole discretion, any of or all its
rights, interests and obligations under this Agreement to AudioCodes or to any Subsidiary
of AudioCodes, but no such assignment shall relieve Merger Sub of any of its obligations
hereunder. Any purported assignment without such consent shall be void. Subject to the
preceding sentence, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by, the parties hereto and their respective successors and assigns.  

57

        Section
10.6. Specific Enforcement.  The Parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not performed
in accordance with their specific terms or were otherwise breached. It is accordingly
agreed that the Parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions of this
Agreement, this being in addition to any other remedy to which they are entitled at Law,
in equity or otherwise.  

        Section
10.7. Waiver and Amendment.  

    (a)        At
any time prior to the Effective Time, the Parties may (a) extend the time for
          the performance of any of the obligations or other acts of the other Parties,
          (b) waive any inaccuracies in the representations and warranties contained in
          this Agreement or in any document delivered pursuant to this Agreement or (c)
          subject to the proviso of Section 10.7(b), waive compliance with any of the
          agreements or conditions contained in this Agreement. No failure or delay on
the           part of any Party in exercising any right, power or remedy hereunder shall
          operate as a waiver thereof, nor shall any single or partial exercise of any
          such right, power or remedy preclude any other or further exercise thereof or
          the exercise of any other right, power or remedy. The remedies provided for
          herein are cumulative and are not exclusive of any remedies that may be
          available to any Party at Law, in equity or otherwise.  

    (b)        Except
as otherwise specifically set forth in this Agreement, this Agreement may           be
amended by the Parties at any time; provided, however, that           there
shall be made no amendment that by Law requires further approval by
          stockholders of either Party, without the further approval of such
stockholders.           This Agreement may not be amended except by an instrument in
writing signed on           behalf of each of the Parties.  

    (c)        Except
as otherwise specifically set forth in this Agreement, any amendment,
          supplement or modification of or to any provision of this Agreement and any
          waiver of any provision of this Agreement shall be effective (i) only if it is
          made or given in writing and signed by Parent and the Company or, in the case
of           a waiver, by the party granting the waiver and (ii) only in the specific
          instance and for the specific purpose for which made or given.  

        Section
10.8. Entire Agreement.  The Transaction Agreements and the
Confidentiality Agreement contain the entire agreement and understanding between the
Parties with respect to the subject matter hereof and thereof and supersede all prior
agreements and understandings, both written and oral, with respect to the transactions
contemplated thereby. The Confidentiality Agreement shall survive any termination of this
Agreement.  

        Section
10.9. No Third-Party Beneficiaries.  Except for the Persons receiving
the benefit of indemnification and additional insurance coverage under Section 5.12, this
Agreement is for the sole benefit of the Parties and their permitted successors and
assigns and nothing herein express or implied shall give or be construed to give to any
Person, other than the Parties and such successors and assigns, any legal or equitable
rights or remedies.  

        Section
10.10. Counterparts.  This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and shall
become effective when one or more counterparts have been signed by each of the Parties
and delivered to the other Parties.  

58

        Section
10.11. Governing Law; Jurisdiction; Venue; Service Of Process; Waiver of Jury Trial.  This
Agreement shall be governed by, and construed in accordance with, the laws of the State
of New York, regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof, except matters mandatorily governed by the DGCL
shall be so governed. Each Party irrevocably submits to the exclusive jurisdiction of (a) the
Supreme Court of the State of New York, New York County and (b) the United States
District Court for the Southern District of New York for the purposes of any suit, action
or other proceeding arising out of this Agreement, any of the other Transaction
Agreements or any transaction contemplated hereby and thereby. Each Party agrees to
commence any action, suit or proceeding relating hereto in the United States District
Court for the Southern District of New York or if such suit, action or other proceeding
may not be brought in such court for jurisdictional reasons, in the Supreme Court of the
State of New York, New York County. Each Party further agrees that service of any
process, summons, notice or document by registered mail to such Party’s respective
address set forth above shall be effective service of process for any action, suit or
proceeding in New York with respect to any matters to which it has submitted to
jurisdiction in this Section 10.11. Each Party irrevocably and unconditionally
waives any objection to the laying of venue of any action, suit or proceeding arising out
of this Agreement, the other Transaction Agreements and the transactions contemplated
hereby or thereby in (i) the Supreme Court of the State of New York, New York County
or (ii) the United States District Court for the Southern District of New York, and
hereby further irrevocably and unconditionally waives, and shall not assert by way of
motion, defense, or otherwise, in any such Legal Proceeding, any claim that it is not
subject personally to the jurisdiction of the above-named courts, that its property is
exempt or immune from attachment or execution, that the Legal Proceeding is brought in an
inconvenient forum, that the venue of the Legal Proceeding is improper, or that this
Agreement or any other Transaction Agreement or the Merger may not be enforced in or by
any of the above-named courts. Each Party irrevocably and unconditionally waives any
right to trial by jury with respect to any Legal Proceeding relating to or arising out of
this Agreement or any other Transaction Agreement or any of the transactions contemplated
hereby or thereby.  

        Section
10.12. Severability.  If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule or Law, or public policy,
all other conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any Party. Upon
such determination that any term or other provision is invalid, illegal or incapable of
being enforced, the Parties shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the Parties as closely as possible in an acceptable
manner to the end that transactions contemplated hereby are fulfilled to the extent
possible.  

        Section
10.13. Currency. All references to “dollars” or “$” shall
refer to the lawful currency of the United States and all calculations of amounts herein
shall be determined in dollars unless otherwise provided herein.  

        Section
10.14. Transaction Costs. Each party shall pay all costs and expenses that it
incurs with respect to the negotiation, execution, delivery and performance of this
Agreement and the transactions contemplated hereby.  

59

        IN
WITNESS WHEREOF, the Parties have duly executed this Agreement as of the date first
written above. 

			AUDIOCODES LTD.

By: /s/ Shabtai Adlersberg
——————————————

Shabtai Adlersberg
Chairman of the Board, President

and CEO

			AUDIOCODES, INC.

By: /s/ Shabtai Adlersberg
——————————————

Shabtai Adlersberg
Director

			GREEN ACQUISITION CORP.

By:  /s/ Shabtai Adlersberg
——————————————

Shabtai Adlersberg
Director

			NUERA COMMUNICATIONS, INC.

By:      /s/ William Ingram
——————————————

William Ingram
President and Chief Executive Officer

			SELLERS' REPRESENTATIVE*

By:     /s/ Robert Wadsworth
——————————————

Robert Wadsworth
M.D. HarbourVest Partners

* For purposes of Section
10.4 of this Agreement only. 

220-F

Exhibit 4.11  

CONVERTIBLE LOAN
AGREEMENT  

This Convertible Loan Agreement (the
“Agreement”) is made as of the 8th day of August, 2005 

BY AND BETWEEN 

	(1)  	Camtek
Ltd. (“Camtek”), a public company (Company no.
                    51-1235434) organized under the laws of the State of Israel, whose
shares are                     traded on Nasdaq (Camtek, collectively with its
Subsidiaries (as defined below),                     the “Companies”),
having its registered office at the                     Industrial Park of Ramat Gavriel,
Migdal Ha’Emek 23150, Israel; and 

	(2)  	FIMI
Opportunity Fund, L.P., a limited partnership formed under the laws of the
                    State of Delaware and FIMI Israel Opportunity Fund, Limited
Partnership, a                     limited partnership formed under the laws of the State
of Israel having its                     registered office at “Rubenstein House”,
37 Begin Road, Tel-Aviv,                     Israel (each, an “Investor” and,
collectively, the                     “Investors”). 

RECITALS 

WHEREAS: 

	A  	Camtek
is a developer, manufacturer and marketer of intelligent optical inspection systems for
Printed Circuit Boards, High Density Interconnect Substrate and Semiconductor
Manufacturing and Packaging industries; and 

	B  	Camtek
wishes to borrow from the Investors an aggregate amount of US$5,000,000 and the Investors
desire to loan to Camtek such amount, in return for the receipt of convertible debentures
(the “Debentures”), all upon the terms and conditions set forth in this
Agreement. 

THEREFORE, in consideration of
the foregoing, the parties, intending to be legally bound, agree as follows: 

	1.  	LOAN
AND ISSUANCE OF THE DEBENTURES  

         (a)       
          Loan and Issuance of the Debentures. Upon the terms and subject to the
          conditions set forth in this Agreement and on the basis of the representations
          and warranties hereinafter set forth, at the Closing the Investors shall extend
          a loan in the aggregate amount of US$5,000,000 to Camtek (the
          “Loan”), in exchange for U.S. dollar denominated Debentures.
          The Debentures issued and delivered to each of the Investors pursuant to this
          Agreement shall have the terms set forth in Section 5 below. The Investors shall
          make the Loan in U.S. dollars. 

1

         (b)       
          Definitions. In this Agreement where the context admits: 

        
“Audited Financial Statements” or “Financial Statements” means the
audited consolidated and adjusted financial statements of Camtek for each of the two years
ended on December 31, 2003 and 2004, including its balance sheet, statements of income,
cash-flow and changes in shareholder equity for the periods ended thereon, prepared in
accordance with generally accepted accounting principles in the United States
(“GAAP”) consistently applied by a recognized firm or firms of
independent certified public accountants, including all notes and reports thereto. 

        “Benefits”
means benefits of every description including, without limitation, salaries,
directors’ and/or management fees, social benefits, bonuses, commissions, profit
shares, automobile, reimbursement of expenses and benefits in kind. 

        “Business
Day” – any day of the week between Sunday and Thursday on which the majority
of the Banks in Israel provide services to the public. 

        “Debt”
means all (i) obligations of a Person for borrowed money or which have been incurred in
connection with the acquisition of property or assets, (ii) obligations secured by any
lien or other charge upon property or assets owned by such Person, even though such Person
has not assumed such obligations, (iii) obligations created or arising under any
conditional sale or other title retention agreement with respect to property acquired by
such Person, notwithstanding the fact that the rights and remedies of the seller, lender
or lessor under such agreement in the event of default are limited to repossession or sale
of property, (iv) amounts due under any capitalized lease as reflected on the balance
sheet of such Person, and (v) all Guaranties. 

        “Guarantee”
as defined in the Guarantee Law 5727-1967. 

        “Material
Agreements” agreements to which Camtek is a party, and which are material to
Camtek’s business, including instruments, leases, licenses, arrangements, or
undertakings of any nature, written or oral. 

        “Person”
means an individual or any type of entity whether incorporated or not. 

        “Related
Party” any Person who is, or who has at any time since December 31, 2001 been, a
“Related Party”, as defined in the Israeli Companies Law, 1999. 

        “Security
Interest” means and includes any right, interest or equity of any Person
(including any right to acquire, option, or right of preemption) or any mortgage, charge,
pledge, lien, or assignment, or any other encumbrance or security interest over or in the
relevant property. 

        “Subsidiaries”
shall mean the subsidiaries listed in Exhibit A attached hereto. 

2

	2.  	REPRESENTATIONS,
WARRANTIES AND COVENANTS OF CAMTEK

        Camtek,
being aware that the Investors have agreed to enter into this Agreement, among other
things, in reliance upon the representations and warranties contained in this Section 2,
hereby represents and warrants to the Investors as of the date hereof, as follows: 

         (a)       
          Organization. Camtek is duly organized and validly existing under the
          laws of the State of Israel. Camtek has all requisite corporate power and
          authority to carry on its business as currently conducted and to own its
          properties. Each of the Subsidiaries of Camtek is an entity duly formed, validly
          existing and, where applicable, is in good standing, under the laws of its
          respective jurisdiction. 

         (b)       
          Organizational Documents. Attached hereto as Exhibit
          2(b) is a complete and correct copy of the Memorandum of
          Association and Articles of Association of Camtek, as amended to date, all of
          which are in full force and effect. 

    (c)        Capitalization.
 

	 	        (i)
 The authorized share capital of Camtek immediately prior to the Closing shall be
          NIS 1,000,000, divided into 100,000,000 Ordinary Shares, par value NIS 0.01
each           (the “Ordinary Shares”), of which 27,081,497 are issued
and           outstanding and 1,011,619 are held in treasury. The names of all beneficial
          holders of more than 5% of the issued and outstanding share capital of Camtek,
          that are known to Camtek, are as set forth in Exhibit 2(c)          attached
hereto. Except as set forth in such Exhibit 2(c), there are no           outstanding or
authorized subscriptions, options, warrants, calls, rights,           commitments,
convertible securities, or any other agreements of any character           directly or
indirectly obligating Camtek to issue any additional shares or any           securities
convertible into, or exchangeable for, or evidencing the right to           subscribe
for, any shares.  

	 	        (ii)
The Debentures and the Ordinary Shares into
which such Debentures are           convertible, when issued, will be duly authorized,
validly issued and fully           paid, and each of the Investors will have good title
to the Debentures (and to           the Ordinary Shares, following the conversion of the
Debentures issued to it),           free and clear of all Security Interests (other than
Security Interests created           by the Investors, if any).  

         (d)       
          Authority. Camtek has the necessary corporate power and authority to (i)
          enter into this Agreement and the Registration Rights Agreement (as defined
          below) dated as of the date hereof, which shall come into effect as of the
          Closing Date (the Registration Rights Agreement and, collectively with this
          Agreement, the “Agreements”); and (ii) perform its obligations
          under the Agreements and to consummate the transactions contemplated herein and
          therein. Without derogating from the above, Camtek confirms that it has obtained
          the approvals and consents required to be obtained by it prior to the execution
          of the Agreements and the performance by it of its obligations under such
          Agreements, which approvals and consents are listed in Exhibit
          2(d)(2) attached hereto (the “Required
          Approvals”). The execution and delivery of the Agreements by Camtek and
          the consummation by Camtek of the transactions contemplated herein and therein
          shall have been, at the Closing Date, duly and validly authorized by all
          necessary corporate action, and no other corporate proceedings on the part of
          Camtek shall be necessary to authorize the Agreements or to consummate the
          transactions contemplated herein and therein. Upon their execution and delivery,
          the Agreements will be duly executed and delivered by Camtek and, contingent
          upon the due authorization, execution and delivery by the Investors, constitute
          the legal, valid and binding obligations of Camtek, enforceable in accordance
          with their terms, except as such enforceability may be limited by bankruptcy,
          insolvency, reorganization, moratorium and other similar laws of general
          applicability relating to or affecting creditors’ rights generally and by
          the application of general principles of equity. 

3

    (e)        Financial
Statements.  

		     (1)        Each
of the Financial Statements, attached as Exhibit           (2)(e)(1)
hereto has been prepared in accordance with GAAP           consistently applied. Each of
the Financial Statements fairly reflects, in           accordance with GAAP, the
financial condition and results of operations of the           Companies at the relevant
dates and for the periods indicated therein.  

		     (2)        A
complete list of Camtek’s Debts and loan facilities in excess of
          US$100,000 as of the date hereof, is set forth in Exhibit
          2(e)(2).  

		     (3)        Since
December 31, 2004 and except as specifically disclosed in Exhibit           2(e)(3): 

	 	        (i)
Camtek has not entered into any material transaction which was not in the
          ordinary course of its business;  

	 	        (ii)
 there has been no material adverse change in Camtek’s operations results,
          assets, liabilities, debts, or financial condition, which would have been
          required to be reflected in Camtek’s financial statements dated as of the
          date hereof in accordance with GAAP;  

	 	        (iii)
 Camtek has not declared or paid any cash dividend or made any distribution on
          its shares; and  

	 	        (iv)
 there has been no sale, assignment, or transfer of any tangible or intangible
          material asset of Camtek.  

         (f)       
          Consequences of the Loan and the Issuance of the Debentures. 

The consummation of the transactions
contemplated by the Agreements does not, on the part of Camtek, require the consent or
agreement of any Person (other than the Required Approvals obtained prior to the date
hereof) and will not constitute a breach by Camtek of any provision of any agreement to
which it is party, will not cause Camtek to lose any interest in or the benefit of any
asset, right, license, or privilege it presently owns or enjoys or, to Camtek’s
knowledge, cause anyone who normally does business with Camtek not to continue to do so on
the same basis as previously, will not result in any present or future indebtedness of
Camtek becoming due prior to its stated maturity, and will not give rise to or cause to
become exercisable any option or right of preemption. 

4

         (g)       
          Compliance with SEC Filings. Camtek has filed all forms, reports,
          statements and other documents required to be filed with the Securities and
          Exchange Commission (“SEC”) for the three years preceding the
          date hereof and, to the extent not available on the SEC’s EDGAR system, has
          heretofore delivered to counsel for the Investor, in the form filed with the SEC
          during such period, together with any amendments thereto all Annual Reports on
          Form 20-F (collectively, the “Camtek SEC Reports”). As of their
          respective filing or publication dates, the Camtek SEC Reports complied as to
          form in all material respects with the requirements of the United States
          Securities Exchange Act of 1934 (the “Exchange Act”) and the
          United States Securities Act of 1933, as amended (the “Securities
          Act”) applicable to Camtek. The Camtek SEC Reports did not at the time
          they were filed, contain any untrue statement of a material fact or omit to
          state a material fact required to be stated therein or necessary to make the
          statements therein, in the light of the circumstances under which they were
          made, not misleading. 

         (h)       
          Litigation. Except as set forth in Exhibit 2(h)
          attached hereto, there are no claims, actions or proceedings pending or, to
          Camtek’s knowledge, threatened against the Companies or any of their
          respective properties, officers or directors before any court, administrative,
          governmental, arbitral, mediation or regulatory authority or body, domestic or
          foreign, that individually or in the aggregate (i) would reasonably be
          likely, or if adversely decided may be expected to, have a Material Adverse
          Effect (as defined below), or (ii) challenge or seek to prevent, enjoin, alter
          or materially delay the transactions contemplated by the Agreements. 

For purposes of this Agreement, a
violation or other matter will be deemed to have a “Material Adverse
Effect” on Camtek if such violation or other matter would have a material adverse
effect on the Companies’ business, condition, assets, liabilities, operations or
financial performance or prospects. 

         (i)       
          Licenses and Permits. Except as set forth in Exhibit
          2(i), Camtek does not lack any permits or licenses, or any
          authorizations or approvals, the lack of which would have a Material Adverse
          Effect and, to Camtek’s knowledge, is not in material violation of
          Applicable Law. 

	 	        As
used herein, the term “Applicable Law” means any provision of any law,
ordinance, rule, regulation, decree, order, governmental grant, governmental permit,
governmental license or other governmental authorization or approval applicable to
Camtek.  

         (j)       
          Properties and Assets. Except as provided in Exhibit 2(j),
          Camtek has good title to its tangible assets, including without
          limitation those reflected in the Financial Statements, free and clear of all
          Security Interests and with respect to the tangible assets that are leased,
          Camtek is in compliance with all material provisions of such leases. 

5

    (k)        Taxation.
 

	 	        (i)
 The Financial Statements reflect, in accordance with GAAP, all material taxation
          for which Camtek was then liable or accountable in respect of or by reference
to           any income, sales, value added, profit, receipt, gain, transaction,
agreement,           distribution or event which was earned, accrued, received, or
realized, entered           into, paid or made on or before December 31, 2004, and Camtek
has promptly paid           or provided in its books of account for all taxation for
which it has become           liable or accountable in the period from the date of its
incorporation to the           Closing Date, except for such omissions which would not
reasonably be likely to           have a material adverse effect on Camtek’s
business.  

	 	        (ii)
 Camtek has at all times and within the requisite time limits promptly, fully and
          accurately observed, performed and complied with all material obligations or
          conditions imposed on it under any legislation relating to taxation, except for
          such non compliance that, both individually and in the aggregate, would not
have           a Material Adverse Effect.  

	 	        (iii)
 Camtek is not aware of any circumstances which will or may, whether by lapse of
          time or the issue of any notice of assessment or otherwise, give rise to any
          dispute with any relevant taxation authority in relation to its liability or
          accountability for taxation, any claim made by it, any relief, deduction, or
          allowance afforded to it, or in relation to the status or character of Camtek
or           any of its enterprises under or for the purpose of any provision of any
          legislation relating to taxation, except for such dispute or claim that, both
          individually and in the aggregate, are not likely to have a Material Adverse
          Effect.  

         (l)       
          Agreements and Trading. 

Other than as set forth on
Exhibit 2(l), Camtek, and to Camtek’s knowledge, all third
parties with whom it has transacted business under the Material Agreements have performed
in all material respects all of their material obligations under the Material Agreements,
except for such non performance that, both individually and in the aggregate would not
have a Material Adverse Effect. 

    (m)        Intellectual
Property  

	 	        (i)
          Subject to clause (ii) of this Sub-Section (m) below, the Companies own, free
          and clear of claims or rights known to it of any other Person, with full
          right to use, sell, license, sublicense, dispose of, and bring actions for
          infringement of, or has acquired or have licenses or other rights to use,
          all Intellectual Property used by them in the conduct of their business as
          presently conducted. To its knowledge, all works that are used or incorporated
          into the Companies’ products or services were developed by or for the
          Companies by their current or former employees, consultants or independent
          contractors or those of their predecessors in interest or purchased or licensed
          by the Companies or their predecessors in interest or otherwise the Companies
          are entitled to use.  

6

	 	        (ii)
          To its knowledge and subject to that which is stated in Exhibit
          2(m)(a), the business of the Companies as presently conducted
and           the production, marketing, licensing, use and servicing of any products or
          services of the Companies do not infringe or conflict with any patent,
          trademark, copyright, or trade secret rights of any third parties or any other
          Intellectual Property of any third parties. Except as set forth in Exhibit
          2(m)(b), the Companies have not received written notice from any
          third party asserting that any Intellectual Property owned or licensed by the
          Companies, or which the Companies otherwise have the right to use, is invalid
or           unenforceable by the Companies and, to Camtek’s knowledge, there is no
          valid basis for any such claim (whether or not pending or threatened).  

	 	        (iii)
          Except as set forth in Exhibit  2(m)(b), no
          claim is pending or, to Camtek’s knowledge, threatened against the
          Companies nor have the Companies received any written notice or other written
          claim from any Person asserting that any of the Companies’ present or
          contemplated activities infringe or may infringe in any material respect any
          Intellectual Property of such Person and Camtek is not aware of any
infringement           by any other Person of any material rights of the Companies under
any           Intellectual Property Rights.  

	 	        (iv)
          All licenses or other agreements under which the Companies are granted
          Intellectual Property (excluding licenses to use software utilized in the
          Companies’ internal operations and which is generally commercially
          available) which are required for the Companies business are in full force and
          effect and, to Camtek’s knowledge, there is no material default by any
          party thereto. Camtek has no reason to believe that the licensors under such
          licenses and other agreements do not have and did not have all requisite power
          and authority to grant the rights to the Intellectual Property purported to be
          granted thereby.  

	 	        (v)
          The Companies have in all material respects taken all steps required in
          accordance with commercially reasonable business practice to establish and
          preserve their ownership in their owned Intellectual Property
and           to keep confidential all material technical information developed by or
          belonging to the Companies which has not been patented or copyrighted. To
          Camtek’s knowledge and subject to that which is stated in Exhibit
          2(m)(a), the Companies are not making any material unlawful use
          of any Intellectual Property of any other Person, including, without
limitation,           any former employer of any past or present employees of the
Companies. To           Camtek’s knowledge, neither the Companies nor any of their
employees have           any agreements or arrangements with former employers of such
employees relating           to any Intellectual Property of such employers, which
materially interfere or           conflict with the performance of such employee’s
duties for the Companies           or result in any former employers of such employees
having any rights in, or           claims on, the Companies’ Intellectual Property.
Except as heretofore           disclosed to the Investors in writing, each current and
former employee of the           Companies has executed agreements regarding
confidentiality, proprietary           information and assignment of inventions and
copyrights to the Companies, each           independent contractor or consultant of the
Companies has executed agreements           regarding confidentiality and proprietary
information, and the Companies have           not received written notice that any
employee, consultant or independent           contractor is in violation of any agreement
or in breach of any agreement or           arrangement relating to proprietary
information or assignment of inventions.  

7

For purposes of this Agreement,
“Intellectual Property” means patents, patent rights, patent
applications, trademarks, trade names, service marks, brand names, logos and other trade
designations (including unregistered names and marks), trademark and service mark
registrations and applications, copyrights and copyright registrations and applications,
inventions, protected formulae, formulations, processes, methods, trade secrets, computer
software, computer programs and source codes, and similar technical information,
engineering know-how, assembly and test data drawings. 

         (n)       
          Employees and Labor Relations. 

	 	        (i)
          Camtek has delivered to the Investors full and complete copies of all
employment           agreements or management and consulting agreements currently in
force for each           of the three most highly paid individuals employed or hired by
Camtek.  

	 	        (ii)
          Camtek confirms that the form(s) of contracts under which substantially all the
          officers, employees and consultants of the Companies at the date hereof, who
          have access to confidential information of the Companies, are engaged, include
          customary provisions relating to non-disclosure and non-competition.  

	 	        (iii)
          There is not now or has been threatened any material labor dispute, strike,
          slow-down, picketing, work-stoppage, or other similar labor activity with
          respect to the employees of the Companies, taken as a group.  

         (o)       
          Related Party Transactions. 

Except as set forth in Exhibit
2(o), no Related Party has any direct or indirect interest in any material
asset used in or otherwise relating to the business of the Companies; (b) no Related
Party is indebted to any of the Companies; (c) no Related Party has entered into, or has
had any direct or indirect financial interest in, any Material Agreement, material
transaction or material business dealing with or involving any of the Companies; (d) no
Related Party is competing, directly or indirectly, with any of the Companies; and (e) no
Related Party has any material claim or right against any of the Companies (other than
rights to receive amounts not yet due with respect to compensation for services performed
as an employee or director of the Board of Directors of any of the Companies). 

         (p)       
          Indebtedness. Except as fully reflected and disclosed in the Financial
          Statements and in Exhibit 2(p) attached hereto, and except
          for customary warranties to purchasers of Camtek’s products and other
          obligations arising in Camtek’s ordinary course of business and consistent
          with past practices and with the budget approved by the Board of Directors,
          Camtek does not have any indebtedness, whether absolute, accrued, fixed,
          contingent or otherwise, which would have been required to be reflected in
          Camtek’s financial statements dated as of the date hereof in accordance
          with GAAP; Camtek is not a guarantor of any debt or obligation of another, and
          no Person has given any guarantee of or security for any obligation of Camtek. 

         (q)       
          Insurance. Camtek has in full force and effect policies of insurance, as
          set forth in Exhibit 2(q) attached hereto, which, to the Company’s
          belief are reasonable to cover Camtek’s risks that are intended to be
          covered thereunder. 

8

         (r)       
          Finders’ Fee. Except as set forth in Exhibit
          2(r) attached hereto, no Person or firm has, or will have, as a
          result of any act or omission by Camtek, or anyone acting on behalf of Camtek,
          any right, interest or valid claim against Camtek for any commission, fee or
          other compensation as a finder or broker or in any similar capacity in
          connection with the transactions contemplated by this Agreement. 

         (s)       
          All Material Information. The representations made to the Investors under
          this Section 2 to the Agreement do not contain any untrue statement of a
          material fact or omit to state a material fact necessary to make the statements
          made therein, in light of the circumstances under which they were made, not
          misleading. 

	2A.  	REPRESENTATIONS,
WARRANTIES AND COVENANTS OF THE INVESTORS

        Each
of the Investors being aware that Camtek has agreed to enter into the Agreements in
reliance on the representations and warranties contained in this Section 2A, hereby
represents and warrants to, and agrees with Camtek as of the date hereof and the Closing
Date, as follows: 

         (a)       
          Due Organization. Each Investor is a limited partnership duly formed and
          validly existing under the laws of its jurisdiction. 

         (b)       
          Validity of Transaction. Each Investor has all requisite power and
          authority to execute, deliver and perform the Agreements (including all exhibits
          thereto, if applicable) and to consummate the transactions contemplated
          thereunder. All necessary proceedings under each Investor’s governing
          documents have been duly taken to authorize the execution, delivery, and
          performance of the Agreements. The Agreements constitute legal, valid, and
          binding obligations of each Investor enforceable against it in accordance with
          their terms. The execution and delivery of the Agreements by the Investors and
          the consummation by the Investors of the transactions contemplated therein have
          been duly and validly authorized by all necessary corporate action, and no other
          corporate proceedings on the part of the Investors shall be necessary to
          authorize the Agreements or to consummate the transactions contemplated in the
          Agreements. The Agreements have been duly executed and delivered by the Investor
          and, assuming the due authorization, execution and delivery by Camtek,
          constitute the legal, valid and binding obligations of the Investors,
          enforceable in accordance with their terms. 

         (c)       
          Finders’ Fee. Except as set forth in Exhibit
          2A(c) attached hereto, no Person acting on behalf or under the
          authority of the Investors is or will be entitled to any broker’s or
          finder’s (or similar capacity) commission, fee or other compensation in
          connection with the transactions contemplated by this Agreement. 

         (d)       
          Purchase Entirely for Own Account. The Debentures and the Camtek shares
          issuable upon the exercise thereof (collectively, the
          “Securities”) are, or will be, acquired for investment purposes
          only, for each Investor’s own account, not as a nominee or agent, and the
          Investor has no present intention of selling or otherwise distributing the same.
          The Investors further represent that they have not entered into any contract,
          undertaking, agreement or arrangement with any other person providing for the
          sale or transfer of any of the Securities. 

9

         (e)       
          Restricted Securities. Each Investor understands that the Securities have
          not been, and will not upon issuance be, registered under the U. S. Securities
          Act of 1933, as amended (the “Securities Act”), and such
          Investor will not sell, offer to sell, assign, pledge, hypothecate or otherwise
          transfer any of the Securities unless (i) pursuant to an effective registration
          statement under the Securities Act, (ii) such Investor provides Camtek with an
          opinion of counsel, in a form reasonably acceptable to Camtek, to the effect
          that a sale, assignment or transfer of the Securities may be made without
          registration under the Securities Act and the transferee agrees to be bound by
          the terms and conditions of this Agreement, or (iii) such Investor provides
          Camtek with reasonable assurances (in the form of seller and broker
          representation letters) that the Securities can be sold pursuant to (A) Rule 144
          promulgated under the Securities Act, as such rule may be amended from time to
          time (“Rule 144”) or (B) Rule 144(k) promulgated under the
          Securities Act, in each case following the applicable holding period set forth
          therein. 

    (f)        Legends.
 

         (i)       
          Such Investor agrees that the certificates representing the Camtek shares shall
          bear a legend in substantially the following form (in addition to any legend
          required by applicable state securities or “blue sky” laws): 

	 	
“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR WITH ANY APPLICABLE STATE
SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED UNLESS (I) A REGISTRATION STATEMENT
COVERING SUCH SECURITIES EFFECTIVE UNDER THE SECURITIES ACT OR (II) THE TRANSACTION IS
EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT AND, IF THE COMPANY REQUESTS, AN
OPINION SATISFACTORY TO THE COMPANY TO SUCH EFFECT HAS BEEN RENDERED BY COUNSEL.” 

        In
addition, such Investor agrees that Camtek may place stop transfer orders with its
transfer agent with respect to such certificates in order to implement the restrictions on
transfer set forth in this Agreement. The appropriate portion of the legend and the stop
transfer orders will be removed promptly upon delivery to Camtek of such satisfactory
evidence as reasonably may be required by Camtek that such legend or stop orders are not
required to ensure compliance with the Securities Act. 

10

         (ii)       
          Such Investor agrees that the Debentures shall bear the following legend: 

	 	
“THIS
DEBENTURE AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR WITH ANY
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED UNLESS (I) A
REGISTRATION STATEMENT COVERING SUCH SECURITIES IS EFFECTIVE UNDER THE SECURITIES ACT OR
(II) THE TRANSACTION IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT AND, IF THE
COMPANY REQUESTS, AN OPINION SATISFACTORY TO THE COMPANY TO SUCH EFFECT HAS BEEN RENDERED
BY COUNSEL.” 

    (e)        Status.
At the time such Investor was offered the Securities, it was,           and at the
date hereof it is, and on each date on which it converts any           Debentures it will
be, an “accredited investor” as defined in Rule           501of Regulation D
promulgated under the Securities Act. Such Investor has not           been formed solely
for the purpose of acquiring the Securities. Such Investor is           not a registered
broker-dealer under Section 15 of the US Exchange Act.  

11

         (f)       
          Investment Experience. The Investors are sophisticated investors, are
          able to fend for themselves, can bear the economic risk of their investment, and
          have such knowledge and experience in financial and business matters required in
          order to evaluate the merits and risks of investments of this type and reach an
          informed business and financial decision regarding the transactions contemplated
          herein. Such Investor understands and is aware that its election to convert the
          Debentures into Camtek shares, if made, involves substantial business risk,
          chould be regarded as highly speculative and may cause it substantial or total
          loss of its investment. 

         (g)       
          The Investors are under the common management of FIMI 2001 Ltd. (“FIMI
          2001”). FIMI 2001 has the full and exclusive power to take any and all
          actions on behalf of the Investors (and, to the extent applicable, their
          Permitted Transferees) and exercise all rights of such entities with respect to
          their interests in Camtek. 

         (h)       
          Available Information. Such Investor has had an opportunity to ask
          questions and receive documents, information and answers from Camtek regarding
          Camtek, its business and the terms and condition of the transactions
          contemplated hereunder. 

         (i)       
          Nothing set forth in this Section 2A shall be deemed to detract from or
          otherwise prejudice the Investors’ reliance on Camtek’s
          representations and warranties set forth in Section 2 above. 

	2B.  	EFFECTIVENESS;
SURVIVAL; INDEMNIFICATION AND SOLE REMEDY. 

         (a)       
          Each representation and warranty herein is deemed to be made on the Closing Date
          and shall survive and remain in full force and effect after the Closing Date. 

         (b)       
          In the event of any breach or misrepresentation of any covenant, warranty or
          representation made or undertaken by the Company under this Agreement, the sole
          remedy and right of the Investors under any law, whether in contract, tort,
          restitution or otherwise shall be limited, except in the case of fraud, to the
          right of the Investors to declare the Debenture due and payable under Section 6
          to this Agreement in accordance with the terms of such section and the Company
          shall have no other or further liability. 

	3.  	CLOSING 

         (a)       
          Actions at the Closing. The delivery of the Debentures (the
          “Closing”) shall take place at the offices of Naschitz, Brandes
          & Co., 5 Tuval St. Tel-Aviv 67897, within 12 business days following the
          date hereof or at such date as Camtek and the Investors shall agree (the
          “Closing Date”). At the Closing, Camtek shall deliver to the
          Investors validly executed Debentures, registered in the name of the respective
          Investor and having the terms set forth in this Agreement, against the making of
          the respective portion of the total amount of the Loan to Camtek, in an amount
          set forth opposite the name of each such Investor in Exhibit
          3(a) attached hereto by a wire transfer to Camtek’s account
          no. 197700/75, at Bank Leumi branch no.876 (Haifa – Main). 

12

         (b)       
          At the Closing, Camtek shall also deliver to the Investors the following
          documents: 

		     (1)        A
copy of resolutions of Camtek’s Board of Directors approving the           execution
of the Agreements and the transactions contemplated herein and           therein,
including, but not limited to, the issuance of the Debentures to the           Investors
(and the reservation of Ordinary Shares into which the Debentures are
          convertible);  

		     (2)        The
duly executed Debentures;  

		     (3)        The
Registration Rights Agreement (the “Registration Rights           Agreement”),
in the form attached hereto as Exhibit           3(b)(3), executed
by Camtek; and  

		     (4)        A
certificate duly executed by Camtek dated as of the Closing Date (the           “Compliance
Certificate”) in the form attached hereto as Exhibit 3(b)(4);
and  

		     (5)        An
opinion of counsel to Camtek, substantially in the form of Exhibit           3(b)(5) to
this Agreement.  

    (c)        In
addition each of the Investors shall sign and deliver to Camtek the standard
          undertaking required by the Office of the Chief Scientist (the “OCS
          Undertaking”), currently in the form attached hereto as Exhibit
          3(c).  

        All
such transactions and actions listed in this Section 3 above to take place at the Closing,
shall be deemed to take place simultaneously and no transaction or action shall be deemed
to have been completed or taken and no document or instrument shall be deemed delivered,
until all such transactions and actions have been completed and taken and all required
documents and instruments delivered. 

    (d)        The
Investors’ Conditions to the Closing. The obligation of the           Investors
to close the transactions contemplated herein shall be subject to the           delivery
of the executed Debentures, the executed Registration Rights Agreement           and all
other agreements and documents to be delivered to the Investors on or           prior to
the Closing.  

Furthermore, the Investors shall
not be obligated to consummate the investment contemplated herein if an event or a series
of events occur on or prior to the Closing Date, which constitutes an Event of Default (as
such term is defined herein) 

    (e)        Camtek’s
Condition to the Closing. The obligation of Camtek to close           the
transactions contemplated herein shall be subject to the receipt by Camtek           of
the total aggregate amount of the Loan from the Investors.  

13

         (f)       
          If any of the conditions set forth in this Section 3 is neither satisfied nor
          waived by the Closing Date, each party for whose benefit such condition must be
          satisfied may terminate this Agreement by notice to the other party, in which
          event it shall not have any further liability to the other parties under this
          Agreement and any other agreement or undertaking made or delivered hereunder and
          this Agreement and such other agreements and undertakings shall be deemed null
          and void for any and all purposes. 

	4.  	CERTAIN
COVENANTS OF CAMTEK FOLLOWING THE CLOSING

         (a)       
          Financial Covenants. Camtek agrees that as of the date hereof and for so
          long as the Debentures have not been redeemed, repurchased, repaid or converted
          in full: (A) the shareholders’ equity of Camtek (as
          reflected in Camtek’s quarterly consolidated financial statements, which
          shall be prepared in accordance with GAAP) (i) shall not be below US$45 million;
          provided, however, that (x) as a result of dividend distributions only,
          the shareholders’ equity may decrease below US$45 million but in no event
          shall it be below US$40 million, and (y) such shareholders’ equity may
          decrease by not more than 10% (i.e., to US$ 40.5 million, subject to the
          dividend distribution adjustments described in sub-section (x) above in which
          event it may decrease to up to US$36 million) provided that such deviation is
          cured within three consecutive financial quarters immediately following the
          financial quarter in which such decrease had occurred, and (ii) represent less
          than 55% of the total assets of Camtek as reflected in its balance sheet for the
          relevant period, provided that such total assets shall not include assets
          acquired after the date hereof and reflected in the balance sheets as a result
          of transactions that were approved in advance by the Investors; and
          (B) the net Loss (as reflected in Camtek’s financial
          statements, which shall be prepared in accordance with GAAP) shall not exceed an
          aggregate of US$10 million in (a) any single financial quarter; or (b) any year. 

         (b)       
          Transactions with Affiliates. For so long as the Debentures have not been
          redeemed, repurchased, repaid or converted in full, Camtek agrees that except
          for the arrangements specified in this Agreement, Camtek will not enter into, or
          be a party to, any transaction, arrangement or agreement with any Affiliate (as
          defined below) other than the transactions currently in place, which are listed
          in Exhibit 4(b) attached hereto without the Investors’
          prior written consent, which consent shall be withheld only for reasonable
          reasons. For the avoidance of doubt, a material amendment of the terms of the
          transactions listed in said Exhibit 4(b) shall also require
          the Investors’ prior written consent. For purposes of this Agreement, the
          term “Affiliate” shall mean, any individual or any type of
          entity whether incorporated or not which, directly or indirectly through one or
          more intermediaries, controls or is under common control with Camtek. The term
          “control” shall have the meaning ascribed to such term in the
          Israeli Securities Law-1968. 

14

         (c)       
          For so long as the Debentures have not been redeemed, repurchased, repaid or
          converted in full, unless Camtek receives the Investors’ prior written
          consent, the aggregate amount of loans granted or made available to Camtek and
          its subsidiaries (excluding the Loan granted by the Investors pursuant to this
          Agreement, other than existing loans and an aggregate amount of 5 million
          dollars out of bank’s credit lines approved and/or made available to Camtek
          as of the date hereof) shall not exceed US$15 million; provided, however, that
          such consent shall not be required with respect to loans which would not have
          caused Camtek not to meet the threshold described in Section 4(a)(A)(ii) above
          had financial statements been prepared in accordance with GAAP on the date
          following the receipt of such loan. 

	5.  	THE
DEBENTURES

Description of the Debentures.
Camtek will authorize the issue and delivery of the Debentures in the aggregate principal
amount of US$5,000,000. 

        The
term of the Debentures shall commence upon the Closing and shall terminate at the end of
the fifth anniversary of the Closing. The Debentures shall be convertible, in whole or in
part, into such number of issued and outstanding Ordinary Shares of Camtek as determined
by dividing (x) the principal amount of the Debentures outstanding and to be converted at
such time by (y) the Conversion Price (as defined below). Subject to the Default
provisions set forth below, (i) the principal shall be repaid in three equal annual
payments commencing at the end of the third anniversary of the Closing; provided,
however, that prior to each payment date, the Investors, at their sole discretion, may
elect, by giving an irrevocable written notice to Camtek, at least seven (7) Business Days
prior to a payment date, to have any portion of the principal be deferred and repaid on
the fifth anniversary of the Closing; (ii) the Debentures shall bear dollar denominated
interest, payable quarterly, at a floating annual rate equal to the then applicable 3
months’ LIBOR plus 2.1%, in each case with such interest payment being
supplemented by applicable value added tax; provided, however, that any interest accrued
and unpaid on the date on which the conversion of the Debentures is effected shall become
immediately payable on such date of conversion; and (iii) be otherwise substantially in
the form attached hereto as Exhibit 5(a). For the avoidance of doubt,
the Debentures may not be prepaid without the Investors prior consent. Interest on each of
the Debentures shall be computed on the basis of a 360 day year. For the purposes of this
Section 5, any payment due to be made on a day which is not a Business Day shall be
deferred to the next Business Day. 

	6.  	EVENTS
OF DEFAULT AND REMEDIES THEREFOR  

         (a)       
          Events of Default. Any one or more of the following shall constitute an
          “Event of Default” as the term is used herein: 

		     (1)        a
default in the payment of interest on the Loan when due and such default shall
          continue for more than three Business Days;  

		     (2)        a
default in the payment of the principal at the expressed or any accelerated           due
date and such default shall continue for more than three Business Days;  

15

		     (3)        a
default in the payment when due of the principal of or interest on any Debt of
          Camtek to a bank or another financial institution or pursuant to which the
          creditor has a registered Security Interest over assets, having an unpaid
          principal amount in excess of US$ 300,000 (three hundred thousand USD) (whether
          by lapse of time, by declaration, by call for redemption or otherwise), and
such           default or event shall continue beyond the period of grace, if any,
allowed with           respect thereto; provided, however, that the provisions of this
Section 6(a)(3)           shall not apply to legitimate disputes in the ordinary course
of the business of           Camtek;  

		     (4)        a
default in the observance or performance of the covenants set forth in Section
          4 of this Agreement;  

		    (5)        any
representation or warranty made by Camtek under Section 2 hereto, is found           to
be untrue in any material respect as of the Closing Date and has a Material
          Adverse Effect on the date on which the Investors notify Camtek of the
          occurrence of an Event of Default, provided that the Investors shall have
          provided Camtek of such notification no later than within 30 days after they
          have learned of such untrue representation or warranty;  

		    (6)        Camtek
is generally not paying its debts (other than legitimate disputes in the
          ordinary course of business) as they become due or makes an assignment for the
          benefit of creditors, or Camtek causes or suffers an order for relief being
          entered with respect to it under applicable bankruptcy law or applies for or
          consents to the appointment of a custodian, trustee or receiver for or over all
          the assets of Camtek or a substantial part thereof;  

		     (7)        a
custodian, liquidator, trustee or receiver is appointed for or over all of the
          assets of Camtek or substantially all of its assets and is not discharged
within           90 days after such appointment; or  

		     (8)        bankruptcy,
arrangement or insolvency proceedings, or other proceedings for           relief under
any bankruptcy or similar law or laws for the relief of debtors,           are instituted
with respect to Camtek by or against Camtek and, if instituted           against Camtek,
are consented to or are not dismissed within 90 days after such           institution.  

         (b)       
          Notice to the Investors. When any Event of Default described in Section
          6(a) has occurred and becomes known to Camtek, Camtek shall give a written
          notice to the Investors within three Business Days of the day such event became
          known to Camtek. 

         (c)       
          Acceleration of Maturities. When any Event of Default described in
          paragraphs (1) through (5), inclusive, of Section 6(a) has happened and is
          continuing and has not been cured within five (5) business days after receiving
          a written notice to such effect from the Investors (the “Cure
          Period”), the Investors may, by notice in writing sent to Camtek,
          declare the Debenture due and payable, provided, however that with respect to
          the Event of Default described in paragraph (5) the Investors may so declare the
          Debenture due and payable only 10 days after the delivery of a notice pursuant
          to said paragraph (5) above. 

16

When any Event of Default described
in paragraphs (6), (7), or (8) of Section 6(a) has occurred, then the Debentures shall
immediately become due and payable without presentment, demand or notice of any kind, all
of which are hereby expressly waived. Upon the Debentures becoming due and payable as a
result of any Event of Default as aforesaid, Camtek will forthwith pay to the Investors
all principal of and interest accrued on the Debentures, together with applicable value
added tax. Such amounts shall be supplemented by additional interest accrued thereon at an
annual rate of 5% from the date when the Event of Default has occurred and until the
payment date. Neither any course of dealing on the part of the Investors nor any delay or
failure on the part of the Investors to exercise any right shall operate as a waiver of
such right or otherwise prejudice the Investors’ rights, powers and remedies. Camtek
further agrees, to the extent permitted by law, to pay the Investors all reasonable
expenses incurred by them in implementation of their rights, powers and remedies under
this Section 6(c). 

	7.  	CONVERSION  

		     (a)        Right
to Convert. Each Debenture shall be convertible, in whole or in           part, at
the option of the Investors, at any Business Day after the Closing           Date, into
such number of issued and outstanding Ordinary Shares of Camtek (the           “Underlying
Shares”) as determined by dividing (i) the           principal amount of such
Debenture outstanding and to be converted at such time           by (ii) the Conversion
Price. The initial Conversion Price per share shall be           US$5.5 (the “Initial
Conversion Price”); provided, however,           that the Initial Conversion
Price shall be subject to the adjustments more fully           set forth herein (the
Initial Conversion Price, as adjusted, shall be referred           to as the “Conversion
Price”).  

		     (b)        Mechanism
of Conversion. Before an Investor shall be entitled to convert           any part of
its Debenture into Underlying Shares it shall give an irrevocable           written
notice to Camtek at its registered office, of the election to convert           the same,
together with the presentment of the Debenture. Camtek shall, as soon           as
practicable thereafter but in any event by no later than ten (10) Business           Days
commencing on the date it received the notice of conversion and the           Debenture
pursuant to the provisions herein, issue and deliver to such Investor,           in
exchange for the Debenture in the Investor’s possession (i) a           certificate
or certificates for the number of Underlying Shares to which the           Investor shall
be entitled as aforesaid, and (ii) a new Debenture for the           balance of the
unconverted principal amount of the Loan. Subject to applicable           laws, such
conversion shall be deemed to have been made, in the relations           between the
converting Investor and Camtek, one Business Day following the date           on which
the Debenture was to be converted, and the Investor shall be treated           for all
purposes as the record holder of such shares as of such date.  

		    (c)        Conversion
Price Changes.  

	 	
(1)
            Camtek shall take all necessary actions to change the Conversion Price of the
          Debentures from time to time as follows:  

		     (i)        In
the event that the average closing price (the  “First
Average Closing Price”) of the shares of Camtek, as reported on Nasdaq for the
sixty (60) consecutive trading days immediately preceding the first anniversary of the
Closing (the “First  Period”) is lower than the Conversion Price
in effect on such date, the Conversion Price in effect on such date shall be reduced to
equal the higher of the First Average Closing Price, and US$2.00.

17

		    (ii)        In
the event that the average closing price (the “Second Average Closing Price”)
of the shares of Camtek, as reported on Nasdaq for the sixty (60) consecutive trading
days immediately preceding the second anniversary of the Closing (the “Second
Period”) is lower than the Conversion Price in effect on such date, the
Conversion Price in effect on such date shall be reduced to equal the higher of the
higher of the Second Average Closing Price and US$2.00. 

      

		    (iii)        Notwithstanding
anything to the contrary herein, in the event that Camtek is (a) acquired in its entirety
or (b) is consolidated or merges with or into any third party in a transaction pursuant
to which the shareholders of Camtek immediately prior to such transaction do not hold at
least 51% of the shares of the surviving entity immediately following such transaction
(each, an “Exit Transaction”), then if such Exit Transaction is
consummated prior to the third anniversary of the Closing, at an effective price per
Camtek share, which, when multiplied by 70% (the “ExitDiscounted PPS”),
is lower than the Conversion Price in effect on such date, then the Conversion Price
shall automatically be adjusted to equal the Exit Discounted PPS; provided, however,
that if such Exit Discounted PPS is lower than $2.00, Camtek may issue shares upon
conversion of the Debentures on the basis of a conversion price of $2.00 and pay the
Investors, upon such conversion, an additional amount equal to the difference between (i)
the value of the shares that would have been issued had the conversion price been equal
to the Exit Discounted PPS and (ii) the value of the shares that were issued on the basis
of the $2.00 conversion price. If such Exit Transaction is consummated following the
third anniversary of the Closing, the same mechanism would apply; provided, however, that
the “70%” number set forth above would be replaced by “65%" 

		    (iv)        If
Camtek shall subdivide or combine its Ordinary Shares, the Conversion Price           in
effect on such date shall be proportionately reduced, in case of subdivision           of
shares, as at the effective date of such subdivision, or if Camtek shall fix           a
record date for the purpose of so subdividing, as at such record date,
          whichever is earlier, or shall be proportionately increased, in the case of
          combination of shares, as at the effective date of such combination, or, if
          Camtek shall fix a record date for the purpose of so combining, as at such
          record date, whichever is earlier.  

		     (v)        If
Camtek at any time shall pay a dividend payable in additional Ordinary Shares
          or other securities or rights convertible into, or entitling the holder thereof
          to receive directly or indirectly, additional Ordinary Shares (hereinafter
          referred to as the “Ordinary Share Equivalent”), then the
          Conversion Price shall be adjusted, as at the date Camtek shall fix as the
          record date for the purpose of receiving such dividend (or if no such record
          date is fixed, as at the date of such payment), to that price determined by
          multiplying the Conversion Price by a fraction,(a) the numerator of
          which shall be the total number of Ordinary Shares outstanding immediately
prior           to such dividend (plus, in the event that Camtek paid cash for fractional
          shares, the number of additional shares which would have been outstanding had
          Camtek issued fractional shares in connection with such dividend), and (b) the
          denominator of which shall be the total number of Ordinary Shares outstanding
          including those issuable with respect to such Ordinary Share Equivalents.  

	 	
(2)           If
at any time prior to the conversion or repayment of the Debentures Camtek           shall
distribute a dividend in liquidation or partial liquidation or by way of           return
of capital, or a dividend payable out of earnings or surplus legally           available
for dividends, the Conversion Price shall be reduced by an amount           equal to the
per-share distribution on the record date fixed for the purpose of           such
distribution.  

18

	 	
(3)
          Notwithstanding the foregoing, in the event that the Investors shall receive an
          aggregate cash consideration in connection with any sale or other disposition
of           all of the Underlying Shares, in one transaction or disposition or a series
or           number of transactions or dispositions (whether related or not), and such
          aggregate consideration (i) exceeds two times the aggregate Conversion Price
          paid by the Investors to Camtek for such Underlying Shares, and (ii) reflects
an           IRR on the Loan of at least 33%, then the Investors shall, jointly and
          severally, pay Camtek, within 7 days after the last sale or disposition of
          Underlying Shares, an aggregate of 50 cents for each US$1.00 dollar received by
          them in excess of the higher of (i) and (ii) above.  

        Notwithstanding
the foregoing, publicly traded securities received by the Investors as consideration for
the sale or other disposition of Underlying Shares shall be deemed “cash
consideration” as of the date on which all of such tradable securities may be freely
sold by the Investors without any restrictions and where the volume of trade during the
trading week starting on such date exceeds ten times the number of shares held by the
Investors. 

     (d)        No
Impairment  

        Camtek
shall act in good faith in the performance of this Agreement and as such will not, through
any reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, intentionally
avoid or seek to avoid the observance or performance of any of the terms to be observed or
performed hereunder by Camtek. 

         (e)       
          No Fractional Shares and Certificate as to Changes 

		     (1)        No
fractional shares shall be issued upon conversion of any Debenture, and the
          number of Underlying Shares to be issued shall be rounded down to the nearest
          whole share (with cash being paid by Camtek for any unissued fractional
shares).  

		     (2)        Upon
the occurrence of an event requiring an adjustment or change of the           Conversion
Price, Camtek shall, at its expense, furnish to the Investors, by no           later than
seven (7) Business Days following the occurance of such an event, a           certificate
setting forth each adjustment or change and showing in detail the           facts upon
which such adjustment or change is based.  

     (f)        Notices
of Record Date  

        In
the event of any taking by Camtek of a record of the holders of any class of securities
for the purpose of determining the holders thereof who are entitled to receive any
dividend (including a cash dividend) or other distribution, any right to subscribe for,
purchase or otherwise acquire any shares of any class or any other securities or property,
or to receive any other right, Camtek shall mail to the Investors a notice, which shall be
sent simultaneously with the notice sent to other shareholders of Camtek, specifying the
date on which any such record is to be taken for the purpose of such dividend,
distribution or right, and the amount and character of such dividend, distribution or
right. 

19

    (g)        Reservation
of Shares Issuable Upon Conversion  

        Camtek
shall at all times as long as all or any portion of the Debentures remains outstanding,
reserve and keep available out of its authorized but unissued Ordinary Shares solely for
the purpose of effecting the conversion of the Debentures such number of its Ordinary
Shares as shall from time to time be sufficient to effect the full conversion of the
Debentures; and if at any time the number of authorized but unissued Ordinary Shares shall
not be sufficient to effect such conversion, in addition to such other remedies as shall
be available to the Investors by law, Camtek will take such corporate action as may be
necessary to increase its authorized but unissued Ordinary Shares to such number of shares
as shall be sufficient for such purposes. 

	 8. 	RESTRICTIONS
ON SALES. Each Investor represents, warrants and undertakes           that such
Investor nor any Affiliate of such Investor which (x) has or shares           discretion
relating to such Investor’s investments or trading or           information
concerning such Investor’s investments, including in respect of           the
Securities, or (y) is subject to such Investor’s review or input
          concerning such Affiliate’s investments or trading, will, directly or
          indirectly, during the ninety (90) consecutive trading day period immediately
          preceding the commencement of each of the First Period and the Second Period
and           throughout such periods engage in (i) any “short sales” (as such
term           is defined in Rule 3b-3 promulgated under the US Exchange Act) of the
Camtek           shares, including, without limitation, the maintaining of any short
position           with respect to, establishing or maintaining a “put equivalent
          position” (within the meaning of Rule 16a-1(h) under the US Exchange Act)
          with respect to, entering into any swap, derivative transaction or other
          arrangement (whether any such transaction is to be settled by delivery of
Camtek           shares, other securities, cash or other consideration) that transfers to
          another, in whole or in part, any economic consequences or ownership, or
          otherwise dispose of, any of the Securities by the Investor or (ii) any hedging
          transaction which establishes a net short position with respect to the
          Securities (clauses (i) and (ii) together, a “Short Sale”);
          except for Short Sales by the Investor or an Affiliate of such Investor to the
          extent that such Investor or Affiliate of such Investor is acting in the
          capacity of a broker-dealer executing unsolicited third-party transactions. 

	9.  	MISCELLANEOUS  

         (a)       
          Exhibits. The Exhibits attached to this Agreement constitute a part of
          this Agreement. They are incorporated herein by reference and shall have the
          same force and effect as if set forth in full in the main body of this
          Agreement. 

20

         (b)       
          Governing Law; Forum for Dispute Resolution. This Agreement shall be
          governed by the laws of Israel. Any dispute arising under or with respect to
          this Agreement shall be resolved exclusively in the appropriate court in Tel
          Aviv, Israel. 

         (c)       
          Notices. 

        All
notices required or permitted hereunder to be given to a party pursuant to this Agreement
shall be in writing and shall be deemed to have been duly given to the addressee thereof
(i) if hand delivered, on the day of delivery, (ii) if given by facsimile transmission, on
the business day on which such transmission is sent and confirmed, (iii) if given by air
courier, five business days following the date it was sent or (iv) if mailed by registered
mail, return receipt requested, two business days following the date it was mailed, to
such party’s address as set forth below or at such other address as such party shall
have furnished to each other party in writing in accordance with this provision: 

		
	if to Camtek:	Camtek Ltd.
	 	the Industrial Park of Ramat Gavria
	 	Migdal Ha'Emek
	 	PO.Box 544
	 	23150, Israel
	 
	if to the Investors:	The Investors
	 	c/o FIMI 2001 Ltd.
	 	"Rubinstein House"
	 	37 Menachem Begin Road
	 	Tel Aviv, Israel
	 	Fax: 03-5652245

        Each
party may from time to time change the address or fax number to which notices to it are to
be delivered or mailed hereunder by notice delivered or sent to the other party in
accordance herewith; provided, however, that any notice of change of address shall be
deemed effective only upon its receipt. 

         (d)       
          Expenses. At the Closing, Camtek shall pay the fees and expenses of the
          Investors in connection with the negotiation and consummation of this
          transaction, up to an aggregate amount of US$ 45,000 plus applicable value added
          tax. 

         (e)       
          Entire Agreement. This Agreement constitutes the entire agreement among
          the parties regarding the transactions contemplated herein and therein, and may
          not be amended except in writing, signed by Camtek and FIMI Opportunity Fund,
          L.P. and FIMI Israel Opportunity Fund on behalf of all Investors. 

         (f)       
          Headings. The headings contained in this Agreement are solely for
          convenience of reference and shall not affect the interpretation of this
          Agreement. 

21

         (g)       
          Counterparts. This Agreement may be executed in one or more counterparts,
          each of which shall be deemed an original, but all of which together shall
          constitute one and the same instrument. 

         (h)       
          Successors and Assigns; Assignment. Except to the extent set forth
          herein, neither Camtek nor any Investor may sell, assign, transfer, or otherwise
          convey any of its rights or delegate any of its duties under this Agreement,
          except that either party may assign this agreement in whole as part of a merger
          acquisition provided in each case that the assignee shall undertake in writing
          towards the other parties hereto to assume and abide by all the terms hereunder,
          mutatis mutandis. 

Notwithstanding any provision of this
Agreement to the contrary, the Investors may assign or otherwise transfer their rights
under this Agreement only together with the relative portion of the Debentures
corresponding to the assigned and transferred rights: (i) to a
Permitted Transferee, as defined below, provided that such assignment or transfer made to
entities and/or persons included in clauses (i) to (iii) of such definition, shall be
permitted only if made in the framework of a distribution of assets to partners and
shareholders of the transferor; or (ii) to such entity or person
approved by Camtek in writing and in advance (which approval shall not be unreasonably
withheld). Notwithstanding the foregoing, such approval shall not be required with respect
to transferees which are Israeli insurance companies, Israeli provident funds and/or
Israeli study funds (“kranot hishtalmut”); all provided, that each such
transfer shall comply with all applicable securities laws and the transferees shall agree
in writing towards Camtek to be bound by any restrictions applicable to the Investors
under this Agreement and otherwise and to the extent required shall also sign the OCS
Undertaking, and further provided that no assignment or transfer pursuant to clause
(ii) above will be made without Camtek’s prior written approval (which may be granted
or denied for reason or for no reason at Camtek’s sole discretion) if it results in
decreasing the aggregate portion of FIMI Opportunity Fund, L.P. and FIMI Israel
Opportunity Fund in the Debentures to less than 51%. 

It is being clarified that the right
and authorization of FIMI Opportunity Fund, L.P. and FIMI Israel Opportunity Fund to take
or exercise any action on behalf of the Investors or any right granted to the Investors
hereunder (including the right to agree to an amendment to this Agreement or declare that
an Event of Default had occurred, on behalf and in the name of all the Investors), as
provided in Section 9(i) below, shall survive any assignment and transfer of rights and
may not be assigned itself, and FIMI Opportunity Fund, L.P. and FIMI Israel Opportunity
Fund shall, notwithstanding any assignment and transfer, continue to be deemed for all
intents and purposes as the duly authorized representatives of all the Investors. 

Except as otherwise expressly limited
herein, this Agreement shall be binding upon and inure to the benefit of and be
enforceable by the Investors and Camtek and their successors. 

For the purpose of this Section 9(h),
a “Permitted Transferee” shall mean with respect to each Investor (i) its
partners, (ii) the shareholders of such partners, (iii) any entity controlled by,
controlling, or under common control with, either such Transferor or FIMI 2001 Ltd., or
(iv) any other Investor. 

22

    (i)        Exercise
of rights. Any action on behalf of the Investors (including           without
limitation the grant of any approvals) or the exercise of any right           granted to
the Investors (other than the right to transfer the Debenture and           Underlying
Shares, the right to defer payment under Section 5 and the right to           convert the
Debenture under Section 7, all subject to the terms and conditions           contained
herein) shall be taken or exercised (as applicable) only by FIMI           Opportunity
Fund, L.P., and FIMI Israel Opportunity Fund and said two entities           shall, for
all intents and purposes be the duly authorized representatives of           all the
Investors, and any and all notices required or permitted hereunder to be           given
to an Investor pursuant to this Agreement shall be deemed to have been           duly
given to each Investor if sent to FIMI Opportunity Fund, L.P. and FIMI           Israel
Opportunity Fund.  

         (j)       
          Delays or Omissions; Waiver. No delay or omission to exercise any right,
          power, or remedy accruing to either Camtek or the Investors upon any breach or
          default by the other party under this Agreement shall impair any such right or
          remedy nor shall it be construed to be a waiver of any such breach or default,
          or any acquiescence therein or in any similar breach or default thereafter
          occurring. 

         (k)       
          Further Actions. At any time and from time to time, each party agrees,
          without further consideration, to take such actions and to execute and deliver
          such documents as may be reasonably necessary to effectuate the purposes of this
          Agreement. 

         (l)       
          Manner of Payment. All payments that are paid to the Investors pursuant
          to this Agreement shall be paid in U.S. Dollars to the Investors to their
          respective bank accounts set forth in Exhibit 8(l) attached
          hereto or such other bank account(s) as shall be designated by or on behalf of
          the Investors from time to time in a written notice sent to Camtek by the
          Investors. Camtek shall make such payments to such bank account by initiating
          such payments on a banking day, before 11.00 a.m., Israel time, by bank wire
          transfer in immediately available funds, marked for attention as indicated. 

[The Remainder of this
Page Intentionally Left Blank] 

        IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first above
written. 

Camtek Ltd.

By: _______________________

Name: _______________________

Title: _______________________ 

	 	 
	FIMI Opportunity Fund, L.P. 	FIMI Israel Opportunity Fund, Limited Partnership 
	By: FIMI 2001 Ltd. 	By: FIMI 2001 Ltd. 
	By: ____________________ 	By: _______________________ 
	Name: ________________ 	Name: _______________________ 
	Title:__________________ 	Title: ________________________ 

23

Exhibit 3(b)(4) 

Date: August
24th, 2005
To: the Investors 

Pursuant to Section 3(b)(4) of the
Convertible Loan Agreement dated August 8, 2005 among Camtek Ltd. (the
“Company”) and the Investors (the “Agreement”), we hereby certify that
as of the date hereof (and except only as set forth in the amended disclosure schedule,
attached hereto as Exhibit A: 

Subject to Section 3(a) of the
Agreement, Camtek has obtained all Required Approvals to be obtained by it in connection
with the transactions contemplated by the Agreement and all such consents are in full
force and effect. 

All capitalized terms shall have the
respective meanings attributed to them in Agreement. 

Very truly yours,

____________________________

24

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