S-1

As filed with the Securities and Exchange Commission on October 20, 2006

Registration No. 333-      

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

VERAZ NETWORKS, INC.

(Exact name of registrant as specified in its charter)

Delaware	7373	94-340961
(State or Other Jurisdiction of Incorporation or Organization)	(Primary Standard Industrial Classification Number)	(IRS Employer Identification No.)

926 Rock Avenue, Suite 20

San Jose, California 95131

(408) 750-9400

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

Douglas A. Sabella

President and Chief Executive Officer

Veraz Networks, Inc.

926 Rock Avenue, Suite 20

San Jose, California 95131

(408) 750-9400

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

James F. Fulton, Jr., Esq.
Cooley Godward Kronish LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA
(650) 843-5000 Eric C. Schlezinger, Esq.
General Counsel
Veraz Networks, Inc.
926 Rock Avenue, Suite 20
San Jose, CA 95131
(408) 750-9400 Jeffrey D. Saper, Esq.
Allison B. Spinner, Esq.
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, CA, 94304
(650) 493-9300

Approximate date of commencement of proposed sale to the public:  As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box.  o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

If the delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box.  o

CALCULATION OF REGISTRATION FEE

		Amount of
Title of Each Class of	Proposed Maximum	Registration
Securities to be Registered	Aggregate Offering Price(a)(b)	Fee
Common stock, $0.001 par value	$115,000,000	$12,305

(a)	Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(o) promulgated under the Securities Act of 1933.
(b)	Including shares of common stock which may be purchased by the underwriters to cover over-allotments, if any.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We and the selling stockholder may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities, and we are not soliciting offers to buy these securities in any state or jurisdiction where the offer or sale is not permitted.

Prospectus

Subject to Completion, Dated October 20, 2006

          Shares

Common Stock

Prior to this offering, there has been no public market for our common stock. The initial public offering price of the common stock is expected to be between $      and $      per share. We have applied to have our common stock listed on The Nasdaq Global Market under the symbol “VRAZ.” We are selling shares of common stock and a selling stockholder is selling shares of common stock. We will not receive any of the proceeds from the shares of common stock sold by the selling stockholder.

The underwriters have an option to purchase from us and the selling stockholder a maximum of      additional shares of common stock to cover over-allotments of shares.

Investing in our common stock involves risks. See “Risk Factors” on page 7.

			Underwriting				Proceeds to
	Price to		Discounts and		Proceeds		Selling
	Public		Commissions		to Issuer		Stockholder
Per Share		$		$		$		$
Total		$		$		$		$

The underwriters expect to deliver the shares on or about          , 2006.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.          

Credit Suisse Lehman Brothers

Jefferies & Company, Inc. Raymond James

          , 2006

TABLE OF CONTENTS

	Page
Prospectus Summary		1
Risk Factors		7
Special Note Regarding Forward-Looking Statements		29
Use of Proceeds		30
Dividend Policy		30
Capitalization		31
Dilution		34
Selected Consolidated Financial Data		36
Management’s Discussion and Analysis of Financial Condition and Results of Operations		38
Business		55
Management		65
Certain Relationships and Related Party Transactions		82
Principal and Selling Stockholders		86
Description of Capital Stock		89
Shares Eligible for Future Sale		93
Underwriting		95
Notice to Canadian Residents		99
United States Federal Income Tax Consequences to non-United States Holders		101
Legal Matters		103
Experts		103
Change in Accountants		104
Where You Can Find More Information		104
Index to Consolidated Financial Statements		F-1
EXHIBIT 2.1
EXHIBIT 2.2
EXHIBIT 3.1
EXHIBIT 3.2
EXHIBIT 3.3
EXHIBIT 3.4
EXHIBIT 10.1
EXHIBIT 10.2
EXHIBIT 10.3
EXHIBIT 10.4
EXHIBIT 10.5
EXHIBIT 10.6
EXHIBIT 10.7
EXHIBIT 10.8
EXHIBIT 10.9
EXHIBIT 10.10
EXHIBIT 10.11
EXHIBIT 10.12
EXHIBIT 10.13
EXHIBIT 10.14
EXHIBIT 10.15
EXHIBIT 10.16
EXHIBIT 10.17
EXHIBIT 10.18
EXHIBIT 10.19
EXHIBIT 10.20
EXHIBIT 10.21
EXHIBIT 10.22
EXHIBIT 10.23
EXHIBIT 10.24
EXHIBIT 10.25
EXHIBIT 10.26
EXHIBIT 10.27
EXHIBIT 10.28
EXHIBIT 10.29
EXHIBIT 10.30
EXHIBIT 10.31
EXHIBIT 10.32
EXHIBIT 10.33
EXHIBIT 10.34
EXHIBIT 10.36
EXHIBIT 16.1
EXHIBIT 23.1

You should rely only on the information contained in this document and any free writing prospectus prepared by or on behalf of us or to which we have referred you. We have not authorized anyone to provide you with information that is different. This document may only be used where it is legal to sell these securities. The information in this document may only be accurate on the date of this document.

Dealer Prospectus Delivery Obligation

Until       , 2006 (25 days after the commencement of this offering), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to unsold allotments or subscriptions.

PROSPECTUS SUMMARY

This summary highlights selected information contained elsewhere in this prospectus and does not contain all of the information you should consider in making your investment decision. You should read the following summary together with the more detailed information regarding us and our common stock, including our consolidated financial statements and the related notes, appearing elsewhere in this prospectus. For convenience in this prospectus, “Veraz Networks,” “Veraz,” “we,” “us,” and “our” refer to Veraz Networks, Inc. and its subsidiaries, taken as a whole, unless otherwise noted.

Our Company

We are a leading global provider of Internet Protocol, or IP, softswitches, media gateways and digital compression products to established and emerging wireline, wireless and broadband service providers. Service providers use our products to transport, convert and manage voice traffic over legacy and IP networks, while enabling voice over IP, or VoIP, and other multimedia communications services. Our IP products, which consist of our innovative ControlSwitch softswitch solution and I-Gate 4000 family of media gateway products, enable service providers to deploy IP networks and efficiently migrate from their legacy circuit-switched networks to IP networks.

Intense competition in the telecommunications industry has driven service providers to seek ways to lower costs, deploy more efficient networks, offer new value-added services and enhance their competitive position. Many service providers are combining separate voice and data networks onto one converged network using IP technologies to offer VoIP and other multimedia communications services.

Our products allow our customers to continue to realize their investment in wireless and wireline legacy networks while simultaneously offering next generation IP applications and services in a cost-effective manner without compromising service quality. Our portfolio of products enables service providers to deploy flexible networks that can adapt to changing end user demands, regulatory conditions and competitive industry dynamics. As service providers continue to migrate to IP networks, our product portfolio has positioned us to capture a growing portion of the next generation communication infrastructure market, in particular the softswitch and media gateway markets. Our products also address emerging opportunities by enabling new entrants to the service provider market or existing service providers entering new markets to implement flexible and cost-effective networks.

We have developed innovative IP product solutions incorporating leading technologies that enable service providers to accomplish several objectives, including:

•  seamless migration of legacy networks to IP;

•  cost reduction;

•  rapid introduction of new services;

•  revenue growth and margin improvement; and

•  compatibility of existing investment with emerging standards.

Our business initially was focused on the sale of digital circuit multiplication equipment, or DCME, products to service providers for use in their legacy networks. We continue to sell DCME products compatible with both legacy and next generation networks, and DCME sales comprise a significant portion of our present business. We have increasingly focused our efforts on our IP products, and we have experienced rapid growth in our IP product revenues. By leveraging our large installed base of DCME customers, we believe we are well positioned to be the provider of IP network solutions to our existing customers as they migrate to IP networks.

Our customers include over 400 service providers that have deployed our DCME products in over 90 countries and over 45 service providers that have deployed our IP products. A representative sample of customers include Belgacom International Carrier Services, Cable & Wireless Panama, Equant, Meditelcom Inc., Moessel (Jamaica) Limited (Digicel), Multiregional Transit-Telecom (MTT), Primus

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Telecommunications, Inc., Telekom SA, Vimplecom and Vodacom SA. We sell our products worldwide through a direct sales force, distributors, systems integrators and resellers.

Industry Background

The global telecommunications industry has been experiencing dramatic changes, driven by several trends, including:

•  significant deregulation in the telecommunications market worldwide;

•  intensified competition in the telecommunication services market;

•  the introduction and adoption of broadband Internet services; and

•  increased subscriber demand for advanced voice, video and data telecommunications services.

To meet the challenge of these evolving industry dynamics, many industry analysts believe that service providers will make substantial capital investments in deploying IP network communications equipment that allows switching and transport of voice traffic and services delivery over IP networks, giving service providers the opportunity to converge voice and data traffic onto a single IP network. IDC, an independent research firm, predicts that the market for media gateways and softswitches will grow from $1.8 billion in 2005 to $7.6 billion in 2010, representing a compound annual growth rate of 33%.

Our Competitive Strengths

We have established ourselves as a leading provider of innovative next generation IP network solutions. We believe our core competitive strengths are:

•  Programmable Softswitch Platform:  Our ControlSwitch incorporates a programmable interface that enables service providers to customize and deploy multimedia communication services, including those offered by third parties, to generate new revenue streams more rapidly than our competitors’ products.

•  Distributed Architecture Enables Flexible Network Design:  Our ControlSwitch enables service providers to easily deploy networks in new regions ranging from a single site to a concurrent global deployment. Our system also allows service providers to centrally manage their geographically dispersed network elements which reduces network management costs.

•  Leading Voice Compression Technology:  We offer industry leading compression capabilities on our media gateways that enable service providers to compress voice traffic and optimize network bandwidth while maintaining high voice quality.

•  Interoperable Solution with Multi-Protocol Connectivity:  Our softswitch solution supports most commonly used legacy and next generation communication protocols and standard network interfaces.

•  IMS Architecture:  Our softswitch architecture is an extensible solution fully mapped to IMS architectures. The IMS principles embedded in our distributed softswitch solution can form a fundamental part of a service provider’s IMS architecture as they seek to deploy IMS solutions.

•  Global and Diversified Installed Customer Base:  We have established a diverse global customer base of leading wireless and wireline service providers. Our experience in providing network solutions to our diverse customer base allows us to develop solutions that address existing and emerging customer needs.

•  Highly Leverageable Business Model:  Our expertise in developing IP networking equipment coupled with our unique software architecture gives us the ability to rapidly add features and functionality to our products with little incremental cost.

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Our Strategy

We intend to be the leading global provider of IP-based network solutions to service providers in the telecommunications industry. Principal elements of our strategy include:

•  Deepen Our Existing Customer Relationships:  By leveraging our installed base of DCME products and our existing relationships, we believe we are well positioned to capture a substantial share of the softswitch market as our existing customers migrate from DCME to media gateway to softswitch solutions, or directly from DCME to softswitch solutions.

•  Expand Our Customer Base and Addressable Markets:  We intend to build on our early success to penetrate new customer segments in both wireless and wireline, such as fixed-mobile convergence-related services and voice over broadband services.

•  Continue to Enhance Our Technology Leadership:  We continue to add features and functionality to our solutions to address emerging customer needs and industry standards and to allow easier deployment and interoperability with other network elements.

•  Expand Our Global Sales, Marketing, Support and Distribution Capabilities:  We will continue to expand our sales, marketing, support and distribution capabilities into new markets. We are also making a significant investment in our own professional services and customer support organization to better support our growing global customer base.

•  Grow Our Base of Software Applications and Development Partners:  We have established a broad range of partners to provide our customers with a variety of advanced services and application options. We will continue to seek new partnerships with companies providing complementary products or services for next generation network solutions.

Corporate Information

We were incorporated in Delaware in October 2001 under the name Softswitch Enterprises, Inc., and we subsequently changed our name to NexVerse Networks, Inc. in December 2001. In December 2002, we received financing from ECI Telecom Ltd., among other investors, and purchased all of the outstanding shares of two subsidiaries of ECI Telecom Ltd. In connection with these transactions, we changed our name to Veraz Networks, Inc. Our principal executive offices are located at 926 Rock Avenue, Suite 20, San Jose, California, 95131. Our telephone number is (408) 750-9400. Our website address is www.veraznetworks.com. Information contained on our website is not incorporated by reference into this prospectus, and you should not consider information contained on our website to be part of this prospectus or in deciding whether to purchase shares of our common stock.

“Veraz Networks,” “Veraz,” “ControlSwitch,” “I-Gate 4000 PRO,” “I-Gate 4000 EDGE,” and “DTX-600,” and other trademarks or service marks of Veraz Networks appearing in this prospectus are the property of Veraz Networks. This prospectus also contains trade names, trademarks and service marks of other companies.

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THE OFFERING

Common stock offered by us	shares
Common stock offered by the selling stockholder, ECI Telecom Ltd.	shares
Common stock to be outstanding after the offering	shares
Use of proceeds from this offering	We intend to use the net proceeds from this offering for capital expenditures in connection with our anticipated expansion and the balance added to working capital for general corporate purposes. A portion may also be used for potential acquisitions of businesses, products or technologies. We will not receive any proceeds from the sale of shares by the selling stockholder. See “Use of Proceeds.”
Proposed Nasdaq Global Market symbol	“VRAZ”

The common stock outstanding after this offering is based on 26,930,346 shares of common stock outstanding as of July 31, 2006 plus 34,965,004 shares of common stock issuable upon the conversion of all outstanding shares of Series C convertible preferred stock and redemption of all outstanding shares of Series A-1, A-2 and B-1 redeemable preferred stock upon the closing of this offering, and excludes:

•  15,489,187 shares of common stock that may be issued upon the exercise of options outstanding as of July 31, 2006 under our stock option and equity incentive plans, with a weighted average exercise price of $0.39 per share;

•  138,926 shares of common stock that may be issued upon the exercise of options outstanding as of July 31, 2006 and granted outside of our stock option and equity incentive plans, with a weighted average exercise price of $0.19 per share;

•  32,450 shares of common stock that may be issued upon the exercise of a warrant outstanding as of July 31, 2006 to purchase shares of Series C convertible preferred stock and the subsequent conversion of such Series C convertible preferred stock into common stock, exercisable at a weighted average exercise price of $0.858 per share; and

•  an aggregate of           additional shares of our common stock reserved for future grants under our 2006 Equity Incentive Plan and our 2006 Employee Stock Purchase Plan, both of which were adopted by our board of directors in June 2006 and approved by our stockholders in           2006, will become effective immediately upon the signing of the underwriting agreement for this offering and contain provisions that automatically increase their share reserves each year as more fully described in “Management — Employee Compensation and Defined Contribution Plans.”

Unless specifically stated otherwise, all information contained in this prospectus assumes:

•  the conversion of all outstanding shares of Series C convertible preferred stock upon the closing of this offering;

•  the redemption and subsequent cancellation of all our outstanding shares of Series A-1, A-2 and B-1 redeemable preferred stock for the par value of $0.001 per share, or an aggregate of $14,000;

•  the amendment and restatement of our certificate of incorporation following the closing of this offering; and

•  the underwriters do not exercise their over-allotment option.

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SUMMARY CONSOLIDATED FINANCIAL DATA

The following table summarizes our consolidated and pro forma financial and other operating data for the periods indicated. Our historical results are not necessarily indicative of future operating results. You should read the information set forth below in conjunction with “Capitalization,” “Selected Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and with our audited consolidated financial statements and their related notes included elsewhere in this prospectus.

We derived the summary consolidated statements of operations data for each of the years in the three year period ended December 31, 2005 from our audited consolidated financial statements included elsewhere in this prospectus. We derived the summary consolidated statements of operations data for the year ended December 31, 2002 from our unaudited consolidated financial statements that are not included in this prospectus. We derived the summary statements of operations data for each of the six months ended June 30, 2005 and 2006 and the unaudited consolidated balance sheet data as of June 30, 2006 from our unaudited consolidated interim financial statements that are also included elsewhere in this prospectus. In our opinion, our unaudited consolidated financial statements have been prepared on the same basis as our audited consolidated financial statements and include all adjustments, consisting only of normal recurring adjustments, that management considers necessary for a fair presentation of the financial position and results of operations for these periods. The results of any interim period are not necessarily indicative of the results that may be expected for any other interim period or for the full fiscal year, and the historical results set forth below do not necessarily indicate results expected for any future period.

The following table also sets forth summary unaudited pro forma and pro forma as adjusted consolidated financial data, which gives effect to the transactions described in the footnotes to the table. The unaudited pro forma and pro forma as adjusted consolidated financial data is presented for informational purposes only and does not purport to represent what our results of operations or financial position actually would have been had the transactions reflected occurred on the dates indicated or to project our financial position as of any future date or our results for any future period.

													Six Months Ended
	Years Ended December 31,												June 30,
	2002(1)			2003			2004			2005			2005			2006
	(In thousands, except per share data)
Consolidated Statements of Operations Data(2):
Revenues:
DCME Products	$	—		$	42,430		$	48,105		$	41,681		$	23,136		$	19,551
IP Products		695			8,246			12,480			24,474			8,451			20,368
Services		105			8,852			8,522			10,089			4,912			4,774
Total revenues		800			59,528			69,107			76,244			36,499			44,693
Gross profit		564			29,107			39,073			43,098			20,315			23,697
Loss from operations		(16,820	)		(10,367	)		(7,043	)		(15,029	)		(6,902	)		(9,891	)
Net loss		(16,915	)		(8,885	)		(5,825	)		(14,311	)		(6,587	)		(9,679	)
Net loss allocable to common stockholder per share — basic and diluted	$	(83.83	)	$	(0.38	)	$	(0.25	)	$	(0.59	)	$	(0.28	)	$	(0.36	)
Weighted average common shares used in computing per share amounts		208			23,176			23,365			24,239			23,730			26,522

(1) Period contains nominal transactions from October 18, 2001 (inception) through December 31, 2001.

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	As of June 30, 2006
				Pro		Pro Forma
	Actual			Forma(3)		As Adjusted(4)
	(In thousands)
Consolidated Balance Sheet Data(2):
Cash and cash equivalents		$27,505		$	27,491
Working capital		14,700			14,686
Total assets		82,663			82,649
Long-term debt, net of current portion		13,333			13,333		13,333
Redeemable and convertible preferred stock		57,993			—		—
Total stockholder’s (deficit) equity		(50,797	)		7,182

(2)	The consolidated statements of operations data and the consolidated balance sheets data set forth herein include significant related party transactions as more fully described in our Consolidated Statements of Operations and in Note 3 to our Notes to Consolidated Financial Statements.
(3)	The pro forma consolidated balance sheet data as of June 30, 2006 gives effect to each of the following as if each had occurred at June 30, 2006.

• the conversion of all outstanding shares of our Series C convertible preferred stock into shares of our common stock, and

• the redemption of all outstanding shares of our Series A-1 redeemable preferred stock, Series A-2 redeemable preferred stock and Series B-1 redeemable preferred stock for the par value of $0.001 per share, or an aggregate of fourteen thousand dollars.

(4) The pro forma as adjusted balance sheet data as of June 30, 2006 reflects the issuance of      shares of common stock in this offering at an assumed initial public offering price of $      per share (the midpoint of the estimated range shown on the cover page of this prospectus), and our receipt of the net proceeds from this offering, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us, as if these events had occurred at June 30, 2006.

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RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the following risk factors and all other information contained in this prospectus, including our consolidated financial statements and the related notes, before investing in our common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, also may become important factors that affect us. If any of the following risks materialize, our business, financial condition or results of operations could be materially harmed. In that case, the trading price of our common stock could decline, and you could lose some or all of your investment.

Risks Related to Our Business

The demand for our solutions depends in large part on continued capital spending in the telecommunications equipment industry. A decline in demand, or a decrease or delay in capital spending by service providers, could have a material adverse effect on our results of operations.

Capital spending in the telecommunications equipment industry has in the past, and may in the future, fluctuate significantly based on numerous factors, including:

•  capital spending levels of service providers;

•  competition among service providers;

•  pricing pressures in the telecommunications equipment market;

•  end user demand for new services;

•  service providers’ emphasis on generating revenues from traditional infrastructure instead of migrating to emerging networks and technologies;

•  lack of or evolving industry standards;

•  consolidation in the telecommunications industry;

•  changes in the regulation of communications services; and

•  general global economic conditions.

We cannot assure you of the rate, or extent to which, the telecommunications equipment industry will grow, if at all. Demand for our solutions and our IP products in particular will depend on the magnitude and timing of capital spending by service providers as they extend and migrate their networks. Furthermore, industry growth rates may not be as forecast, resulting in spending on product development well ahead of market requirements. The telecommunications equipment industry from time to time has experienced and may again experience a pronounced downturn. To respond to a downturn, many service providers may be required to slow their capital expenditures, cancel or delay new developments, reduce their workforces and inventories and take a cautious approach to acquiring new equipment and technologies, which could have a negative impact on our business. A downturn in the telecommunications industry may cause our operating results to fluctuate from period to period, which also may increase the volatility of the price of our common stock and harm our business.

Our success depends in large part on continued migration to an IP network architecture for interactive communications.

Our IP products are used by service providers to deliver premium interactive communications over IP networks. Our success depends on the continued migration of service providers’ networks to a single IP network architecture. The migration of voice traffic from the public switched telephone network, or PSTN, to IP networks is in its early stages, and the continued migration to IP networks depends on a number of factors outside of our control. Among other things, existing networks include switches and other equipment that may have remaining useful lives of twenty or more years and therefore may continue to operate reliably

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for a lengthy period of time. Other factors that may delay or speed the migration to IP networks include service providers’ concerns regarding initial capital outlay requirements, available capacity on legacy networks, competitive and regulatory issues, and the implementation of an enhanced services business model. As a result, service providers may defer investing in products, such as ours, that are designed to migrate interactive communications to IP networks. If the migration to IP networks does not occur for these or other reasons, or if it occurs more slowly than we expect, our operating results will be harmed.

Our revenue and operating results may be adversely impacted if the market for IP products does not develop as we expect or if sales of our IP products and other products do not make up for expected declines in revenue from our DCME products.

Our DCME products incorporate mature technologies that we expect to be in less demand by our customers in the future. While we are actively pursuing new customers for our DCME products and seeking to increase sales of our additional product offerings to these customers, including our IP products, we believe that there are fewer opportunities for new DCME sales, and we expect DCME sales to continue to decrease for the foreseeable future. If the decrease in DCME revenues occurs more rapidly than we anticipate and/or the sales of our other products, including our IP products, do not make up for the decline in revenues, our business and results of operations will be harmed.

Our accountants have identified and reported to us material weaknesses for the years ended December 31, 2003, 2004 and 2005, relating to our internal controls over financial reporting. If we fail to maintain proper and effective internal controls, our ability to produce accurate financial statements could be impaired, which could adversely affect our operating results, our ability to operate our business and our stock price.

In connection with the audit of our consolidated financial statements for the years ended December 31, 2003, 2004 and 2005, our independent registered public accounting firm identified material weaknesses in our internal controls over financial reporting related to closing processes, adequate maintenance of books and records and our revenue recognition processes along with other matters involving our internal controls that constituted significant deficiencies, as established in the Public Company Accounting Oversight Board, or PCAOB, Auditing Standard No. 2, An Audit of Internal Control Over Financial Reporting Performed in Conjunction With an Audit of Financial Statements. Our independent registered public accounting firm was not, however, engaged to audit, nor has it audited, the effectiveness of our internal control over financial reporting. Accordingly, our independent registered public accounting firm has not rendered an opinion on our internal control over financial reporting. Likewise, we have not performed an evaluation of internal controls over financial reporting, as we are not currently required to comply with Section 404 of the Sarbanes-Oxley Act of 2002. If such an evaluation had been performed or when we are required to perform such an evaluation, additional material weaknesses, significant deficiencies and other control deficiencies may have been or may be identified. Ensuring that we have adequate internal financial and accounting controls and procedures in place to help ensure that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort that needs to be evaluated frequently.

Although we have taken measures to remediate the material weaknesses as well as the other significant deficiencies and control deficiencies, we cannot assure you that we have identified all, or that we will not in the future have additional, material weaknesses, significant deficiencies and control deficiencies. Our independent registered public accounting firm has not evaluated any of the measures we have taken, or that we propose to take, to address the material weakness and the significant deficiencies and control deficiencies discussed above. Any failure to maintain or implement required new or improved controls, or any difficulties we encounter in implementation, could cause us to fail to meet our periodic reporting obligations or result in material misstatements in our financial statements. Any such failure could also adversely affect management’s assessment of our disclosure controls and procedures, required with the filing of our quarterly and annual reports after our initial public offering, and the results of periodic management evaluations and annual auditor attestation reports regarding the effectiveness of our internal controls over financial reporting that will be required when the SEC’s rules under Section 404 of the Sarbanes-Oxley Act for 2002 become applicable to us beginning with our Annual Report on Form 10-K for the year ending December 31, 2007,

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to be filed in early 2008. The existence of a material weakness could result in errors in our financial statements that could result in a restatement of financial statements, cause us to fail to meet our reporting obligations and cause investors to lose confidence in our reported financial information, leading to a decline in our stock price.

We have not been profitable and our losses could continue.

We have experienced significant losses in the past and have never been profitable. For the fiscal years ended December 31, 2004 and 2005 and for the six months ended June 30, 2006, we recorded net losses of approximately, $5.8 million, $14.3 and $9.7 million, respectively. As of June 30, 2006, our accumulated deficit was $55.6 million. We have never generated sufficient cash to fund our operations and can give no assurance that our losses will not continue.

Our limited operating history makes it difficult to evaluate our current business and future prospects, and may increase the risk of your investment.

Our company was formed in October 2001, and much of our growth has occurred since December 2002. Our limited operating history may make it difficult to evaluate our current business and our future prospects. We have encountered and will continue to encounter significant risks related to our growth and substantial risks related to the rapidly changing telecommunications industry. If we are unable to address these and other risks successfully, our business, financial condition and results of operations likely would be adversely affected.

We face intense competition from the leading telecommunications networking companies in the world as well as from emerging companies. If we are unable to compete effectively, we might not be able to achieve sufficient market penetration, revenue growth or profitability.

Competition in the market for our products and especially our IP products is intense. This market has historically been dominated by established telephony equipment providers, such as Alcatel USA Inc., Ericsson LM Telephone Co., Lucent Technologies Inc., Nortel Networks Corp. and Siemens Industries Ltd., all of which are our direct competitors. We also face competition from other telecommunications and networking companies, including Cisco Systems, Inc., Sonus Networks, Inc., Tekelec and Huawei, some of which have entered our market by acquiring companies that design competing products. Because the market for our products is rapidly evolving, additional competitors with significant financial resources may enter these markets and further intensify competition.

Many of our current and potential competitors have significantly greater selling and marketing, technical, manufacturing, financial and other resources available to them, allowing them to offer a more diversified bundle of products and services. In some cases, our competitors have severely undercut the pricing of our products, which has made us uncompetitive or forced us to reduce our average selling prices, negatively impacting our margins. Further, some of our competitors sell significant amounts of other products to our current and prospective customers. In addition, some potential customers when selecting equipment vendors to provide fundamental infrastructure products prefer to purchase from larger, established vendors. Our competitors’ broad product portfolios, coupled with already existing relationships, may cause our customers or potential customers to buy our competitors’ products or harm our ability to attract new customers.

To compete effectively, we must deliver innovative products that:

•  provide extremely high reliability, compression rates and voice quality;

•  scale and deploy easily and efficiently;

•  interoperate with existing network designs and other vendors’ equipment;

•  support existing and emerging industry, national and international standards;

•  provide effective network management;

•  are accompanied by comprehensive customer support and professional services;

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•  provide a cost-effective and space efficient solution for service providers; and

•  offer a broad array of services.

If we are unable to compete successfully against our current and future competitors, we could experience price reductions, order cancellations, loss of customers and revenues and reduced gross profit margins, each of which would adversely impact our business.

Our business is dependent upon our relationship with ECI Telecom Ltd. and certain of its subsidiaries and affiliates, or ECI, and ECI is our largest stockholder and a significant technology and commercial partner of ours. If ECI’s business is adversely affected or if our relationship with ECI is adversely affected for any reason, our business could be harmed and our results of operations would likely be negatively affected.

We have strong historical and commercial ties to ECI. We acquired the technology and rights to our I-Gate 4000 family of products pursuant to our 2002 acquisition of two of ECI’s wholly-owned subsidiaries. ECI and an affiliate entity assigned to us certain intellectual property rights with respect to VOIP and granted us an irrevocable license under certain patents and intellectual property. ECI invested $10 million in our Series C convertible preferred stock and continues to be our largest stockholder.

Given the backdrop of our historical relationship, our agreements with ECI were entered into in the context of affiliated parties and were negotiated in the overall context of the 2002 share acquisition. As a result, the terms of our agreements with ECI may be more or less favorable to us than if they had been negotiated with unaffiliated third parties. Conflicts of interest may arise between ECI and us with respect to any number of matters, including indemnification obligations we have to each other, labor, tax, employee benefit and other matters arising from the 2002 share acquisition transaction, intellectual property matters and business opportunities that are attractive to ECI and us. Either we or ECI may make strategic choices that are not in the best interest of the other party. For example, other than restrictions with respect to ECI’s exploitation of DCME products, nothing prohibits ECI from competing with us in other matters or offering VoIP products which compete with ours. We may not be able to resolve any potential conflicts that may arise between ECI and us, and even if we are able to do so, the resolution may be less favorable than if we were dealing with an unrelated third party.

ECI also owns the technology underlying our DCME product lines. Pursuant to the DCME Master Manufacturing and Distribution Agreement, or the DCME Agreement, we have secured the right to act as exclusive worldwide distributor of ECI’s DCME line of products. Under the DCME Agreement, ECI provides certain supply, service and warranty obligations and manufactures or subcontracts the manufacture of all DCME equipment sold by us. The DCME Agreement may only be terminated by ECI in the event we project DCME revenues of less than one million dollars in a calendar year, we breach a material provision of the DCME Agreement and fail to cure such breach within 30 days or we become insolvent. Upon the occurrence of one of these events and the election by ECI to terminate the DCME Agreement, ECI would be under no obligation to continue to contract with us. If the value of the shares held by ECI declines, either by disposition of the shares or a decline in our stock price, ECI may be less likely to enter into agreements on reasonable terms or at all. Accordingly, in the event of the occurrence of one of these termination events, we cannot assure you that the DCME Agreement will be extended or renewed at all or on reasonable commercial terms.

In addition, our relationship with ECI could be adversely affected by divestment of its shares of our common stock or by declines in our stock price.

We do not currently have an independent ability to produce DCME products and have not entered into arrangements with any third party that would enable us to obtain DCME or similar products in the event that ECI ceases to provide us with DCME products. Should ECI, or a successor entity to ECI, become unable or unwilling to fulfill its obligations under the DCME Agreement for any reason or if the DCME Agreement is terminated, we will need to take remedial measures to manufacture DCME or similar products, which could be expensive, and if such efforts fail, our business would be materially harmed.

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ECI beneficially owns a significant percentage of our common stock, which will allow ECI to significantly influence us and matters requiring stockholder approval and could discourage potential acquisitions of our company.

Following this offering and assuming no exercise of the underwriters’ over-allotment option, ECI will own approximately     % of our outstanding common stock. As a result of its ownership in us, ECI is able to exert significant influence over actions requiring the approval of our stockholders, including change of control transactions and any amendments to our certificate of incorporation. In addition, Giora Bitan, Executive Vice President and Chief Financial Officer of ECI and Dror Nahumi, Executive Vice President and Chief Strategy Officer of ECI, are members of our board of directors. Because of the nature of our business relationship with ECI, the size and nature of ECI’s ownership position in us and the membership of Messrs. Bitan and Nahumi on our board of directors, the interests of ECI may be different than those of our other stockholders. In addition, the significant ownership percentage of ECI could have the effect of delaying or preventing a change in control of our company or otherwise discouraging a potential acquirer from obtaining control of our company.

The largest customers in the telecommunications industry have substantial negotiating leverage, which may require that we agree to terms and conditions that are less advantageous to us than the terms and conditions of our existing customer relationships or risk limiting our ability to sell our products to these large service providers.

Large telecommunications service providers have substantial purchasing power and leverage negotiating contractual terms and conditions relating to the sale of our products to them. As we seek to sell more products to these large telecommunications providers, we may be required to agree to such terms and conditions in order to complete such sales, which may result in lower margins, affect the timing of the recognition of the revenue derived from these sales and the amount of deferred revenues, each of which may have an adverse effect on our business and financial condition.

In addition, our future success depends in part on our ability to sell our products to large service providers operating complex networks that serve large numbers of subscribers and transport high volumes of traffic. The communications industry historically has been dominated by a relatively small number of service providers. While deregulation and other market forces have led to an increasing number of service providers in recent years, large service providers continue to constitute a significant portion of the market for communications equipment. If we fail to sell additional IP products to our large customers or to expand our customer base to include additional customers that deploy our products in large-scale networks serving significant numbers of subscribers, our revenue growth will be limited.

Consolidation or downturns in the telecommunications industry may affect demand for our products and the pricing of our products which could limit our growth and may harm our business.

The telecommunications industry, which includes all of our customers, has experienced increased consolidation in recent years, and we expect this trend to continue. Consolidation among our customers and prospective customers may cause delays or reductions in capital expenditure plans and/or increased competitive pricing pressures as the number of available customers declines and their relative purchasing power increases in relation to suppliers. The occurrence of any of these factors, separately or in combination, may lead to decreased sales or slower than expected growth in revenues and could harm our business and operations.

The communications industry is cyclical and reactive to general economic conditions. In the recent past, worldwide economic downturns, pricing pressures and deregulation have led to consolidations and reorganizations. These downturns, pricing pressures and restructurings have been causing delays and reductions in capital and operating expenditures by many service providers. These delays and reductions, in turn, have been reducing demand for communications products like ours. A continuation or subsequent recurrence of these industry patterns, as well as general domestic and foreign economic conditions and other

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factors that reduce spending by companies in the communications industry, could harm our operating results in the future.

If we fail to anticipate and meet specific customer requirements or if our products fail to interoperate with our customers’ existing networks or with existing and emerging industry, national and international standards, we may not be able to retain our current customers or attract new customers.

We must effectively anticipate, and adapt our business, products and services in a timely manner to meet customer requirements. We must also meet existing and emerging industry, national and international standards in order to meet changing customer demands. Prospective customers may require product features and capabilities that are not included in our current product offerings. The introduction of new or enhanced products also requires that we carefully manage the transition from our older products in order to minimize disruption in customer ordering patterns and ensure that adequate supplies of our new products can be delivered to meet anticipated customer demand. If we fail to develop products and offer services that satisfy customer requirements, or if we fail to effectively manage the transition from our older products to our new or enhanced products, our ability to create or increase demand for our products would be seriously harmed and we may lose current and prospective customers, thereby harming our business.

Many of our customers will require that our products be designed to interface with their existing networks or with existing or emerging industry, national and international standards, each of which may have different and unique specifications. Issues caused by a failure to achieve homologation to certain standards or an unanticipated lack of interoperability between our products and these existing networks may result in significant warranty, support and repair costs, divert the attention of our engineering personnel from our hardware and software development efforts and cause significant customer relations problems. If our products do not interoperate with our customers’ respective networks or applicable standards, installations could be delayed or orders for our products could be cancelled, which would seriously harm our gross margins and result in the loss of revenues and/or customers.

We expect that a majority of the revenues generated from our products, especially our IP products, will be generated from a limited number of customers. If we lose customers or are unable to grow and diversify our customer base, our revenues may fluctuate and our growth likely would be limited.

To date, we have sold our IP products to over 45 customers. We expect that for the foreseeable future, the majority of the revenues from our IP products will be generated from a limited number of customers in sales transactions that are unpredictable in many key respects, including, but not limited to, the timing of when these transactions close relative to when the related revenue will be recognized, when cash will be received, the mix of hardware and software, the gross margins related to these transactions and the total amount of payments to be received. We do not expect to have regular, recurring sales to a limited number of customers. Due to the limited number of our customers and the irregular sales cycle in the industry, if we lose customers and/or fail to grow and diversify our customer base, or if they do not purchase our IP products at levels or at the times we anticipate, our ability to maintain and grow our revenues will be adversely affected. The growth of our customer base could also be adversely affected by:

•  consolidation in the telecommunications industry affecting our customers;

•  unwillingness of customers to implement our new products or renew contracts as they expire;

•  potential customer concerns about our status as an emerging telecommunications equipment vendor;

•  delays or difficulties that we may experience in the development, introduction and/or delivery of products or product enhancements;

•  deterioration in the general financial condition of our customers;

•  new product introductions by our competitors;

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•  geopolitical risks and uncertainties in countries where our customers or our own facilities are located; or

•  failure of our products to perform as expected.

Our quarterly operating results have fluctuated significantly in the past and may continue to fluctuate in the future, which could lead to volatility in the price of our common stock.

Our quarterly revenues and operating results have fluctuated significantly in the past and they may continue to fluctuate in the future, due to a number of factors, many of which are outside of our control and any of which may cause our stock price to fluctuate. From our experience, customer purchases of telecommunications equipment have been unpredictable and irregular batch sales as customers build out their networks, rather than regular, recurring sales. The primary factors that may affect our quarterly revenues and results include the following:

•  fluctuation in demand for our products and the timing and size of customer orders;

•  the length and variability of the sales cycle for our products;

•  new product introductions and enhancements by our competitors and us;

•  our ability to develop, introduce and ship new products and product enhancements that meet customer requirements in a timely manner;

•  the mix of product configurations sold;

•  our ability to obtain sufficient supplies of sole or limited source components;

•  our ability to attain and maintain production volumes and quality levels for our products;

•  costs related to acquisitions of complementary products, technologies or businesses;

•  changes in our pricing policies, the pricing policies of our competitors and the prices of the components of our products;

•  the timing of revenue recognition and amount of deferred revenues;

•  difficulties or delays in deployment of customer IP networks that would delay anticipated customer purchases of additional products and services;

•  general economic conditions, as well as those specific to the telecommunications, networking and related industries;

•  consolidation within the telecommunications industry, including acquisitions of or by our customers; and

•  the failure of certain of our customers to successfully and timely reorganize their operations, including emerging from bankruptcy.

In addition, as a result of our accounting policies, we may be unable to recognize all of the revenue associated with certain customer contracts in the same period as the costs associated with those contracts are expensed, which could cause our quarterly gross margins to fluctuate significantly.

A significant portion of our operating expenses are fixed in the short-term. If revenues for a particular quarter are below expectations, we may not be able to reduce operating expenses proportionally for the quarter. Therefore, any such revenue shortfall would likely have a direct negative effect on our operating results for that quarter.

We believe that quarter-to-quarter comparisons of our operating results are not a good indication of our future performance. We believe it likely that in some future quarters, our operating results may be below the expectations of public market analysts and investors, which may adversely affect our stock price.

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If we do not respond rapidly to technological changes or to changes in industry standards, our products could become obsolete.

The market for IP infrastructure products and services is characterized by rapid technological change, frequent new product introductions and evolving standards. We may be unable to respond quickly or effectively to these developments. We may experience difficulties with software development, hardware design, manufacturing, marketing or certification that could delay or prevent our development, introduction or marketing of new products and enhancements. The introduction of new products by our competitors, the market acceptance of products based on new or alternative technologies or the emergence of new industry standards could render our existing or future products obsolete. If the standards adopted are different from those that we have chosen to support, market acceptance of our products may be significantly reduced or delayed. If our products become technologically obsolete, we may be unable to sell our products in the marketplace and generate revenues, and our business could be adversely affected.

Because our products are sophisticated and designed to be deployed in complex environments and in multiple locations, they may have errors or defects that we find only after full deployment. If these errors lead to customer dissatisfaction or we are unable to establish and maintain a support infrastructure and required support levels to service these complex environments, our business may be seriously harmed.

Our products are sophisticated and are designed to be deployed in large and complex networks. Because of the nature of our products, they can only be fully tested when substantially deployed in very large networks with high volumes of traffic. Some of our customers have only recently begun to commercially deploy our products or deploy our products in larger configurations and they may discover errors or defects in the software or hardware, or the products may not operate as expected or our products may not be able to function in the larger configurations required by certain customers. If we are unable to fix errors or other performance problems that may be identified after full deployment of our products, we could experience:

•  cancellation of orders or other losses of, or delays in, revenues;

•  loss of customers and market share;

•  harm to our reputation;

•  a failure to attract new customers or achieve market acceptance for our products;

•  increased service, support and warranty costs and a diversion of development resources;

•  increased insurance costs and losses to our business and service provider customers; and

•  costly and time-consuming legal actions by our customers.

If we experience warranty failure that indicates either manufacturing or design deficiencies, we may be required to recall units in the field and/or stop producing and shipping such products until the deficiency is identified and corrected. In the event of such warranty failures, our business could be adversely affected resulting in reduced revenue, increased costs and decreased customer satisfaction. Because customers often delay deployment of a full system until they have tested the products and any defects have been corrected, we expect these revisions may cause delays in orders by our customers for our systems. Because our strategy is to introduce more complex products in the future, this risk will intensify over time. Service provider customers have discovered errors in our products. If the costs of remediating problems experienced by our customers exceed our expected expenses, which historically have not been significant, these costs may adversely affect our operating results.

In addition, because our products are deployed in large and complex networks around the world. Our customers expect us to establish a support infrastructure and maintain demanding support standards to ensure that their networks maintain high levels of availability and performance. To support the continued growth of our business, our support organization will need to provide service and support at a high level throughout the world. This will include hiring and training customer support engineers both at our primary

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corporate locations as well as our smaller offices in new geographies such as Central and South America and Russia. If we are unable to provide the expected level of support and service to our customers, we could experience:

•  loss of customers and market share;

•  a failure to attract new customers in new geographies;

•  increased service, support and warranty costs and a diversion of development resources; and

•  network performance penalties.

We intend to expand our operations and increase our expenditures in an effort to grow our business. If we are not able to manage this growth and expansion, or if our business does not grow as we expect, our operating results may suffer.

We significantly expanded our operations in 2005 and the first half of 2006. For example, during the period from December 31, 2004 to June 30, 2006, we increased the number of our employees and full-time contractors by 41%, from 340 to 478, and we opened new offices in Singapore, France and Brazil. In addition, our total operating expenses for the year ended December 31, 2005 increased by 25% as compared to the fiscal year ended December 31, 2004, and for the six months ended June 30, 2006 were 23% higher than for the six months ended June 30, 2005. We anticipate that further expansion of our infrastructure and headcount will be required to achieve planned expansion of our product offerings, projected increases in our customer base and anticipated growth in the number of product deployments. Our rapid growth has placed, and will continue to place, a significant strain on our administrative and operational infrastructure. Our ability to manage our operations and growth will require us to continue to refine our operational, financial and management controls, human resource policies, and reporting systems and procedures. Further, we intend to grow our business by entering new markets, developing new product and service offerings and pursuing new customers. If we fail to timely or efficiently expand operational and financial systems in connection with such growth or if we fail to implement or maintain effective internal controls and procedures, resulting operating inefficiencies could increase costs and expenses more than we planned and might cause us to lose the ability to take advantage of market opportunities, enhance existing products, develop new products, satisfy customer requirements, respond to competitive pressures or otherwise execute our business plan. Additionally, if we increase our operating expenses in anticipation of the growth of our business and such growth does not meet our expectations, our financial results likely would be negatively impacted.

The long and variable sales and deployment cycles for our products may cause our operating results to vary materially, which could result in a significant unexpected revenue shortfall in any given quarter.

Our products have lengthy sales cycles, which typically extend from six to twelve months and may take up to two years. A customer’s decision to purchase our products often involves a significant commitment of the customer’s resources and a product evaluation and qualification process that can vary significantly in length. The length of our sales cycles also varies depending on the type of customer to which we are selling, the product being sold and the type of network in which our product will be utilized. We may incur substantial sales and marketing expenses and expend significant management effort during this time, regardless of whether we make a sale.

Even after making the decision to purchase our products, our customers may deploy our products slowly. Timing of deployment can vary widely among customers. The length of a customer’s deployment period will impact our ability to recognize revenue related to such customer’s purchase and may also directly affect the timing of any subsequent purchase of additional products by that customer. As a result of these lengthy and uncertain sales and deployment cycles for our products, it is difficult for us to predict the quarter in which our customers may purchase additional products or features from us, and our operating results may vary significantly from quarter to quarter, which may negatively affect our operating results for any given quarter.

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We rely on indirect channel partners for a significant portion of our revenue. Our failure to effectively develop and manage these third party distributors, systems integrators and resellers specifically and our indirect sales channel generally, and disruptions to the processes and procedures that support our indirect sales channel could adversely affect our ability to generate revenues from the sale of our products.

We rely on third party distributors, systems integrators and resellers for a significant portion of our revenue. Our revenues depend in large part on the performance of these indirect channel partners. Although many aspects of our partner relationships are contractual in nature, our arrangements with our indirect channel partners are not exclusive. Accordingly, important aspects of these relationships depend on the continued cooperation between the parties.

In particular, we have appointed ECI as an agent for selling our IP and DCME products in Russia and an affiliate of ECI provides services for us in Russia. During the fiscal year ended December 31, 2005 and for the six months ended June 30, 2006, $20.4 million and $14.2 million, respectively, of our revenues were derived from sales by this affiliate entity of ECI. The agreement governing this arrangement may be terminated by either party with three months written notice. In the event ECI, a successor entity to ECI or this affiliate entity of ECI is unable to continue to sell our products for any reason, elects not to sell our products or elects to terminate this agreement, then our business and results of operations would likely be materially harmed.

Many factors out of our control could interfere with our ability to market, license, implement or support our products with any of our partners, which in turn could harm our business. These factors include, but are not limited to, a change in the business strategy of one of our partners, the introduction of competitive product offerings by other companies that are sold through one of our partners, potential contract defaults by one of our partners, or changes in ownership or management of one of our distribution partners. Some of our competitors may have stronger relationships with our distribution partners than we do, and we have limited control, if any, as to whether those partners implement our products rather than our competitors’ products or whether they devote resources to market and support our competitors’ products rather than our offerings. In addition, we recognize a portion of our revenue based on a sell-through model using information provided by our partners. If those partners provide us with inaccurate or untimely information, then the amount or timing of our revenues could be adversely impacted and our operating results may be harmed.

Moreover, if we are unable to leverage our sales and support resources through our distribution partner relationships, we may need to hire and train additional qualified sales and engineering personnel. We cannot assure you, however, that we will be able to hire additional qualified sales and engineering personnel in these circumstances, and our failure to do so may restrict our ability to generate revenue or implement our products on a timely basis. Even if we are successful in hiring additional qualified sales and engineering personnel, we will incur additional costs and our operating results, including our gross margin, may be adversely affected. The loss of or reduction in sales by these resellers could reduce our revenues. If we fail to maintain relationships with these third party resellers, fail to develop new relationships with third party resellers in new markets, fail to manage, train, or provide incentives to, existing third party resellers effectively or if these third party resellers are not successful in their sales efforts, sales of our products may decrease and our operating results would suffer.

We may face risks associated with our international sales that could impair our ability to grow our revenues.

For the fiscal years ended December 31, 2004 and 2005 and for the six months ended June 30, 2006, international revenues were approximately, $55.1 million, $63.0 million and $38.6 million, respectively. We intend to continue selling into our existing international markets and expand into additional international markets where we currently do not do business. If we are unable to continue to sell products effectively in these existing international markets and expand into additional new international markets, our ability to

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grow our business will be adversely affected. Some factors that may impact our ability to maintain our international operations and sales include:

•  difficulty enforcing contracts and collecting accounts receivable in foreign jurisdictions, leading to longer collection periods;

•  certification and qualification requirements relating to our products;

•  the impact of recessions in economies outside the United States;

•  unexpected changes in foreign regulatory requirements, including import and export regulations, and currency exchange rates;

•  certification and qualification requirements for doing business in foreign jurisdictions;

•  inadequate protection for intellectual property rights in certain countries;

•  less stringent adherence to ethical and legal standards by prospective customers in certain foreign countries, including compliance with the Foreign Corrupt Practices Act;

•  potentially adverse tax consequences; and

•  political and economic instability.

Maintaining and improving our financial controls and the requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members.

As a public company, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, or the Exchange Act, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and The NASDAQ Stock Market Rules, or Nasdaq rules. The requirements of these rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and may also place undue strain on our personnel, systems and resources. The Exchange Act will require, among other things, that we file annual, quarterly and current reports with respect to our business and financial condition.

The Sarbanes-Oxley Act will require, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. As a public company, our systems of internal controls over financial reporting will be required to be periodically assessed and reported on by management and management’s assessment of internal controls over financial reporting will be subject to annual audits by our independent auditors. We are presently evaluating our internal controls for compliance. During the course of our evaluation, we may identify areas requiring improvement and may be required to design enhanced processes and controls to address issues identified through this review. This could result in significant delays and cost to us and require us to divert substantial resources, including management time, from other activities. We have commenced a review of our existing internal control structure and plan to hire additional personnel. Although our review is not complete, we have taken steps to improve our internal control structure by hiring or transferring dedicated, internal Sarbanes-Oxley Act compliance personnel to analyze and improve our internal controls, to be supplemented periodically with outside consultants as needed. However, we cannot be certain regarding when we will be able to successfully complete the procedures, certification and attestation requirements of Section 404 of the Sarbanes-Oxley Act. If we fail to achieve and maintain the adequacy of our internal controls, we may not be able to conclude that we have effective internal controls over financial reporting in accordance with the Sarbanes-Oxley Act. Moreover, effective internal controls are necessary for us to produce reliable financial reports and are important to help prevent fraud. As a result, our failure to satisfy the requirements of Section 404 on a timely basis could result in the loss of investor confidence in the reliability of our financial statements, which in turn could harm the market value of our common stock. Any failure to maintain effective internal controls also could impair our ability to manage our business and harm our financial results.

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Under the Sarbanes-Oxley Act and Nasdaq rules, we are required to maintain an independent board. We also expect these rules and regulations will make it more difficult and more expensive for us to maintain directors’ and officers’ liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to maintain coverage. If we are unable to maintain adequate directors’ and officers’ insurance, our ability to recruit and retain qualified directors, especially those directors who may be deemed independent for purposes of Nasdaq rules, and officers will be significantly curtailed.

If we lose the services of one or more members of our current executive management team or other key employees, or if we are unable to attract additional executives or key employees, we may not be able to execute on our business strategy.

Our future success depends in large part upon the continued service of our executive management team and other key employees. In particular, Doug Sabella, our president and chief executive officer, is critical to the overall management of our company as well as to the development of our culture and our strategic direction. Pinhas Reich, our vice president of sales for EMEA and Asia-Pacific plays a key role in our sales efforts and strategy.

In order to be successful, we must also retain and motivate key employees, including those in managerial, technical, marketing and sales positions. In particular, our product generation efforts depend on hiring and retaining qualified engineers. Experienced management and technical, sales, marketing and support personnel in the telecommunications and networking industries are in high demand and competition for their talents is intense. This is particularly the case in Silicon Valley, where our headquarters and significant operations are located.

The loss of services of any of our executives or of one or more other members of our executive management or sales team or other key employees, none of which is bound by an employment agreement for any specific term could seriously harm our business.

We have a substantial employee presence in India and the hiring and retention of skilled employees in India has become increasingly difficult. If we are unable to hire and retain skilled employees in India and elsewhere, we may not be able to execute our business strategy.

As of June 30, 2006, we had a staff of 132 employees and contractors in India. Due to increased expansion into India of research and development by technology companies, hiring and retaining skilled employees has become increasingly difficult. In the past we have experienced substantial turnover and we expect this turnover to get worse as competition for skilled employees increases. If we are unable to retain our current employees and/or hire skilled employees in the future, we may not be able to execute on our business strategy.

We have no internal hardware manufacturing capabilities and we depend exclusively upon contract manufacturers to manufacture our hardware products. In particular, our I-Gate 4000 media gateways are exclusively manufactured for us by Flextronics (Israel) Ltd., or Flextronics. We buy our DCME products from ECI who subcontracts manufacturing of these products to Flextronics. Our failure to successfully manage our relationships with Flextronics, ECI or other replacement contract manufacturers would impair our ability to deliver our products in a manner consistent with required volumes or delivery schedules, which would likely cause us to fail to meet the demands of our customers and damage our customer relationships.

We outsource the manufacturing of all of our hardware products. Our I-Gate 4000 media gateways are exclusively manufactured for us by Flextronics. We buy our DCME products from ECI who subcontracts the manufacturing to Flextronics. These contract manufacturers provide comprehensive manufacturing services, including assembly of our products and procurement of materials and components. Each of our contract manufacturers also builds products for other companies and may not always have sufficient quantities of inventory available or may not allocate their internal resources to fill these orders on a timely basis.

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We do not have long-term supply contracts with these contract manufacturers and they are not required to manufacture products for any specified period at any specified price. We do not have internal manufacturing capabilities to meet our customers’ demands and we cannot assure you that we will be able to develop or contract for additional manufacturing capacity on acceptable terms on a timely basis if it is needed. An inability to manufacture our products at a cost comparable to our historical costs could impact our gross margins or force us to raise prices, affecting customer relationships and our competitive position.

Qualifying a new contract manufacturer and commencing commercial scale production is expensive and time consuming and could result in a significant interruption in the supply of our products. If our contract manufacturers are not able to maintain our high standards of quality, increase capacity as needed, or are forced to shut down a factory, our ability to deliver quality products to our customers on a timely basis may decline, which would damage our relationships with customers, decrease our revenues and negatively impact our growth.

We and our contract manufacturers rely on single or limited sources for the supply of some components of our products and if we fail to adequately predict our manufacturing requirements or if our supply of any of these components is disrupted, we will be unable to ship our products on a timely basis, which would likely cause us to fail to meet the demands of our customers and damage our customer relationships.

We and our contract manufacturers currently purchase several key components of our products, including commercial digital signal processors, from single or limited sources. We purchase these components on a purchase order basis. If we overestimate our component requirements, we could have excess inventory, which would increase our costs and result in write-downs harming our operating results. If we underestimate our requirements, we may not have an adequate supply, which could interrupt manufacturing of our products and result in delays in shipments and revenues.

We currently do not have long-term supply contracts with our component suppliers and they are not required to supply us with products for any specified periods, in any specified quantities or at any set price, except as may be specified in a particular purchase order. Because the key components and assemblies of our products are complex, difficult to manufacture and require long lead times, in the event of a disruption or delay in supply, or inability to obtain products, we may not be able to develop an alternate source in a timely manner, at favorable prices, or at all. In addition, during periods of capacity constraint, we are disadvantaged compared to better capitalized companies, as suppliers may in the future choose not to do business with us or may require higher prices or less advantageous terms. A failure to find acceptable alternative sources could hurt our ability to deliver high-quality products to our customers and negatively affect our operating margins. In addition, reliance on our suppliers exposes us to potential supplier production difficulties or quality variations. Our customers rely upon our ability to meet committed delivery dates, and any disruption in the supply of key components would seriously adversely affect our ability to meet these dates and could result in legal action by our customers, loss of customers or harm our ability to attract new customers, any of which could decrease our revenues and negatively impact our growth.

Failure to manage expenses and inventory risks associated with meeting the demands of our customers may adversely affect our business or results of operations.

To ensure that we are able to meet customer demand for our products, we place orders with our contract manufacturers and suppliers based on our estimates of future sales. If actual sales differ materially from these estimates because of inaccurate forecasting or as a result of unforeseen events or otherwise, our inventory levels and expenses may be adversely affected and our business and results of operations could suffer. In addition, in order to remain competitive, we must continue to introduce new products and processes into our manufacturing environment. There cannot be any assurance, however, that the introduction of new products will not create obsolete inventories related to older products.

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If we are not able to obtain necessary licenses of third-party technology at acceptable prices, or at all, our products could become obsolete.

We have incorporated third-party licensed technology into our current products. From time to time, we may be required to license additional technology from third parties to develop new products or product enhancements. Third-party licenses may not be available or continue to be available to us on commercially reasonable terms or at all. The inability to maintain or re-license any third-party licenses required in our current products or to obtain any new third-party licenses to develop new products and product enhancements could require us to obtain substitute technology of lower quality or performance standards or at greater cost, and delay or prevent us from making these products or enhancements, any of which could seriously harm the competitiveness of our products.

Failures by our strategic partners or by us in integrating our products with those provided by our strategic partners could seriously harm our business.

Our solutions include the integration of products supplied by strategic partners, who offer complementary products and services and we expect to further integrate our IP Products with such partner products and services in the future. We rely on these strategic partners in the timely and successful deployment of our solutions to our customers. If the products provided by these partners have defects or do not operate as expected, or if we do not effectively integrate and support products supplied by these strategic partners, we may have difficulty with the deployment of our solutions, which may result in:

•  a loss of, or delay in, recognizing revenues;

•  increased service, support and warranty costs and a diversion of development resources; and

•  network performance penalties.

In addition to cooperating with our strategic partners on specific customer projects, we also may compete in some areas with these same partners. If these strategic partners fail to perform or choose not to cooperate with us on certain projects, in addition to the effects described above, we could experience:

•  a loss of customers and market share; and

•  a failure to attract new customers or achieve market acceptance for our products.

Our ability to compete and our business could be jeopardized if we are unable to protect our intellectual property.

We rely on a combination of patent, copyright, trademark and trade secret laws and restrictions on disclosure to protect our intellectual property rights. However, these legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep any competitive advantage. Our patent applications may not issue as patents at all or they may not issue as patents in a form that will be advantageous to us. Our issued patents and those that may issue in the future may be challenged, invalidated or circumvented, which could limit our ability to stop competitors from marketing related products. Although we have taken steps to protect our intellectual property and proprietary technology, there is no assurance that third parties will not be able to invalidate or design around our patents. Furthermore, although we have entered into confidentiality agreements and intellectual property assignment agreements with our employees, consultants and advisors, such agreements may not be enforceable or may not provide meaningful protection for our trade secrets or other proprietary information in the event of unauthorized use or disclosure or other breaches of the agreements.

Additionally, despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use our products or technology. Monitoring unauthorized use of our products is difficult and we cannot be certain that the steps we have taken to do so will prevent unauthorized use of our technology, particularly in foreign countries where the laws may not protect our proprietary rights as comprehensively as in the United States. If competitors are able to use our technology or develop

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unpatented proprietary technology similar to ours or competing technologies, our ability to compete effectively could be harmed.

Possible third-party claims of infringement of proprietary rights against us could have a material adverse effect on our business, results of operation or financial condition.

The telecommunications industry generally and the market for IP telephony products in particular are characterized by a relatively high level of litigation based on allegations of infringement of proprietary rights. We have in the past received and may in the future receive inquiries from other patent holders and may become subject to claims that we infringe their intellectual property rights. We cannot assure you that we are not in infringement of third party patents. Any parties claiming that our products infringe upon their proprietary rights, regardless of its merits, could force us to license their patents for substantial royalty payments or to defend ourselves and possibly our customers or contract manufacturers in litigation. We may also be required to indemnify our customers and contract manufacturers for damages they suffer as a result of such infringement. These claims and any resulting licensing arrangement or lawsuit, if successful, could subject us to significant royalty payments or liability for damages and invalidation of our proprietary rights. Any potential intellectual property litigation also could force us to do one or more of the following:

•  stop selling, incorporating or using our products that use the challenged intellectual property;

•  obtain from the owner of the infringed intellectual property right a license to sell or use the relevant technology, which license may not be available on reasonable terms, or at all; or

•  redesign those products that use any allegedly infringing technology.

Any lawsuits regarding intellectual property rights, regardless of their success, would be time-consuming, expensive to resolve and would divert our management’s time and attention.

If we acquire or invest in other companies, assets or technologies and we are not able to integrate them with our business, or we do not realize the anticipated financial and strategic goals for any of these transactions, our financial performance may be impaired.

If appropriate opportunities present themselves, we may consider acquiring or making investments in companies, assets or technologies that we believe to be strategic. We do not have any experience in doing so, and if we do succeed in acquiring or investing in a company, asset or technology, we will be exposed to a number of risks, including:

•  we may find that the acquired company, asset or technology does not further our business strategy, that we overpaid for the company, asset or technology or that the economic conditions underlying our acquisition decision have changed;

•  we may have difficulty integrating the assets, technologies, operations or personnel of an acquired company, or retaining the key personnel of the acquired company;

•  our ongoing business and management’s attention may be disrupted or diverted by transition or integration issues and the complexity of managing geographically or culturally diverse enterprises;

•  we may encounter difficulty entering and competing in new product or geographic markets, and we may face increased competition, including price competition or intellectual property litigation; and

•  we may experience significant problems or liabilities associated with product quality, technology and legal contingencies relating to the acquired business or technology, such as intellectual property or employment matters.

In addition, from time to time we may enter into negotiations for acquisitions or investments that are not ultimately consummated. These negotiations could result in significant diversion of management time, as well as substantial out-of-pocket costs. If we were to proceed with one or more significant acquisitions or investments in which the consideration included cash, we could be required to use a substantial portion of our available cash, including proceeds of this offering. To the extent we issue shares of capital stock or other

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rights to purchase capital stock, including options and warrants, existing stockholders might be diluted and earnings per share might decrease. In addition, acquisitions and investments may result in the incurrence of debt, large one-time write-offs, such as of acquired in-process research and development costs, and restructuring charges.

Regulation of the telecommunications industry could harm our operating results and future prospects.

The telecommunications industry is highly regulated and our business and financial condition could be adversely affected by the changes in the regulations relating to the telecommunications industry. Currently, there are few laws or regulations that apply directly to access to, or delivery of, voice services on IP networks. We could be adversely affected by regulation of IP networks and commerce in any country, including the United States, where we operate. Such regulations could include matters such as voice over the Internet or using Internet protocol, encryption technology, and access charges for service providers. The adoption of such regulations could decrease demand for our products, and at the same time increase the cost of selling our products, which could have a material adverse effect on our business, operating result and financial condition.

Compliance with regulations and standards applicable to our products may be time consuming, difficult and costly, and if we fail to comply, our product sales will decrease.

In order to achieve and maintain market acceptance, our products must continue to meet a significant number of regulations and standards. In the United States, our products must comply with various regulations defined by the Federal Communications Commission and Underwriters Laboratories, including particular standards relating to our DCME products and our enhanced access switching solution, also known as our Class 5 solution.

As these regulations and standards evolve, and if new regulations or standards are implemented, we will be required to modify our products or develop and support new versions of our products, and this will increase our costs. The failure of our products to comply, or delays in compliance, with the various existing and evolving industry regulations and standards could prevent or delay introduction of our products, which could harm our business. User uncertainty regarding future policies may also affect demand for communications products, including our products. Moreover, distribution partners or customers may require us, or we may otherwise deem it necessary or advisable, to alter our products to address actual or anticipated changes in the regulatory environment. Our inability to alter our products to address these requirements and any regulatory changes could have a material adverse effect on our business, financial condition and operating results.

Failure of our hardware products to comply with evolving industry standards and complex government regulations may prevent our hardware products from gaining wide acceptance, which may prevent us from growing our sales.

The market for network equipment products is characterized by the need to support industry standards as different standards emerge, evolve and achieve acceptance. We will not be competitive unless we continually introduce new products and product enhancements that meet these emerging standards. Our products must comply with various domestic regulations and standards defined by agencies such as the Federal Communications Commission, in addition to standards established by governmental authorities in various foreign countries and the recommendations of the International Telecommunication Union. If we do not comply with existing or evolving industry standards or if we fail to obtain timely domestic or foreign regulatory approvals or certificates we will not be able to sell our products where these standards or regulations apply, which may harm our business.

Production and marketing of products in certain states and countries may subject us to environmental and other regulations including, in some instances, the requirement to provide customers the ability to return product at the end of its useful life and make us responsible for disposing or recycling products in an environmentally safe manner. Additionally, certain states and countries may pass regulations requiring our

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products to meet certain requirements to use environmentally friendly components. Such laws and regulations have recently been passed in several jurisdictions in which we operate, including the European Union which issued Directive 2002/96/EC Waste Electrical and Electronic Equipment, or WEEE, to mandate funding, collection, treatment, recycling and recovery of WEEE by producers of electrical or electronic equipment into Europe. China is in the final approval stage of compliance programs which will harmonize with the European Union WEEE and RoHS directives. In the future, Japan and other countries are expected to adopt environmental compliance programs. If we fail to comply with these regulations, we may not be able to sell our products in jurisdictions where these regulations apply, which would have a material adverse affect on our results of operations.

We have invested substantially in our enhanced access switching solution and we may be unable to achieve and maintain substantial sales.

We have spent considerable effort and time developing our Class 5 solution, and have had limited sales of this product line to date. We anticipate substantial sales of our access solution as part of our operational plan and we may not achieve the success rate we currently anticipate or we may not achieve any success at all. The market for our access solution is new and it is unclear whether there will be broad adoption of this solution by our existing and future potential customers.

Recent rulemaking by the Financial Accounting Standards Board, or FASB, requires us to expense equity compensation given to our employees and may impact our ability to effectively utilize equity compensation to attract and retain employees.

FASB has adopted changes that require companies to record a charge to earnings for employee stock option grants and other equity incentives effective January 1, 2006, which we have adopted. These accounting changes may cause us to reduce the availability and amount of equity incentives provided to employees, which may make it more difficult for us to attract, retain and motivate key personnel. Additionally, it may be difficult for us to estimate the impact of such compensation charges on future operating results because they will be based upon the fair market value of our common stock and other assumptions at future dates.

Future interpretations of existing accounting standards could adversely affect our operating results.

Generally accepted accounting principles in the United States are subject to interpretation by the FASB, the American Institute of Certified Public Accountants, or AICPA, the SEC and various other bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results, and could affect the reporting of transactions completed before the announcement of a change.

For example, we recognize our product software license revenue in accordance with AICPA Statement of Position, or SOP, 97-2, Software Revenue Recognition, as amended by SOP 98-9, Software Revenue Recognition with Respect to Certain Transactions, and related interpretations. The AICPA or other accounting standards setters may continue to issue interpretations and guidance for applying the relevant accounting standards to a wide range of sales contract terms and business arrangements that are prevalent in software licensing arrangements. Future interpretations of existing accounting standards, including SOP 97-2 and SOP 98-9, or changes in our business practices could result in future changes in our revenue recognition accounting policies that have a material adverse effect on our results of operations. We may be required to delay revenue recognition into future periods, which could adversely affect our operating results. We have in the past had to, and in the future may have to, defer recognition for license fees due to several factors, including whether a transaction involves:

•  software arrangements that include undelivered elements for which we do not have vendor specific objective evidence, or VSOE, of fair value;

•  requirements that we deliver services for significant enhancements and modifications to customize our software for a particular customer;

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•  material acceptance criteria or other identified product-related issues; or

•  payment terms extending beyond our customary terms.

Because of these factors and other specific requirements under accounting principles generally accepted in the United States for software revenue recognition, we must have very precise terms in our software arrangements in order to recognize revenue when we initially deliver software or perform services. Negotiation of mutually acceptable terms and conditions can extend our sales cycle, and we sometimes accept terms and conditions that do not permit revenue recognition at the time of delivery.

We may require significant capital to pursue our growth strategy, but we may not be able to obtain additional financing on favorable terms or at all.

As described in more details in “Use of Proceeds,” we intend to continue spending substantial amounts in connection with our expansion in order to grow our business. We may need to obtain additional financing to pursue our business strategy, to develop new products, to respond to competition and market opportunities and to acquire complementary businesses or technologies. We can offer no assurances that we will be able obtain such financing on favorable terms or at all. If we were to raise additional capital through further sales of our equity securities, our stockholders would suffer dilution of their equity ownership in the Company.

Product liability claims related to our customers’ networks could result in substantial costs.

Our products are critical to the business operations of our customers. If one of our products fails, a service provider may assert a claim for substantial damages against us, regardless of our responsibility for the failure. Our product liability insurance may not cover claims brought against us. Product liability claims could require us to spend significant time and money in litigation or to pay significant damages. Any product liability claims, whether or not successful, could seriously damage our reputation and our business.

Risks Related to Our Operations in Israel

Substantially all of the manufacturing of our hardware products occurs in Israel. We are in the process, however, of diversifying the location of our manufacturing capabilities to locations outside of the Middle East. In addition, a substantial portion of our operations is located in Israel, including a total of 176 employees and contractors, which includes our entire media gateway research and development team.

Increased political, economic and social instability in the Middle East, may adversely affect our business and operating results.

The continued threat of terrorist activity and other acts of war or hostility, including the war in Iraq and threats against Israel, have created uncertainty throughout the Middle East and have significantly increased the political, economic and social instability in Israel where substantially all of our products are manufactured. Acts of terrorism, either domestically or abroad and particularly in Israel, or a resumption of the confrontation along the northern border of Israel, would likely create further uncertainties and instability. To the extent terrorism, or the political, economic or social instability results in a disruption of our operations or delays in our manufacturing or shipment of our products, then our business, operating results and financial condition could be adversely affected.

Our I-Gate 4000 media gateways and our DCME products are exclusively manufactured for us by Flextronics, with the DCME products being manufactured by Flextronics through our relationship with ECI. The Flextronics manufacturing facility is located in Migdal-Haemek, Israel, which is located in northern Israel. While Flextronics has other locations across the world at which our manufacturing requirements may be fulfilled, any disruption to its Israeli manufacturing capabilities in Migdal-Haemek would likely cause a material delay in our manufacturing process. If we are forced or if we decide to switch the manufacture of our products to a different Flextronics facility, the time and expense of such switch along with the increased costs, if any, of operating in another location, would adversely affect our operations.

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In addition, while we expect that Flextronics will have the capacity to manufacture our products at facilities outside of Israel, there can be no assurance that such capacity will be available when we require it or upon terms favorable or acceptable to us. To the extent terrorism, or political, economic or social instability results in a disruption of Flextronics’ manufacturing facilities in Israel or ECI operations in Israel as they relate to our business, then our business, operating results and financial condition could be adversely affected.

In addition, any hostilities involving Israel or the interruption or curtailment of trade between Israel and its present trading partners, or a significant downturn in the economic or financial condition of Israel, could adversely affect our operations and product development, cause our revenues to decrease and adversely affect the price of our shares. Furthermore, several countries, principally in the Middle East, still restrict doing business with Israel, Israeli companies or companies with operations in Israel. Should additional countries impose restrictions on doing business with Israel, our business, operating results and financial condition could be adversely affected.

Our operations may be disrupted by the obligations of our personnel to perform military service.

Many of our employees in Israel, including certain key employees, are obligated to perform up to one month (in some cases more) of annual military reserve duty until they reach age 45 and, in emergency circumstances, could be called to active duty. Recently, there have been call-ups of military reservists, including several of our employees, and it is possible that there will be additional call-ups in the future. Our operations could be disrupted by the absence of a significant number of our employees due to military service or the absence for extended periods of one or more of our key employees for military service. Such disruption could adversely affect our business and results of operations.

The grants we have received from the Israeli government for certain research and development expenditures restrict our ability to manufacture products and transfer technologies outside of Israel and require us to satisfy specified conditions. If we fail to satisfy these conditions, we may be required to refund grants previously received together with interest and penalties.

Our research and development efforts have been financed, in part, through grants that we have received from the Office of the Chief Scientist of the Israeli Ministry of Industry, Trade and Labor, or the OCS. We, therefore, must comply with the requirements of the Israeli Law for the Encouragement of Industrial Research and Development, 1984 and related regulations, or the Research Law.

Under the Research Law, the discretionary approval of an OCS committee is required for any transfer of technology or manufacturing of products developed with OCS funding. OCS approval is not required for the export of any products resulting from the research or development. There is no assurance that we would receive the required approvals for any proposed transfer. Such approvals, if granted, may be subject to the following additional restrictions:

•  we could be required to pay the OCS a portion of the consideration we receive upon any transfer of such technology or upon an acquisition of our Israeli subsidiary by an entity that is not Israeli. Among the factors that may be taken into account by the OCS in calculating the payment amount are the scope of the support received, the royalties that were paid by us, the amount of time that elapsed between the date on which the know-how was transferred and the date on which the grants were received, as well as the sale price; and

•  the transfer of manufacturing rights could be conditioned upon an increase in the royalty rate and payment of increased aggregate royalties and payment of interest on the grant amount.

These restrictions may impair our ability to sell our company, technology assets or to outsource manufacturing outside of Israel. The restrictions will continue to apply even after we have repaid the full amount of royalties payable for the grants.

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Risks Related to This Offering

There has been no prior market for our common stock, our stock price may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the initial public offering price.

Prior to the offering there has been no public market for our common stock. The initial public offering price for our common stock was determined through negotiations between the underwriters and us. This initial public offering price may vary from the market price of our common stock following this offering. If you purchase shares of our common stock, you may not be able to resell those shares at or above the initial public offering price. We cannot predict the extent to which investor interest in our company will lead to the development of a trading market on the Nasdaq Global Market or otherwise or how liquid that market might become. An active public market for our common stock may not develop or be sustained after the offering. If an active public market does not develop or is not sustained, it may be difficult for you to sell your shares of common stock at a price that is attractive to you, or at all. The market price of our common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:

•  price and volume fluctuations in the overall stock market;

•  changes in operating performance and stock market valuations of other technology companies generally, or those that sell telecommunications products in particular;

•  the timing of customer orders that may cause quarterly or other periodic fluctuations in our results that may, in turn, affect the market price of our common stock;

•  the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;

•  changes in financial estimates by any securities analysts who follow our company, our failure to meet these estimates or failure of those analysts to initiate or maintain coverage of our stock;

•  ratings downgrades by any securities analysts who follow our company;

•  the public’s response to our press releases or other public announcements, including our filings with the SEC;

•  market conditions or trends in our industry or the economy as a whole;

•  the development and sustainability of an active trading market for our common stock;

•  future sales of our common stock by our officers, directors and significant stockholders; and

•  other events or factors, including those resulting from war, incidents of terrorism or responses to these events.

In addition, the stock markets, and in particular the Nasdaq Global Market, have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many technology companies. Stock prices of many technology companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were involved in securities litigation, it could have substantial costs and divert resources and the attention of management from our business.

A significant portion of our total outstanding common stock is restricted from immediate resale but may be sold into the market in the near future. If there are substantial sales of our common stock or issuances of our common stock by us, our stock price could decline.

If our existing stockholders sell substantial amounts of our common stock in the public market or we issue additional shares of common stock following the offering, the market price of our common stock could

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decline. Upon completion of the offering, we will have           outstanding shares of common stock based on the number of shares outstanding as of July 31, 2006 and adjusting for the           shares that we are selling in this offering. The           shares being sold in this offering may be resold in the public market immediately following the closing of this offering. The remaining           shares, or     % of our outstanding shares after this offering, are currently restricted as a result of securities laws, market standoff agreements entered into by our stockholders with us or lock-up agreements entered into by our stockholders with the underwriters but will be able to be sold in the public market beginning 180 days after the date of this prospectus. However, the underwriters can waive the provisions of these lock-up agreements and allow these stockholders to sell their shares at any time.

We have also agreed that we will not sell additional shares of our common stock during this period. However, these lockup agreements are subject to important exceptions. See “Underwriting.” In addition, the shares subject to outstanding options, of which 9,045,732 are exercisable as of July 31, 2006, and the shares reserved for future issuance under our stock option and equity incentive plans will become available for sale immediately upon the exercise of such options and the expiration of the lock-up agreements.

Anti-takeover provisions in our charter documents and Delaware corporate law might deter acquisition bids for us that you might consider favorable.

Our amended and restated certificate of incorporation and bylaws contain provisions that may make the acquisition of our company more difficult without the approval of our board of directors. These provisions:

•  establish a classified board of directors so that not all members of our board are elected at one time;

•  authorize the issuance of undesignated preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval, including rights superior to the rights of the holders of common stock;

•  prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders;

•  provide that the board of directors is expressly authorized to make, alter, or repeal our bylaws; and

•  establish advance notice requirements for nominations for elections to our board or for proposing matters that can be acted upon by stockholders at stockholder meetings.

These anti-takeover provisions and other provisions under Delaware law could discourage, delay or prevent a transaction involving a change in control of our company, even if doing so would benefit our stockholders. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and cause us to take other corporate actions you desire. Due to these factors, sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock.

If you purchase shares of common stock sold in this offering, you will incur immediate and substantial dilution.

If you purchase shares of common stock in this offering, you will incur immediate and substantial dilution in the amount of $      per share, because the initial public offering price of $      is substantially higher than the pro forma net book value per share of our outstanding common stock. This dilution is due in large part to the fact that our earlier investors paid substantially less that the initial public offering price when they purchased their shares. In addition, you may also experience additional dilution upon future equity issuances or the exercise of stock options to purchase common stock granted to our employees, consultants and directors under our stock option and equity incentive plans. See “Dilution.”

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Our existing principal stockholders, executive officers and directors will continue to have substantial control over the company after this offering, which may prevent you and other stockholders from influencing significant corporate decisions and may harm the market price of our common stock.

Upon completion of this offering, assuming no exercise of the underwriters’ over-allotment option, our existing principal stockholders, executive officers and directors together with their affiliates, will beneficially own, in the aggregate, approximately     % of our outstanding common stock, and our executive officers and directors will beneficially own, in the aggregate, approximately     % of our outstanding common stock. These stockholders may have interests that conflict with yours and, if acting together, have the ability to determine the outcome of matters submitted to our stockholders for approval, including the election and removal of directors and any merger, consolidation or sale of all or substantially all of our assets. In addition, these stockholders, acting together, may have the ability to control the management and affairs of our company. Accordingly, this concentration of ownership may harm the market price of our common stock by:

•  delaying, deferring or preventing a change in control;

•  impeding a merger, consolidation, takeover or other business combination involving us; or

•  discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of our company, the trading price for our stock would be negatively impacted. If we obtain securities or industry analyst coverage and if one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline.

Because management has broad discretion as to the use of the net proceeds from this offering, you may not agree with how we use them, and such proceeds may not be invested successfully.

The proceeds from this offering have not been allocated for a particular purpose, and our management will have broad discretion with respect to the use of the net proceeds. We currently intend to use the net proceeds from the offering for expansion, working capital and general corporate purposes. You will be relying on the judgment of our management concerning these uses and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. The failure of our management to apply these funds effectively could result in unfavorable returns and uncertainty about our prospects, each of which could cause the price of our common stock to decline.

We do not expect to pay any cash dividends for the foreseeable future.

The continued expansion of our business will require substantial funding. Accordingly, we do not anticipate that we will pay any cash dividends on shares of our common stock for the foreseeable future and our credit facility with Bank Leumi le-Israel B.M. prevents us from doing so without its prior written consent. Any determination to pay dividends in the future will be at the discretion of our board of directors and will depend upon results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law and other factors our board of directors deems relevant. Accordingly, if you purchase shares in this offering, realization of a gain on your investment will depend on the appreciation of the price of our common stock, which may never occur. Investors seeking cash dividends in the foreseeable future should not purchase our common stock.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus, particularly the sections entitled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” contains forward-looking statements. In particular, our disclosure and analysis in this prospectus concerning our operations, cash flows and financial position, including, in particular, the likelihood of our success in expanding our business and our assumptions regarding the regulatory environment, include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate” and similar expressions, are forward-looking statements. Although these statements are based upon reasonable assumptions, including projections of sales, operating margins, earnings, cash flow, working capital and capital expenditures, they are subject to risks and uncertainties that are described more fully in this prospectus in the section titled “Risk Factors.” These forward-looking statements represent our estimates and assumptions only as of the date of this prospectus and are not intended to give any assurance as to future results. As a result, you should not place undue reliance on any forward-looking statements. We assume no obligation to update any forward-looking statements to reflect actual results, changes in assumptions or changes in other factors, except as required by applicable securities laws. Factors that might cause future results to differ include, but are not limited to, the following:

•  the timing of the initiation, progress or cancellation of significant contracts or arrangements;

•  the mix and timing of products and services sold in a particular period;

•  the impact of our revenue recognition policies on the timing of both revenues and the related expenses;

•  our inability to maintain relationships with our indirect channel partners;

•  the reluctance of customers to migrate to an IP network architecture;

•  rapid technological change and our ability to continue to deliver products that are competitive in the marketplace; and

•  general economic and business conditions.

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USE OF PROCEEDS

We estimate that we will receive net proceeds from the sale of the           shares of our common stock being sold in this offering of approximately $      million or $      million if the underwriters exercise their over-allotment option in full, based on an assumed initial public offering price of $      per share (the midpoint of the estimated price range shown on the cover page of this prospectus), and after deducting underwriting discounts and commissions and other estimated offering expenses of $      million payable by us.

We intend to use the net proceeds from this offering for capital expenditures in connection with our expansion and the balance added to working capital for general corporate purposes. We may also use a portion of the proceeds for the future acquisition of, or investment in, businesses, products or technologies that complement our business, although we are not pursuing any acquisitions or investments as of the date of this prospectus. We have not allocated specific amounts of net proceeds for any of these purposes.

We have not determined the amounts we plan to spend on certain of the items listed above or the timing of these expenditures. As a result, our management will have broad discretion in the application of the net proceeds we receive from this offering and investors will be relying on the judgment of our management regarding the application of these proceeds of this offering. Pending these uses, we plan to invest these net proceeds in short-term, interest bearing obligations, investment grade instruments, certificates of deposit or direct or guaranteed obligations of the United States. The goal with respect to the investment of these net proceeds is capital preservation and liquidity so that such funds are readily available to fund our operations.

A $           increase (decrease) in the assumed initial public offering price of $           per share (the midpoint of the estimated price range shown on the cover page of this prospectus), would increase (decrease) the net proceeds to us from this offering by approximately $      million, or approximately $      million if the underwriters’ over-allotment option is exercised in full, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses.

DIVIDEND POLICY

We have never paid or declared any dividends on our common stock and do not anticipate paying any dividends for the indefinite future. The terms of our credit facility with Bank Leumi le-Israel B.M. restrict our ability to pay dividends on our common stock without prior written consent. Although we intend to terminate our credit facility upon the consummation of this offering, we intend to retain all future earnings, if any, for use in the operation of our business and to fund future growth. The decision whether to pay dividends will be made by our board of directors in light of conditions then existing, including factors such as our results of operations, financial condition and requirements, business conditions and covenants under any applicable contractual arrangements.

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CAPITALIZATION

The following table contains a summary of our balance sheet data as of June 30, 2006:

•  on an actual basis; 

•  on a pro forma basis to reflect:

•  the redemption and subsequent cancellation of all our outstanding shares of Series A-1, A-2 and B-1 redeemable preferred stock for the par value of $0.001 per share, or an aggregate of fourteen thousand dollars; and

•  the conversion of all our outstanding shares of Series C convertible preferred stock into an aggregate of 34,965,004 shares of our common stock;

•  on a pro forma as adjusted basis to reflect the pro forma adjustments above as well as:

•  the issuance and sale of           shares of our common stock in this offering at an assumed initial public offering price of $      per share (the midpoint of the estimated price range shown on the cover page of this prospectus), after deducting underwriting discounts and commissions and estimated offering expenses payable by us; and

•  the amendment and restatement of our certificate of incorporation following the closing of this offering.

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You should read the following table in conjunction with the consolidated financial statements and the related notes, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Use of Proceeds” included elsewhere in this prospectus.

	As of June 30, 2006
							Pro Forma
	Actual			Pro Forma			as Adjusted
	(In thousands, except share
	and per share data)
Cash and cash equivalents	$	27,505		$	27,491		$
Restricted cash		1,162			1,162
Total long-term debt		13,333			13,333
Redeemable and convertible preferred stock:
Redeemable preferred stock, Series A-1, $0.001 par value; 5,446,500 shares authorized; 5,000,048 shares issued and outstanding, actual; 5,000,048 shares authorized and no shares issued and outstanding, pro forma; and no shares authorized and no shares issued and outstanding, pro forma as adjusted		15,871			—
Redeemable preferred stock, Series A-2, $0.001 par value; one share authorized; one share issued and outstanding, actual; one share authorized and no shares issued and outstanding, pro forma; and no shares authorized and no shares issued and outstanding, pro forma as adjusted		1,349			—
Redeemable preferred stock, Series B-1, $0.001 par value; 9,000,000 shares authorized; 9,000,000 shares issued and outstanding, actual; 9,000,000 shares authorized and no shares issued and outstanding, pro forma; and no shares authorized and no shares issued and outstanding, pro forma as adjusted		2,576			—
Convertible preferred stock, Series C, $0.001 par value; 36,000,000 shares authorized; 34,965,004 shares issued and outstanding, actual; 36,000,000 shares authorized and no shares issued and outstanding, pro forma; and no shares authorized and no shares issued and outstanding, pro forma as adjusted		38,197			—
Total redeemable and convertible preferred stock:		57,993			—
Stockholders’ (deficit) equity:
Undesignated preferred stock, $0.001 par value; no shares authorized, no shares issued and outstanding, actual and pro forma; and 10,000,000 authorized and no shares issued and outstanding, pro forma as adjusted
Common stock, $0.001 par value;
100,000,000 shares authorized; 26,928,595 shares issued and outstanding, actual; 100,000,000 shares authorized and 61,893,599 shares issued and outstanding, pro forma; and 200,000,000 shares authorized and        shares issued and outstanding, pro forma as adjusted		27			62
Additional paid-in capital		5,659			63,603
Deferred stock-based compensation		(868	)		(868	)
Accumulated deficit		(55,615	)		(55,615	)
Total stockholders’ (deficit) equity		(50,797	)		7,182
Total capitalization	$	20,529		$	20,515		$

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The common stock outstanding after this offering is based on 26,928,595 shares of common stock outstanding as of June 30, 2006 plus 34,965,004 shares of common stock issuable upon the conversion of all outstanding shares of Series C convertible preferred stock and the redemption of all outstanding shares of Series A-1, A-2 and B-1 redeemable preferred stock upon the closing of this offering, and excludes:

•  15,509,232 shares of common stock that may be issued upon the exercise of options outstanding as of June 30, 2006 under our stock option and equity incentive plans, with a weighted average exercise price of $0.39 per share;

•  138,926 shares of common stock that may be issued upon the exercise of options outstanding as of June 30, 2006 and granted outside of our stock option and equity incentive plans, with a weighted average exercise price of $0.19 per share;

•  32,450 shares of common stock that may be issued upon the exercise of a warrant outstanding as of June 30, 2006 to purchase shares of Series C convertible preferred stock and the subsequent conversion of such Series C convertible preferred stock into common stock, exercisable at a weighted average exercise price of $0.858 per share; and

•  an aggregate of           additional shares of our common stock reserved for future grants under our 2006 Equity Incentive Plan and our 2006 Employee Stock Purchase Plan, both of which were adopted by our board of directors in June 2006 and approved by our stockholders in          , will become effective immediately upon the signing of the underwriting agreement for this offering and contain provisions that automatically increase their share reserves each year as more fully described in “Management — Employee Compensation and Defined Contribution Plans.”

A $          increase (decrease) in the assumed initial public offering price of $           per share (the midpoint of the estimated price range shown on the cover page of this prospectus), would increase (decrease) each of total shareholders’ equity and total capitalization by $           million, or $           million if the underwriters’ over-allotment option is exercised in full, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and our estimated offering expenses.

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DILUTION

Our net tangible book value as of June 30, 2006 was $      million, or $      per share. Net tangible book value per share is determined at any date by subtracting our total liabilities from the total book value of our tangible assets and dividing the difference by the number of our shares of common stock deemed to be outstanding at that date. Dilution is the amount by which the offering price paid by the purchasers of our common stock to be sold in this offering exceeds the net tangible book value per share after this offering. Assuming that the           shares of our common stock offered by this prospectus are sold at an initial public offering price of $      per share, after deducting the estimated underwriting discounts and commissions and offering expenses payable by us, our pro forma net tangible book value of our common stock, as of December 31, 2005, would have been approximately $      million, or $      per share. This represents an immediate increase in pro forma net tangible book value of $      per share to existing stockholders and an immediate dilution of $      per share to new investors purchasing shares of common stock in this offering. The following table illustrates this substantial and immediate per share dilution to new investors:

	Per Share
Assumed initial public offering price share	$
Historical net tangible book value per share as of June 30, 2006
Pro forma net tangible book value per share as of June 30, 2006
Increase per share attributable to sale of common stock in this offering
Pro forma as adjusted net tangible book value per share after this offering
Dilution of pro forma net tangible book value per share to new investors	$

If the underwriters exercise in full their over-allotment option to purchase up to           additional shares from us in this offering, our pro forma as adjusted net tangible book value per share as of June 30, 2006 would have been $     , representing an immediate increase in pro forma net tangible book value per share attributable to this offering of $      to our existing stockholders and an immediate dilution per share to new investors in this offering of $     . If the underwriters’ over-allotment option is exercised in full, our existing stockholders would own     % and our new investors would own     % of the total number of shares of our common stock outstanding after this offering.

The following table summarizes, as of June 30, 2006, on a pro forma basis the total number of shares of common stock purchased from us, the total consideration paid to us, assuming an initial public offering price of $      per share (before deducting the estimated underwriting discount and commissions and offering expenses payable by us in connection with this offering), and the average price per share paid by existing stockholders and by new investors purchasing shares in this offering:

					Average
	Shares Purchased		Total Consideration		Price per
	Number	Percent	Amount	Percent	Share
Existing stockholders(1)					$
Investors in the offering
Total

(1)  Includes 34,965,004 shares resulting from the conversion of all of our outstanding shares of our Series C convertible preferred stock as of June 30, 2006.

The tables and calculations above do not include:

•  15,509,232 shares of common stock that may be issued upon the exercise of options outstanding as of June 30, 2006 under our stock option and equity incentive plans, with a weighted average exercise price of $0.39 per share;

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•  138,926 shares of common stock that may be issued upon the exercise of stock options outstanding as of June 30, 2006 and granted outside of our stock option and equity incentive plans, with a weighted average exercise price of $0.19 per share;

•  32,450 shares of common stock that may be issued upon the exercise of a warrant outstanding as of June 30, 2006 to purchase shares of Series C convertible preferred stock and the subsequent conversion of such Series C convertible preferred stock into common stock, exercisable at a weighted average exercise price of $0.858 per share; or

•  an aggregate of           additional shares of our common stock reserved for future grants under our 2006 Equity Incentive Plan and our 2006 Employee Stock Purchase Plan, both of which were adopted by our board of directors in June 2006 and approved by our stockholders in          , will become effective immediately upon the signing of the underwriting agreement for this offering and contain provisions that automatically increase their share reserves each year as more fully described in “Management — Employee Compensation and Defined Contribution Plans.”

To the extent any of these options are exercised, there will be further dilution to new investors.

A $           increase (decrease) in the assumed initial public offering price of $           per share (the midpoint of the estimated price range shown on the cover page of this prospectus), would increase (decrease) the dilution to new investors by $           per share, or $           million if the underwriters’ over-allotment option is exercised in full, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and our estimated offering expenses.

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SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial and operating data as of December 31, 2003, 2004 and 2005 and for the years then ended have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The selected consolidated financial and operating data as of December 31, 2002 and for the year ended December 31, 2002 were derived from our unaudited consolidated financial statements that are not included in this prospectus. The summary statements of operations for each of the six months ended June 30, 2005 and 2006 and the unaudited consolidated balance sheet data as of June 30, 2006 were derived from our unaudited consolidated interim financial statements that are also included elsewhere in this prospectus. In our opinion, our unaudited consolidated financial statements have been prepared on the same basis as our audited consolidated financial statements and include all adjustments, consisting only of normal recurring adjustments, that management considers necessary for a fair presentation of the financial position and results of operations for these periods. The results of any interim period are not necessarily indicative of the results that may be expected for any other interim period or for the full fiscal year, and the historical results set forth below do not necessarily indicate results expected for any future period. This information is qualified by reference to and should be read in conjunction with the Consolidated Financial Statements and Notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, appearing elsewhere in this prospectus. In particular, the consolidated statements of operations data and the consolidated balance sheets data set forth below include significant related party transactions as more fully disclosed on the face of our Consolidated Financial Statements and described in Note 3 of our Notes to Consolidated Financial Statements appearing elsewhere in the prospectus.

	Years Ended December 31,												Six Months Ended June 30,
	2002(1)			2003			2004			2005			2005			2006
	(In thousands, except for per share data)
Consolidated Statements of Operations Data:
Revenues:
DCME Products	$	—		$	42,430		$	48,105		$	41,681		$	23,136		$	19,551
IP Products		695			8,246			12,480			24,474			8,451			20,368
Services		105			8,852			8,522			10,089			4,912			4,774
Total revenues		800			59,528			69,107			76,244			36,499			44,693
Costs of revenues		236			30,421			30,034			33,146			16,184			20,996
Gross profit		564			29,107			39,073			43,098			20,315			23,697
Operating Expenses:
Research and development, net		10,096			15,317			19,935			26,527			12,202			16,295
Sales and marketing		3,954			18,431			20,474			25,798			12,368			13,167
General and administrative		3,334			5,726			5,707			5,802			2,647			4,126
Total operating expenses		17,384			39,474			46,116			58,127			27,217			33,588
Loss from operations		(16,820	)		(10,367	)		(7,043	)		(15,029	)		(6,902	)		(9,891	)
Other income (expense), net		(95	)		1,520			1,232			753			341			234
Loss before income taxes		(16,915	)		(8,847	)		(5,811	)		(14,276	)		(6,561	)		(9,657	)
Income taxes		—			38			14			35			26			22
Net loss	$	(16,915	)	$	(8,885	)	$	(5,825	)	$	(14,311	)	$	(6,587	)	$	(9,679	)
Basic and diluted net loss per share	$	(83.83	)	$	(0.38	)	$	(0.25	)	$	(0.59	)	$	(0.28	)	$	(0.36	)
Weighted average common shares		202			23,176			23,365			24,239			23,730			26,522

(1) Period contains nominal transactions from October 18, 2001 (inception) through December 31, 2001.

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	December 31,												June 30,
	2002			2003			2004			2005			2006
				(In thousands)
Consolidated Balance Sheets Data:
Cash and cash equivalents	$	24,985		$	37,024		$	28,324		$	20,437		$	27,505
Working capital		35,412			33,266			26,247			10,116			14,700
Total assets		43,018			66,601			62,097			64,669			82,663
Long-term debt, net of current portion		—			—			—			—			13,333
Redeemable and convertible preferred stock		52,098			57,993			57,993			57,993			57,993
Total stockholders’ deficit		(13,379	)		(22,175	)		(27,898	)		(41,555	)		(50,797	)

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion together with “Selected Consolidated Financial Data” and our consolidated financial statements and the related notes thereto included elsewhere in this prospectus. This discussion contains forward-looking statements about our business and operations, based on current expectations and related to future events and our future financial performance, that involve risks and uncertainties. Our actual results may differ materially from those we currently anticipate as a result of many important factors, including the factors we describe under “Risk Factors,” “Cautionary Notice Regarding Forward-Looking Statements” and elsewhere in this prospectus.

Overview

Veraz is a leading global provider of IP softswitches, media gateways and digital compression products to established and emerging wireline, wireless and broadband service providers. Service providers use our products to transport, convert and manage data and voice traffic over legacy and IP networks, while enabling VoIP and other communications services. Our products include our IP products which consist of our ControlSwitch family of softswitch modules, our I-Gate 4000 family of media gateways and our Secure Communications Software enhancement to our DCME products and our DTX family of DCME products. We also offer services consisting of hardware and software maintenance and support, installation, training and other professional services.

Our business initially focused on the sale of DCME products and services. While the sale of DCME products continues to be a substantial part of our business, we expect DCME revenue to continue to decline over time. Our DCME product revenues were $42.4 million, $48.1 million and $41.7 million for the years ended December 31, 2003, 2004 and 2005, respectively. We have increasingly focused our efforts on our IP products and we have experienced rapid growth in our IP product revenues. Our IP product revenues increased from $8.2 million to $12.5 million to $24.5 million for the years ended December 31, 2003, 2004 and 2005, respectively. We have a history of losses to date and as of June 30, 2006, our accumulated deficit was $55.6 million.

We outsource the manufacturing of our hardware products. Our I-Gate 4000 media gateways are manufactured for us by Flextronics. We buy our DCME products from ECI which subcontracts the manufacturing to Flextronics. This enables us to focus mainly on the design, development, sales and marketing of our products and lowers our capital requirements. However, our ability to bring new products to market, fulfill customer orders and achieve long-term growth depends on our ability to maintain sufficient technical personnel and obtain necessary external subcontractor capacity.

We sell our products primarily through a direct sales force and also through indirect sales channels. Historically, ECI has been a primary indirect sales channel in a number of regions worldwide. During the past year, we terminated our relationship with ECI as the primary sales partner in a number of regions and have brought in-house many of the resources previously provided by ECI.

We were incorporated in Delaware in October 2001 under the name Softswitch Enterprises, Inc., and we subsequently changed our name to NexVerse Networks, Inc. in December 2001. In December 2002, we received financing from ECI and other investors and purchased all of the outstanding shares of two subsidiaries of ECI. In connection with these transactions, we changed our name to Veraz Networks, Inc.

Components of Our Results of Operations

Revenues

Our product revenues consist of sales of our DCME product for voice compression over legacy networks and of our IP products, including our ControlSwitch family of softswitch modules, our I-Gate 4000 family of media gateways and our Secure Communications Software enhancement to our DCME products. Services revenues primarily consist of hardware and software maintenance and support, installation, training and other professional services.

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Cost of Revenues

Our cost of revenues consists primarily of amounts paid to ECI for the manufacture of our DCME product, to third parties for the manufacture of our media gateways and to third-party suppliers of components of our ControlSwitch product. Cost of revenues also includes royalties and professional services personnel and related costs. Our cost of revenues as a percentage of revenues varies according to the mix of product and service revenue, the mix of products sold and total sales volume.

We defer the cost of inventory when IP products have been shipped, but have not yet been installed or accepted, and expense those costs in full in the same period that any of the related deferred revenue is recognized as revenue (generally upon customer acceptance). In arrangements for which revenue recognition is limited to amounts due and payable or cash received, all related inventory costs are expensed at the date of acceptance; this will initially result in lower or negative IP product margins and cause higher margins in subsequent periods, as compared to similar arrangements with customary payment terms.

We outsource the manufacturing of all of our hardware products. We do not have long-term supply contracts with any contract manufacturers. As a result, we may not be able to manufacture our products at a cost comparable to our historical costs.

Operating Expenses

Operating expenses consist of research and development, sales and marketing, and general and administrative expenses. Personnel-related costs is the largest component of each of these expense categories.

Research and Development Expenses

Research and development expenses consist primarily of salaries and related compensation for our engineering personnel responsible for the design, development, testing and certification of our products. Our research and development efforts have been partially financed through grants from the Office of the Chief Scientist of the Israel Ministry of Industry and Trade (OCS). We record grants received from the OCS as a reduction of research and development expenses.

Sales and Marketing Expenses

Sales and marketing expenses consist primarily of salaries and related compensation for our personnel, as well as marketing expenses, including attendance at trade shows, participation in trade associations and promotional activities.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related compensation costs for our executive management, finance personnel, legal and professional services, travel and related expenses, insurance and other overhead costs.

Income taxes

In 2003, our subsidiary in Israel received approval as an “Approved Enterprise” and became eligible for tax benefits under Israel’s Law for the Encouragement of Capital Investments, 1959. Subject to compliance with applicable requirements, the portion of our Israeli subsidiary’s undistributed income derived from its Approved Enterprise program will be exempt from corporate tax for a period of two years. In addition, our subsidiary in Israel will enjoy a reduced tax rate of 15% commencing in the first year in which it generates taxable income. The period of tax benefits is subject to limits of the earlier of 12 years from the commencement of production, or 14 years from receiving the approval. Dividend distributions originating from the income of the Approved Enterprise will be subject to tax at the rate of 15%, provided that the dividend is distributed during the period stipulated under Israeli law. In the event of a dividend distribution (including withdrawals and charges that are deemed to be dividends) out of the income originating from

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the Approved Enterprise, and on which we received a tax exemption, the distribution is subject to corporate taxes at rates varying from 10% to 25% depending on the percentage of foreign investment holding in the company, as defined by the law.

We expect that our net operating loss carryforwards and our Approved Enterprise status in Israel will reduce our provision for income taxes in future years.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of our financial position and results of operations is based upon the consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. We base our estimates on historical experience, knowledge of current conditions and beliefs of what could occur in the future given available information. We consider the following accounting policies to be both those most important to the portrayal of our financial condition and those that require the most subjective judgment. If actual results differ significantly from management’s estimates and projections, there could be a material effect on our financial statements. The significant accounting policies that we believe are the most critical to aid in fully understanding and evaluating our reported financial results include the following:

•  Revenue recognition

•  Allowance for doubtful accounts

•  Stock-based compensation

•  Accounting for income taxes

Revenue recognition.  DCME product revenues consists of revenues from the sale of our DCME hardware products. IP product revenues consists of revenues from the sale of the I-Gate family of media gateway hardware products, our ControlSwitch family of softswitch modules, and our Secure Communications Software. Services revenue consists of revenues from separately-priced maintenance and extended warranty contracts, post-contract customer support, or PCS, installation, training and other professional services.

We are the exclusive distributor of DCME products under the DCME Agreement with ECI, a related party. Management has determined that revenues from sales of DCME products should be reported on a gross basis after considering the indicators included in Emerging Issues Task Force, or EITF, Issue No. 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent. Specifically, we are the primary obligor, maintains the general inventory risk, and determines the product specifications based on the customer’s order.

Revenue from standalone sales of DCME products is recognized in accordance with Securities and Exchange Commission, or SEC, Staff Accounting Bulletin No. 104, Revenue Recognition, or SAB 104. When sales of DCME are bundled with installation services, the hardware and services are accounted for as separate units of accounting as the arrangement meets the separation criteria in EITF Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables”. Revenue for each deliverable is recognized in accordance with SAB 104.

All of our IP products may be sold in a bundled arrangement that includes PCS, installation, training and other professional services. Our media gateway hardware when sold in a bundled arrangement is referred to as a static trunking solution and when sold in a bundled arrangement that includes our softswitch module software is referred to as a VoIP solution. When our Secure Communications Software is sold in a bundled arrangement with DCME hardware we refer to this sale as a Secure Communications solution. In sales of static trunking solutions, VoIP solutions or Secure Communications solutions, the software is considered more than incidental to the arrangement and essential to the functionality of the hardware.

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Therefore, all revenue from these arrangements is recognized in accordance with AICPA Statement of Position 97-2, Software Revenue Recognition, or SOP 97-2, as amended by SOP 98-9, Modification of SOP 97-2, Software Revenue Recognition, with Respect to Certain Transactions.

In accordance with both SAB 104 and SOP 97-2, we recognize revenue when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the fee is fixed or determinable, and (iv) collectibility is probable. We evaluate each of the four criteria as follows:

(i) Persuasive evidence of an arrangement exists

Our customary practice is to have a written contract, which is signed by both the customer and us, or a purchase order or other written or electronic order documentation for those customers who have previously negotiated a standard arrangement with us.

(ii) Delivery has occurred

For standalone sales of DCME products, revenue is recognized when title and risk of loss has passed to the customer, which is typically at time of shipment. Revenue is recognized for installation services, if any, as the services are performed. We sell our DCME products through our direct sales force and channel partners. For DCME products sold through indirect channels, revenue is recognized either on a sell-in basis, or when the channel partner sells the product to the end user, depending on our experience with the individual channel partner.

For sales of static trunking solutions, revenue is deferred until installation and training services are completed because we do not yet have vendor-specific objective evidence of fair value, or VSOE, for those services. However, we have established VSOE for related PCS based on stated renewal rates. Therefore, upon completion of the installation services, we recognize revenue using the residual method. Under the residual method, upon completion of the installation services, PCS revenue equal to its VSOE is deferred and recognized ratably over the PCS term.

VoIP solution arrangements typically require evidence of customer acceptance of the implementation of the VoIP solution in the customer’s network, including the ability of the network to carry live data traffic. As a result, delivery of the software, hardware and services is not considered to have occurred until evidence of acceptance is received from the customer. For most arrangements, we have established VSOE for the related PCS based on stated renewal rates. Therefore, upon customer acceptance, we recognize revenue using the residual method. For arrangements in which we are unable to establish VSOE for our PCS, the entire arrangement fee is deferred and recognized ratably over the PCS term after delivery and acceptance of the software, hardware and services.

For sales of Secure Communications solutions, delivery of the DCME hardware and Secure Communications Software is considered to have occurred when title and risk of loss has passed to the customer, which is typically at time of shipment. The installation services are not considered essential to the functionality of the hardware or software and we have established VSOE of fair value for those services based on separate sales of similar services. Therefore, for sales of Secure Communication solutions that do not include PCS, we recognize revenue using the residual method after deferring revenue for installation services based on VSOE which is recognized upon completion of those services. We have not yet established VSOE of fair value for the related PCS. Therefore, for sales of Secure Communication solutions that also include PCS, the entire arrangement fee is deferred and recognized ratably over the PCS term, which always exceeds the period over which the installation services are performed.

Revenue from sales of standalone training courses is recognized when the services are completed. Revenues from separately priced hardware maintenance or extended hardware warranty contracts are recognized ratably over the contract term. The amount recognized is based on the amount on the invoice.

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(iii) The fee is fixed or determinable

We do not offer a right of return to our customers. Arrangement fees are generally due within one year or less from the later of the date of delivery or acceptance. Some arrangements may have payment terms extending beyond these customary payment terms and therefore the arrangement fees are considered not to be fixed or determinable. For multiple element arrangements with payment terms that are considered not to be fixed or determinable, revenue is recognized equal to the cumulative amount due and payable after allocating a portion of the cumulative amount due and payable to any undelivered elements (generally PCS) based on VSOE, after delivery and acceptance of the software, hardware and services, and assuming all other revenue recognition criteria are satisfied. We defer the cost of inventory when products have been shipped, but have not yet been installed or accepted, and expense those costs in full in the same period that the deferred revenue is recognized as revenue (generally upon customer acceptance). In arrangements for which IP revenue recognition is limited to amounts due and payable, all related inventory costs are expensed at the date of acceptance; this will initially result in lower or negative product margins and cause higher margins in subsequent periods, as compared to similar arrangements with customary payment terms.

(iv) Collectibility is probable

Collectibility is assessed on a customer-by-customer basis. We evaluate the financial position, payment history, and ability to pay of new customers, and existing customers that substantially expand their commitments. If it is determined prior to revenue recognition that collectibility is not probable, recognition of the revenue is deferred and recognized upon receipt of cash, assuming all other revenue recognition criteria are satisfied. In arrangements for which IP revenue recognition is limited to amounts of cash received, all related inventory costs are expensed at the date of acceptance; this will initially result in lower or negative product margins and cause higher margins in subsequent periods, as compared to similar arrangements with customary payment terms.

Revenues include amounts billed to customers in sales transactions for shipping and handling. Shipping and handling fees represent less than 1% of revenues in each of 2003, 2004 and 2005. Shipping and handling costs are included in cost of revenues.

For purposes of classification in our consolidated statements of operations, revenue from sales of static trunking solutions, VoIP solutions, and Secure Communications solutions is allocated between DCME Products, IP Products and Services, as applicable, based on VSOE for any elements for which VSOE exists or based on the relative stated invoice amount for elements for which VSOE does not exist.

Allowance for doubtful accounts.  We maintain an allowance for doubtful accounts for estimated losses resulting from our customers’ failure to make required payments. Our judgment is required to determine whether an increase or reversal of the allowance is warranted. We will record an increase of the allowance if there is a deterioration in past due balances, if economic conditions are less favorable than we had anticipated, or for customer-specific circumstances, such as bankruptcy. We will record a reversal of the allowance if there is significant improvement in collection rates. Historically, our allowance has been adequate to cover our actual losses from uncollectible accounts.

Stock-based compensation.  Prior to January 1, 2006, we accounted for options granted to employees and directors using the intrinsic-value-based method in accordance with Accounting Principles Board, or APB, Opinion No. 25, Accounting for Stock Issued to Employees, or APB Opinion No. 25, and Financial Accounting Standards Board, or FASB, Interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensation, an Interpretation of APB Opinion No. 25, or FIN 44, and had adopted the disclosure-only provisions of SFAS No. 123, Accounting for Stock-Based Compensation, or SFAS No. 123, and SFAS No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure, or SFAS No. 148.

In accordance with APB Opinion No. 25, stock-based compensation expense, which is a non-cash charge, resulted from stock option grants at exercise prices that, for financial reporting purposes, were determined to be below the estimated fair value of the underlying common stock at date of grant. During

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the period January through September 2005, we granted options to employees to purchase a total of 4,727,188 shares of common stock at an exercise price of $0.25 per share. At the respective dates of grant, the fair value of the common stock was determined by the board of directors with input from management. Because there has been no public market for our common stock, the board of directors determined the fair value of the common stock by considering a number of objective and subjective factors, including our operating and financial performance, corporate milestones, the price at which we sold shares of convertible preferred stock, the superior rights and preferences of the convertible preferred stock and the risk and non-liquid nature of our common stock. We did not obtain contemporaneous valuations from an independent valuation specialist during this period. Instead, we relied on our board of directors to determine a reasonable estimate of the then current value of our common stock.

In November 2005, in response to the adoption by the Internal Revenue Service of Internal Revenue Code Section 409A, we re-evaluated the estimated fair value of our common stock for financial reporting purpose for the year ended December 31, 2005. We engaged an independent valuation specialist to perform retrospective valuations as of January 1, 2005 and April 15, 2005, and a contemporaneous valuation as of December 15, 2005.

Through the provision of valuation reports dated March 17, 2006, the valuation specialist estimated the fair value of our common stock at $0.52 as of January 1, 2005, at $0.57 as of April 15, 2005, and $0.77 as of December 15, 2005. Based upon the reassessment, management determined that the fair value of the common stock underlying options to purchase 4,727,188 shares of common stock granted during the period from January through September 2005 exceeded the option exercise price. The exercise prices on these options were modified and increased to the respective reassessed fair value at date of grant. In November 2005, the board of directors granted options to employees to purchase 1,222,300 shares of common stock at an exercise price of $0.81 per share based on a preliminary valuation. As the exercise price of those options exceeded the final valuation of $0.77 per share, we did not modify the options to reduce the exercise price.

Determining the fair value of our common stock requires making complex and subjective judgments. The estimated fair value of our common stock as of January 1, April 15, and December 15, 2005, was determined by the valuation specialist using a two-step approach that first estimated the fair value of the Company as a whole, and then allocated the enterprise value to our common stock.

The valuation specialist utilized an income approach and two market approaches to estimate our enterprise value. The income approach consisted of the discounted cash flow method which involved applying appropriate discount rates to estimated future cash flows that are based on forecasts of revenue and costs. These cash flow estimates were consistent with the plans and estimates that management used to manage the business. There is inherent uncertainty in making these estimates. The risks associated with achieving the forecasts were assessed in selecting the appropriate discount rates which ranged from 22% to 26%. If different discount rates had been used, the valuations would have been different. The market approaches that the valuation specialist used were a comparable public company analysis and a comparable acquisition analysis. Based on the three approaches, the valuation specialist arrived at a high and low range for the total equity value of the Company and concluded on the average of the three as the estimated enterprise value.

The valuation specialist then utilized the option-pricing method to allocate the total equity value to the various securities that comprised our capital structure. Application of this method involved making estimates of the anticipated timing of a potential liquidity event such as a sale of the Company or an initial public offering, or IPO. The anticipated timing and likelihood of each scenario was based on the plans of our board of directors and management as of the respective valuation date. Under each scenario, the enterprise value of the Company was allocated to preferred and common shares using the option-pricing method under which values are assigned to each class of our preferred stock and the common stock is viewed as an option on the remaining equity value. The options were then valued using the Black-Scholes option-pricing model which required estimates of the volatility of our equity securities. Estimating volatility of the share price of a privately held company is complex because there is no readily available market price for the shares. The volatility of the stock was based on available information on volatility of stocks of public

43

traded companies in the industry. Had we used different estimates of volatility, the allocations between preferred and common shares would have been different. The option-pricing method resulted in an estimated fair value per share of our common stock that was reduced for lack of marketability by a discount of 40%, 40% and 26% in the January 2005, April 2005 and December 2005 valuations, respectively. The discounts for lack of marketability at each valuation date were determined by considering restricted stock and studies of pre-IPO company valuations.

Information on employee stock options granted during 2005 is summarized as follows:

					Reassessed
			Original		Fair Value
	Number of		Exercise		per Share /		Intrinsic
	Options		Price		Modified		Value
Period of Issuance	Granted		per Share		Exercise Price		per Share
Jan - Mar 2005		3,608,000	$	0.25	$	0.52	$	0.27
Apr - Jun 2005		754,000	$	0.25	$	0.57	$	0.32
Jul - Sep 2005		365,188	$	0.25	$	0.65	$	0.40
Oct - Dec 2005		1,222,300	$	0.81	$	0.77	$	—

As a result of the reassessed fair value of options granted during the nine months ended September 30, 2005, we recorded deferred stock-based compensation related to these options of $1,318,000 during the year ended December 31, 2005, which is being amortized over the vesting period of the applicable options on a straight-line basis. During the year ended December 31, 2005, and the six months ended June 30, 2006, we amortized $286,000 and $164,000, respectively, of deferred stock-based compensation, leaving $868,000 to be amortized in future periods. The total unamortized deferred stock-based compensation recorded for all outstanding option grants made through December 31, 2005 is expected to be amortized as follows: $165,000 in the remainder of 2006, $330,000 in 2007, $330,000 in 2008, and $43,000 in 2009.

We account for stock options granted to non-employees on a fair-value basis in accordance with EITF Issue No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services, and FASB Interpretation No. 28, Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans. As a result, the amount of stock-based compensation expense recorded for non-employee options with vesting or other performance criteria is affected each reporting period by changes in the estimated fair value of our common stock.

Effective January 1, 2006, we adopted the fair value recognition provisions of SFAS No. 123 (Revised 2004). Share-Based Payment. or SFAS No. 123R, using the prospective transition method, which requires us to apply the provisions of SFAS No. 123R only to new awards granted, and to awards modified, repurchased or cancelled, after the effective date. Under this transition method, total employee stock-based compensation expense recognized beginning January 1, 2006 is based on the following: (a) the grant-date fair value of stock option awards granted or modified after January 1, 2006; and (b) the balance of deferred stock-based compensation related to stock option awards granted prior to January 1, 2006, which was calculated using the intrinsic value method as previously permitted under APB Opinion No. 25.

Under SFAS No. 123R, we estimated the fair value of stock options granted using the Black-Scholes option-pricing model. This fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. The expected term represents the period that stock-based awards are expected to be outstanding, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior as influenced by changes to the terms of our stock-based awards. For the six months ended June 30, 2006, we elected to use the simplified method of determining the expected term as permitted by SEC SAB No. 107. The computation of expected volatility for the six months ended June 30, 2006 is based on the historical volatility of comparable companies from a representative peer group based on industry and market capitalization data. As required by SFAS No. 123R, management made an estimate of expected forfeitures and is recognizing compensation costs only for those equity awards expected to vest.

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In April and May 2006, we granted options to employees to purchase a total of 1,382,700 shares of common stock at an exercise price of $0.90 per share. At the respective dates of grant, the fair value of the common stock was determined by the board of directors with input from management. The board of directors determined the fair value of the common stock by considering a number of objective and subjective factors, including the December 2005 valuation of our common stock at $0.77. We did not obtain contemporaneous valuations from an independent valuation specialist during this period. Instead, we relied on our board of directors to determine a reasonable estimate of the then current value of our common stock.

In August 2006, we again engaged the independent valuation specialist to perform a valuation of our common stock. The valuation specialist estimated the fair value of our common stock at $3.09 per share as of August 15, 2006, using the same approaches and methods as described above on a consistent basis. The significant increase in valuation as of August 2006, as compared to the December 2005 valuation, was partially due to a reduced discount rate used to estimate future cash flows to 20%, a reduced discount for lack of marketability to 15%, and an increase in the weighted probability of an IPO as a potential liquidity event. After reviewing the valuation report as of August 15, 2006, management decided to use the $3.09 per share valuation of the underlying common stock when estimating the fair value, and related compensation expense, associated with the options granted in April and May 2006.

The assumptions used to value options granted during the six months ended June 30, 2006 were as follows:

	Six Months
	Ended
	June 30,
	2006
	(Unaudited)
Expected life in years		6.41
Risk-free interest rate		5.00	%
Volatility		79	%
Dividend yield		—
Estimated fair value per share of underlying common stock	$	3.09

The weighted average fair value per share of options granted to employees for the six months ended June 30, 2006, was approximately $2.70.

For the six months ended June 30, 2006, the total compensation cost related to stock-based awards granted under SFAS No. 123R to employees and directors was approximately $3,167,000, net of estimated forfeitures of $559,000. This cost will be amortized on a straight-line basis over a period of approximately four years. Amortization in the six months ended June 30, 2006 was $112,000. As a result of adopting SFAS No. 123R on January 1, 2006, our loss from operations and net loss for the six months ended June 30, 2006 are each $5,000 greater than if we had continued to account for stock-based compensation under APB Opinion No. 25. Net loss per share for the six months ended June 30, 2006 would not have changed if we had not adopted SFAS No. 123R.

In accordance with SFAS No. 123R, unamortized compensation expense on stock option grants after January 1, 2006 is not included in deferred stock-based compensation. The balance in deferred stock-based compensation as of June 30, 2006 is $868,000, which is comprised of employee stock option grants prior to December 31, 2005, subject to vesting.

Accounting for income taxes.  Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as operating losses and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation

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allowances are established when necessary in order to reduce deferred tax assets to the amounts expected to be recovered.

We believe sufficient uncertainty exists regarding our ability to realize our deferred tax assets and, accordingly, a valuation allowance has been established against the net deferred tax assets.

Results of operations

The following table sets forth each of our sources of revenues and costs of revenues for the specified periods as a percentage of our total revenues for those periods:

										For the Six
	For the Year Ended									Months Ended
	December 31,									June 30,
	2003			2004			2005			2005			2006
Revenues:
DCME Products		71	%		70	%		55	%		63	%		44	%
IP Products		14			18			32			23			45
Services		15			12			13			14			11
Total revenues		100	%		100	%		100	%		100	%		100	%
Cost of revenues:
DCME Products		33	%		29	%		22	%		25	%		17	%
IP Products		11			8			14			13			20
Services		7			6			7			7			10
Gross margin		49	%		57	%		57	%		55	%		53	%

Six months ended June 30, 2005 and 2006

Revenues.  Total revenues increased by $8.2 million, or 22.4%, from $36.5 million for the six months ended June 30, 2005 to $44.7 million for the six months ended June 30, 2006. The increase in revenues resulted primarily from an $11.9 million growth in IP product revenues, offset by a $3.6 million decline in DCME product revenues.

DCME product revenues decreased by $3.6 million, or 15.5%, from $23.1 million for the six months ended June 30, 2005 to $19.5 million for the six months ended June 30, 2006. The decrease in DCME product revenues was the result of the expected decline in the size of the overall DCME market and we expect the decline to continue. DCME product revenues represented 63.4% of total revenues for the six months ended June 30, 2005 and 43.7% of total revenues for the six months ended June 30, 2006.

IP product revenues increased by $11.9 million, or 141.0%, from $8.5 million for the six months ended June 30, 2005 to $20.4 million for the six months ended June 30, 2006. The increase in IP product revenues was the result of the continued migration of service providers from legacy to next generation IP-based communication networks. IP product revenues represented 23.2% of total revenues for the six months ended June 30, 2005 and 45.6% of total revenues for the six months ended June 30, 2006. We expect that IP product revenues as a percentage of total revenues will continue to increase in future periods.

Services revenues decreased by $0.1 million, or 2.8%, from $4.9 million for the six months ended June 30, 2005 to $4.8 million for the six months ended June 30, 2006. The decrease in services revenues resulted primarily from a decrease in DCME service revenues which was partially offset by an increase in IP services revenues. Services revenues represented 13.5% of total revenues for the six months ended June 30, 2005 and 10.7% of total revenues for the six months ended June 30, 2006.

Cost of revenues.  Total cost of revenues increased by $4.8 million, or 29.7%, from $16.2 million for the six months ended June 30, 2005 to $21.0 million for the six months ended June 30, 2006. The increase in cost of revenues resulted primarily from an increase in sales of IP products, plus an increase in services

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revenues costs, partly offset by lower cost of revenues related to the decrease in DCME product revenues. Total cost of revenues was 44.3% of total revenues for the six months ended June 30, 2005 and 47.0% of total revenues for the six months ended June 30, 2006.

Cost of DCME product revenues decreased by $1.6 million, or 17.3%, from $9.1 million for the six months ended June 30, 2005 to $7.5 million for the six months ended June 30, 2006 primarily due to a proportionate decrease in DCME product revenues.

Cost of IP product revenues increased by $4.2 million, or 89.1%, from $4.7 million for the six months ended June 30, 2005 to $8.9 million for the six months ended June 30, 2006 primarily due to a 141% increase in IP product revenues.

Cost of services revenues increased by $2.2 million, or 92.1%, from $2.4 million for the six months ended June 30, 2005 to $4.6 million for the six months ended June 30, 2006. The increase in cost of services revenues is primarily due to an increase in labor and related expenses of $1.0 million as a result of an increase in customer support headcount to support our growing customer base in new product implementations, support and maintenance and other professional services. Additionally, overhead expenses for items such as facilities, equipment and depreciation, increased by $0.4 million.

Gross profit.  Gross profit increased by $3.4 million, or 16.6%, from $20.3 million for the six months ended June 30, 2005 to $23.7 million for the six months ended June 30, 2006. This increase was primarily due to higher IP product revenues. DCME product gross profit decreased by $2.0 million, or 14.3%, from $14.0 million for the six months ended June 30, 2005 to $12.0 million for the six months ended June 30, 2006 which approximates the 15.5% decrease in DCME product revenues. IP product gross profit increased by $7.7 million, or 206.2%, from $3.7 million for the six months ended June 30, 2005 to $11.4 million for the six months ended June 30, 2006 which approximates the 141% increase in IP product revenues. Services gross profit decreased by $2.3 million, or 91.9%, from $2.5 million for the six months ended June 30, 2005 to $0.2 million for the six months ended June 30, 2006.

Gross margin, which is gross profit as a percentage of revenue, was 55.7% for the six months ended June 30, 2005 and 53.0% for the six months ended June 30, 2006. The decrease in gross margin was primarily due to a decrease in services gross margin resulting from higher labor expenses, partially offset by an increase in IP product gross margins. DCME product gross margin increased from 60.7% for the six months ended June 30, 2005 to 61.5% for the six months ended June 30, 2006. We expect that DCME product gross margins will remain relatively consistent with the most recent periods. IP product gross margin increased from 44.3% for the six months ended June 30, 2005 to 56.3% for the six months ended June 30, 2006. Services gross margin decreased from 51.6% for the six months ended June 30, 2005 to 4.3% for the six months ended June 30, 2006 due to increased services costs resulting from an increase in customer implementation activity for which revenue has not yet been recognized. Overall IP product gross margin may fluctuate on a quarter by quarter basis due to changes in the IP product mix and the timing of the recognition of revenue and the associated costs.

Research and development expenses, net.  Research and development expenses, net of grants received from the OCS, increased by $4.1 million, or 33.5%, from $12.2 million for the six months ended June 30, 2005 to $16.3 million for the six months ended June 30, 2006. The increase in research and development expenses is primarily due to an increase in headcount, consultants and related expense of $2.1 million. In addition, depreciation expense increased by $0.5 million and purchases of non-capitalized information technology equipment increased by $0.4 million. Grants received from the OCS, which are recorded as a reduction of research and development expenses, were $0.6 million during both the six months ended June 30, 2005 and June 30, 2006.

Research and development expenses, net were 33.4% of total revenues for the six months ended June 30, 2005 and 36.5% of total revenues for the six months ended June 30, 2006. We expect research and development expenses to increase on an absolute basis but decrease as a percentage of total revenues.

Sales and marketing expenses.  Sales and marketing expenses increased by $0.8 million, or 6.5%, from $12.4 million for the six months ended June 30, 2005 to $13.2 million for the six months ended June 30,

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2006. The increase in sales and marketing expenses is primarily due to an increase in labor and related expense of $0.7 million as a result of an increase in sales and marketing headcount and related activities.

Sales and marketing expenses were 33.9% of total revenues for the six months ended June 30, 2005 and 29.5% of total revenues for the six months ended June 30, 2006. We expect sales and marketing expenses to increase on an absolute basis but decrease as a percentage of total revenues.

General and administrative expenses.  General and administrative expenses increased by $1.5 million, or 55.9%, from $2.6 million for the six months ended June 30, 2005 to $4.1 million for the six months ended June 30, 2006. The increase in general and administrative expenses is due to an increase of $1.0 million in fees for audit, legal, information technology support and other professional services and an increase in headcount, consultants and related expenses of $0.4 million.

As a result of the reassessed fair value of options granted between January 2005 and September 2005, we recorded deferred stock-based compensation in the amount of $1.3 million, which is being amortized over the vesting period of the applicable options on a straight-line basis. During the six months ended June 30, 2006 such amortization amounted to approximately $0.2 million. The amount of amortization for the six months ended June 30, 2005 was $0.1 million.

General and administrative expenses were 7.3% of total revenues for the six months ended June 30, 2005 and 9.2% of total revenues for the six months ended June 30, 2006.

Other income (expense), net.  Other income (expense), net consists primarily of interest income earned on cash and cash equivalents, offset by interest expense and bank charges. Other income (expense), net was $0.3 million for the six months ended June 30, 2005 and $0.2 million for the six months ended June 30, 2006.

Income taxes.  Income taxes were $26,000 for the six months ended June 30, 2005 and $22,000 for the six months ended June 30, 2006. We expect that our net operating loss carryforwards, and that our Approved Enterprise status in Israel will reduce our provision for income taxes.

Net loss.  Net loss increased $3.1 million, or 46.9% from $6.6 million for the six months ended June 30, 2005 to $9.7 million for the six months ended June 30, 2006. The increase in the net loss is mainly attributable to the increase in the expense associated with the increase in worldwide headcount and related expense for compensation and benefits partially offset by an increase in gross profit of $3.4 million.

Years ended December 31, 2004 and 2005

Revenues.  Total revenues increased by $7.1 million, or 10.3%, from $69.1 million in 2004 to $76.2 million in 2005. The increase in revenues was primarily due to growth in IP product sales.

DCME product revenues decreased from $48.1 million in 2004 to $41.7 million in 2005. DCME product revenues represented 69.6% of total revenues in 2004 and 54.7% of total revenues in 2005.

IP product revenues increased from $12.5 million in 2004 to $24.5 million in 2005 due to increased sales of IP products. The increase in revenue was attributable to the increase in the number of service providers deploying our IP products from 37 in 2004 to over 45 in 2005 as well as expansion sales to existing service providers. IP product revenues represented 18.1% of total revenues in 2004 and 32.1% of total revenues in 2005.

Services revenues increased from $8.5 million in 2004 to $10.1 million in 2005. The increase in Services revenues resulted primarily from an increase in IP services revenues, offset by a decrease in DCME services revenues. The increase in IP services revenue was a result of increased maintenance and support for existing customers and installation services for new customers. The decrease in DCME services was a result of the reduction in DCME product sales. Services revenues represented 12.3% of total revenues in 2004 and 13.2% of total revenues in 2005.

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Cost of revenues.  Total cost of revenues increased by $3.1 million, or 10.4%, from $30.0 million in 2004 to $33.1 million in 2005. The increase in cost of revenues resulted primarily from growth in IP sales. Total cost of revenues was 43.5% of total revenues in 2004 and 43.5% of total revenues in 2005.

Cost of DCME product revenues decreased by $3.1 million, or 15.6%, from $20.1 million in 2004 to $17.0 million in 2005 due to a decrease in DCME product sales and a decrease in the contractual royalty rate paid to ECI for the manufacture of our DCME family of products.

Cost of IP product revenues increased by $5.1 million, or 88.7%, from $5.7 million in 2004 to $10.8 million in 2005, primarily due to the increase in IP product revenues discussed above.

Cost of services revenues increased by $1.2 million, or 27.5%, from $4.2 million in 2004 to $5.4 million in 2005. The increase in cost of services revenues resulted primarily from the increase in services revenues.

Gross profit.  Gross profit increased by $4.0 million, or 10.3%, from $39.1 in 2004 to $43.1 million in 2005. The increase in gross profit was primarily due to higher IP product revenues. DCME product gross profit decreased by $3.3 million, or 11.7%, from $28.0 million in 2004 to $24.7 million in 2005. IP product gross profit increased by $6.9 million, or 102.4%, from $6.7 million in 2004 to $13.6 million in 2005. Services gross profit increased by $0.4 million, or 9.6%, from $4.3 million in 2004 to $4.7 million in 2005.

Gross margin was 56.5% in 2004 and 56.5% in 2005. DCME product gross margin increased from 58.2% in 2004 to 59.3% in 2005. IP product gross margin increased from 54.0% in 2004 to 55.7% in 2005. Services gross margin decreased from 50.7% in 2004 to 46.9% in 2005 primarily due to increased services costs associated with customer implementation activity for which services revenue has not yet been recognized.

Research and development expenses, net.  Research and development expenses, net of grants received from the OCS, increased by $6.6 million, or 33.1%, from $19.9 million in 2004 to $26.5 million in 2005. The increase in research and development expenses is primarily due to an increase in labor and related expense of $1.8 million as a result of an increase in headcount, a change in the mix of headcount to include a higher proportion of engineers in the United States, and additional bonuses of $1.1 million. In addition, fees for consultants used to supplement company labor increased by $2.9 million, primarily due to growth at our development center in India; depreciation expense increased by $0.3 million as a result of additional information technology assets purchased during 2005. In addition, grants received from the OCS, which are recorded as a reduction of research and development expenses, decreased by $0.3 million, from $1.9 million received in 2004 to $1.6 million received in 2005.

Research and development expenses, net were 28.8% of revenues in 2004 and 34.8% of revenues in 2005.

Sales and marketing expenses.  Sales and marketing expenses increased by $5.3 million, or 26.0%, from $20.5 million in 2004 to $25.8 million in 2005. The increase in sales and marketing expenses is primarily due to an increase in headcount, consultants and related expense of $2.4 million, which includes $1.7 million in higher commissions paid to company sales personnel on higher sales. Additionally, commissions paid to independent sales agents increased by $1.7 million as a result of higher sales generated by such agents, expenditures on marketing programs increased by $0.7 million as we increased our participation in trade shows and industry events, and travel and entertainment expense increased by $0.6 million in support of higher sales. Overhead charges increased by $0.7 million mainly due to allocations associated with increased headcount.

Sales and marketing expenses were 29.6% of revenues in 2004 and 33.8% of revenues in 2005.

General and administrative expenses.  General and administrative expenses increased by $0.1 million, or 1.7%, from $5.7 million in 2004 to $5.8 million in 2005. Labor and related expenses increased by $0.4 million and travel and entertainment expense increased by $0.6 million. These increases were offset by a decrease in bad debt expenses of $1.2 million.

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As a result of the reassessed fair value of options granted between January 2005 and September 2005, we recorded deferred stock-based compensation in the amount of $1.3 million, which is being amortized over the vesting period of the applicable options on a straight-line basis. During 2005, amortization of approximately $0.3 million was included in general and administrative expenses.

General and administrative expenses were 8.3% of revenues in 2004 and 7.6% of revenues in 2005.

Other income (expense), net.  Other income (expense), net consists primarily of interest income, offset by bank charges. Other income (expense), net was $1.2 million in 2004 and $0.8 million in 2004. The decrease in Other income (expense), net was attributable to an increase in bank charges and foreign currency exchange losses.

Income tax expense.  Income tax expense was $14,000 in 2004 and $35,000 in 2005. The provision for income taxes in 2004 related to minimum state taxes and in 2005 to minimum state taxes and foreign income taxes. We expect that our net operating loss carryforwards, and that our Approved Enterprise status in Israel will reduce our provision for income taxes.

Net loss.  Net loss was $5.8 million in 2004 and $14.3 million in 2005. The increase in the net loss was mainly attributable to the increase in headcount and related expense for compensation and benefits.

Years ended December 31, 2003 and 2004

Revenues.  Total revenues increased by $9.6 million, or 16.1%, from $59.5 million in 2003 to $69.1 million in 2004. The increase in revenues resulted from growth in both DCME and IP sales.

DCME product revenues increased from $42.4 million in 2003 to $48.1 million in 2004 primarily due to an increase in expansion sales to existing customers. DCME product revenues represented 71.3% of total revenues in 2003 and 69.6% of total revenues in 2004.

IP product revenues increased from $8.2 million in 2003 to $12.5 million in 2004 due to increased sales of both ControlSwitch and I-Gate 4000 products. ControlSwitch revenues increased from $0.6 million in 2003 to $3.4 million in 2004, and I-Gate 4000 revenues increased from $7.6 million in 2003 to $9.1 million in 2004. The increase in revenue was attributable to the increase in the number of customers for our IP products from 25 in 2003 to 37 in 2004 as well as expansion sales to existing customers. IP product revenues represented 13.9% of total revenues in 2003 and 18.1% of total revenues in 2004.

Services revenues decreased from $8.8 million in 2003 to $8.5 million in 2004. The increase in services revenues resulted primarily from an increase in IP services revenues offset by a decrease in DCME services revenue. The increase in IP services revenue was a result of increased maintenance and support for existing customers and installation services for new customers. The decrease in DCME services was a result of the reduction in DCME product sales. Services revenues represented 14.9% of total revenues in 2003 and 12.3% of total revenues in 2004.

Cost of revenues.  Total cost of revenues decreased by $0.4 million, or 1.3%, from $30.4 million in 2003 to $30.0 million in 2004. Total cost of revenues was 51.1% of total revenues in 2003 and 43.5% of total revenues in 2004.

Cost of DCME product revenues increased by $0.4 million, or 2.0%, from $19.7 million in 2003 to $20.1 million in 2004. Although DCME product revenues increased by 13.4%, cost of DCME product revenues increased by a smaller percentage due to a decrease in the contractual royalty rate paid to ECI for the manufacture of our DCME family of products.

Cost of IP product revenues decreased by $1.0 million, or 14.7%, from $6.7 million in 2003 to $5.7 million in 2004, primarily due to costs that were expensed in 2003 for which all of the related revenue was not recognized until later periods.

Cost of services revenues increased by $0.2 million, or 5.4%, from $4.0 million in 2003 to $4.2 million in 2004.

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Gross profit.  Gross profit increased by $10.0 million, or 34.2%, from $29.1 million in 2003 to $39.1 million in 2004. DCME product gross profit increased by $5.3 million, or 23.3%, from $22.7 million in 2003 to $28.0 million in 2004. IP product gross profit increased by $5.2 million, or 345.2%, from $1.5 million in 2003 to $6.7 million in 2004. Services gross profit decreased by $0.5 million, or 11.2%, from $4.8 million in 2003 to $4.3 million in 2004. The increase in gross profit was due to both higher sales and higher gross margins.

Gross margin was 48.9% in 2003 and 56.5% in 2004. The increase in gross margin was attributable to increases in both DCME product and IP product gross margins. DCME product gross margin increased as a result of the decrease in the contractual price paid to ECI for the manufacture of our DCME family of products referred to above. DCME product gross margin increased from 53.6% in 2003 to 58.2% in 2004. IP product gross margin increased from 18.3% in 2003 to 54.0% in 2004, mainly due to arrangements for which revenue recognition during 2003 was limited to amounts due and payable, or cash received, but for which all related inventory costs were expensed at the date of acceptance of the related products. This resulted in lower or negative product margins in 2003 and higher margins in 2004. Services gross margin decreased from 55.0% in 2003 to 50.7% in 2004 which approximates the decreases in services revenues for the same period.

Research and development expenses, net.  Research and development expenses, net of grants received from the OCS, increased by $4.6 million, or 30.1%, from $15.3 million in 2003 to $19.9 million in 2004. The increase in research and development expenses was primarily due to an increase in labor and related expense of $3.4 million as a result of an increase in research and development headcount, a change in the mix of headcount to include a higher proportion of engineers in the United States, a market-based salary adjustment program and additional bonuses of $0.5 million. Fees for consultants used to supplement company labor increased by $1.5 million. In addition, grants received from the OCS, which are recorded as a reduction of research and development expenses, decreased by $0.4 million from $2.3 million received in 2003 to $1.9 million received in 2004.

Research and development expenses, net were 25.7% of revenues in 2003 and 28.8% of revenues in 2004.

Sales and marketing expenses.  Sales and marketing expenses increased by $2.0 million, or 11.1%, from $18.4 million in 2003 to $20.4 million in 2004. The increase in sales and marketing expenses is primarily due to an increase in labor and related expense of $1.4 million as a result of an increase in sales and marketing headcount, and higher commissions (on higher sales) and bonuses of $0.7 million. Additionally, commissions paid to independent sales agents increased by $0.7 million as a result of higher sales facilitated by such channels.

Sales and marketing expenses were 31.0% of revenues in 2003 and 29.6% of revenues in 2004.

General and administrative expenses.  General and administrative expenses were unchanged at $5.7 million in 2003 and $5.7 million in 2004. However, general and administrative expenses in 2003 included amortization of intangible assets of $0.6 million.

General and administrative expenses were 9.6% of revenues in 2003 and 8.3% of revenues in 2004.

Other income (expense), net.  Other income (expense), net consisted primarily of collection fees earned on collection of certain accounts receivable on behalf of ECI and interest income, offset by interest expense and bank charges. Other income (expense), net was $1.5 million in 2003 and $1.2 million in 2004. The decrease in Other income (expense), net was attributable to a $0.5 million decrease in collection fees earned from ECI as the remaining balance of the underlying accounts receivable decreased.

Income taxes.  We recorded a provision for income taxes of $38,000 in 2003 and $14,000 in 2004, respectively.

Net loss.  Net loss was $8.9 million in 2003 and $5.8 million in 2004. The reduction in the net loss between 2003 and 2004 was primarily due to an increase in gross profit partially offset by an increase in operating expenses.

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Liquidity and Capital Resources

To date, we have satisfied our liquidity needs primarily through private sales of our preferred stock, bank borrowing and, to a lesser extent, grants received from the OCS. Since October 2001, we have received cash proceeds of approximately $45.0 million from private sales of our preferred stock, and in March 2006, we secured a loan with Bank Leumi le-Israel B.M. in the amount of $15.0 million. In addition, we sold trade receivables to Israeli financial institutions in the total amount of $3.5 million in fiscal 2005 and $10.7 million during the six months ended June 30, 2006. At June 30, 2006, we had unrestricted cash and cash equivalents of $27.5 million, an increase of $7.1 million from December 31, 2005.

Operating Activities

Net cash used in our operating activities was $7.3 million in the six months ended June 30, 2006, $2.6 million in fiscal 2005 and $5.2 million in fiscal 2004.

Net cash used in our operating activities in the six months ended June 30, 2006 was primarily due to our net loss of $9.7 million, and increases in accounts receivable, inventories, and prepaid expenses and other current assets, in the aggregate amount of $13.0 million, which was offset by increases in accounts payable and deferred revenue in the aggregate amount of $14.7 million, all related to sales growth and expanded operations. In addition, we sold trade receivables to Israeli financial institutions in the total amount of $10.7 million during the six months ended June 30, 2006. Further, we incurred $1.4 million and $0.3 million of depreciation and stock-based compensation, respectively, which are non-cash expenses. Our working capital increased from $10.1 million as of December 31, 2005, to $14.7 million as of June 30, 2006.

Net cash used by our operating activities in fiscal 2005 was primarily attributable to our net loss of $14.3 million, and an increase in accounts receivable and inventories of $7.9 million, which was offset by increases in accounts payable, accrued expenses and deferred revenue in the aggregate amount of $17.0 million. During 2005 we sold trade receivables in the total amount of $3.5 million. In addition, we incurred $2.0 million and $0.3 million of depreciation and stock-based compensation, respectively.

Net cash used by our operating activities in fiscal 2004 was primarily attributable to our net loss of $5.8 million and an increase in accounts receivable and inventories of $4.3 million, offset by increases in accrued expenses and deferred revenue in the aggregate amount of $5.6 million. In addition, we incurred $1.7 million and $1.2 million of depreciation and provision for doubtful accounts, respectively.

Investing Activities

Net cash used in our investing activities was $0.8 million in the six months ended June 30, 2006, $5.6 million in fiscal 2005 and $3.6 million in fiscal 2006.

Investing activities in the six months ended June 30, 2006 consisted primarily of purchases of property and equipment of $2.3 million, which was offset by decreases in our restricted cash and short term investments in the aggregate amount of $1.5 million.

Investing activities in fiscal 2005 consisted primarily of purchases of property and equipment of $4.2 million and increases in our restricted cash and short term investments in the aggregate amount of $1.4 million.

Investing activities in fiscal 2004 consisted primarily of purchases of property and equipment of $3.3 million.

Financing Activities

Net cash provided by our financing activities was $15.2 million in the six months ended June 30, 2006, $0.3 million in fiscal 2005 and $0.1 million in fiscal 2004.

Net cash provided by our financing activities in the six months ended June 30, 2006 primarily consisted of bank borrowings, from Bank Leumi le-Israel B.M., in the amount of $15.0 million and to a lesser extent

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of proceeds from the issuance of common stock due to the exercise of stock options in the amount of $0.2 million. The loan bears interest at London Interbank Offered Rate (LIBOR) plus 2.35%, (8.12% as of June 30, 2006) until the date of an initial public offering, and at LIBOR plus 1.4% following an initial public offering. The loan is granted for a period of three years with the principal due in nine equal consecutive quarterly installments commencing on April 1, 2007. The loan agreement includes financial and non-financial covenants. In the event that our consolidated balance of cash and cash equivalents, as defined in the loan agreement, becomes less than $20.0 million, the bank is entitled to declare the loan, in whole or in part, to be immediately due and payable. We are in breach of certain non-financial loan covenants, with respect to financial reporting, and have received a waiver from Bank Leumi le-Israel B.M. waiving any demand payment rights that they may have as a result of such breach.

Net cash provided by our financing activities in fiscal 2005 consisted of proceeds from the issuance of common stock due to the exercise of stock options in the amount of $0.3 million.

Contractual Obligations and Commitments

The following summarizes our future contractual obligations for the periods presented (in thousands):

			Payment Due
			July 1, 2006 through		January 1, 2007 through		January 1, 2009 through
			December 31,		December 31,		December 31,
	Total		2006		2008		2011
Contractual Obligations:
Long-term debt obligations	$	15,000	$	—	$	11,667	$	3,333
Operating lease obligations		5,616		849		3,117		1,650
Purchase commitments		4,481		4,481		—		—
Total	$	25,097	$	5,330	$	14,784	$	4,983

Working Capital and Capital Expenditure Needs

We believe that the net proceeds from this offering and our existing cash and cash equivalents will be sufficient to meet our working capital and capital expenditure needs over at least the next twelve months. In the event that our revenue plan does not meet our expectations, we may eliminate or curtail expenditures to mitigate the impact on our working capital. Our future capital requirements will depend on many factors, including our rate of revenue growth, the expansion of our sales and marketing activities, the timing and extent of spending to support product development efforts, the timing of introductions of new products and enhancements to existing products, the acquisition of new capabilities or technologies, and the continuing market acceptance of our products and services. Moreover, to the extent that the net proceeds from this offering and existing cash and cash equivalents are insufficient to fund our future activities, we may need to raise additional funds through public or private equity or debt financing. Although we are not currently a party to any agreement or letter of intent with respect to potential investment in, or acquisitions of, businesses, services or technologies, we may enter into these types of arrangements in the future, which could also require us to seek additional equity or debt financing. Additional funds may not be available on terms favorable to us or at all.

Off-Balance Sheet Arrangements

At December 31, 2004 and 2005, and June 30, 2006, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

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Recent Accounting Pronouncements

In July, 2006, the FASB issued Financial Accounting Standards Interpretation No. 48, Accounting for Uncertainty in Income Taxes, or FIN 48. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprises’ financial statements in accordance with SFAS No. 109. FIN 48 prescribes a recognition and measurement method of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosures and transitions. FIN 48 is effective for fiscal years beginning after December 15, 2006. We are currently analyzing the effects of FIN 48 on our consolidated financial position and our results from operations.

Quantitative and qualitative disclosures about market risk

Foreign Currency Risk

Nearly all of our revenue, costs and expenses, including subcontractor manufacturing expenses, are denominated in U.S. dollars. However, we do maintain sales and business operations in foreign countries, and part of our revenue is derived from customers in foreign countries. As such, we have exposure to adverse changes in exchange rates associated with operating expenses, including personnel, facilities and other expenses, of our foreign operations and sales to our customers. To manage the risk of fluctuations in our results of operations and cash flows due to changes in exchange rates between the U.S. dollar and the New Israeli Shekel, we have entered into forward exchange contracts where the counterparty is generally a bank.

We had outstanding forward foreign currency contracts with notional amounts totaling $5.4 million at June 30, 2006. These forward contracts expire on various dates through December 2006. As of June 30, 2006, the fair value of these contracts was $335,000.

Interest Rate Sensitivity

We had cash, cash equivalents and restricted cash totaling $28.7 million at June 30, 2006. These amounts were invested primarily in commercial paper and money market funds. The unrestricted cash and cash equivalents are held for working capital purposes. We do not enter into investments for trading or speculative purposes. Due to the short-term nature of these investments, we do not believe that a 10% change in interest rates would have a material impact on our financial position and results of operations. However, declines in interest rates and cash balances will reduce future investment income.

As of June 30, 2006, we had $15.0 million of debt outstanding. Our loan agreement provides for an interest at London Interbank Offered Rate (LIBOR) plus 2.35%, or 8.12% as of June 30, 2006, until the date of an initial public offering, and at LIBOR plus 1.4% following an initial public offering. If the interest rate as of June 30, 2006 increased by 10%, our interest expense would have increased on an annualized basis by approximately $86,000, assuming consistent borrowing level. We had no debt outstanding as of December 31, 2004 and 2005, respectively.

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BUSINESS

Our Company

We are a leading global provider of Internet Protocol, or IP, softswitches, media gateways and digital compression products to established and emerging wireline, wireless and broadband service providers. Service providers use our products to transport, convert and manage data and voice traffic over legacy and IP networks, while enabling voice over IP, or VoIP, and other new multimedia communications services. Our innovative ControlSwitch softswitch solution and I-Gate 4000 family of media gateway products enable service providers to deploy IP networks and efficiently migrate from their legacy circuit-switched networks to IP networks. Our products provide the necessary tools for service providers to offer value-added services to their customers and generate new revenue. In addition, use of our products can significantly reduce a service provider’s total cost of owning and managing their own network.

Intense competition in the telecommunications industry has driven service providers to seek ways to lower costs, deploy more efficient networks, offer new value-added services and enhance their competitive position. Many service providers are combining separate voice and data networks onto one converged network using IP technologies to offer VoIP and other new multimedia communications services. The VoIP market is growing rapidly and Gartner predicts that the worldwide VoIP number of residential and business lines will grow from 22.1 million in 2005 to 218.1 million in 2010, representing a compound annual growth rate of 58%.

Our products allow our customers to continue to realize their investment in wireless and wireline legacy networks while simultaneously offering IP applications and services in a more cost-effective manner without compromising service quality. Our portfolio of products enables service providers to deploy flexible networks that can adapt to changing end user demands, regulatory conditions and competitive industry dynamics. As service providers continue to migrate to IP networks, our market leading product portfolio has positioned us to capture a growing portion of the next generation communication infrastructure market, in particular the softswitch and media gateway markets. Our products also address emerging opportunities by enabling new entrants to the service provider market or existing service providers entering new markets to implement flexible and cost-effective networks.

Our portfolio of products offers an all IP softswitch solution that is interoperable with legacy networks as well as established and emerging IP networks. The scalable and distributed architecture of our ControlSwitch enables our customers to design their network in a flexible manner, remotely manage the network from a single point of control and quickly offer differentiated services. Our media gateway products deliver industry-leading voice quality and compression capabilities and are designed to be deployed in service provider networks ranging in size from a few dozen ports to thousands of ports. Our softswitch and media gateway platforms deliver a scalable, interoperable and modular network solution that is compatible with existing legacy and IP standards and IMS architecture. As new standards emerge, our ControlSwitch is software upgradeable which protects service providers against expensive hardware infrastructure replacements. Our digital compression products have been used for over 20 years by leading service providers to compress voice traffic to optimize network bandwidth while maintaining high voice quality.

Our business initially was focused on the sale of digital circuit multiplication equipment, or DCME, products to service providers for use in their legacy networks. We continue to sell DCME products compatible with both legacy and next generation networks, and DCME sales comprise a significant portion of our present business. We have increasingly focused our efforts on our IP products, and we have experienced rapid growth in our IP product revenues. By leveraging our large installed base of DCME customers, we believe we are well positioned to be the provider of IP network solutions to our existing customers as they migrate to IP networks.

Our customers include over 400 service providers that have deployed our DCME products in over 90 countries and over 45 service providers that have deployed our IP products. A representative sample of customers include Belgacom International Carrier Services, Cable & Wireless Panama, Equant, Meditelecom, Moessel (Jamaica) Limited (Digicel), Multiregional Transit-Telecom (MTT), Primus

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Telecommunications, Telekom SA, Vimplecom and Vodacom SA. We sell our products worldwide through a direct sales force, distributors and resellers.

Industry Overview

Historically, telecommunications companies globally have been either government-owned or heavily regulated with the primary objective of providing voice services. This trend limited the innovation of telecommunications technology and service offerings. In addition, providers of different types of services, such as telephony, cable television, wireless and Internet services generally did not compete across each others’ markets, either due to prevailing regulatory restrictions or lack of technical capabilities. Instead, these service providers developed single purpose networks suitable for the type of service they provided using then-prevailing technology.

More recently, the global telecommunications industry has experienced dramatic changes, and it continues to be driven by several trends, including:

•  Significant deregulation in the telecommunications market worldwide has encouraged new entrants to the service provider market, such as Internet service providers and Internet portals, and has led to additional bundled service offerings;

•  Intensified competition in the telecommunication services market as emergence of new technologies such as IMS has allowed existing and new wireline and wireless providers of voice, video, and data services to increasingly compete across each other’s service and geographic markets driving down prices; and

•  The introduction and adoption of broadband Internet services have forced incumbent service providers to build data-centric IP networks which run in parallel to their legacy circuit-switched voice networks.

•  Increased subscriber demand for advanced voice, video and data telecommunications services, including VoIP; and

To meet the challenge of these evolving industry dynamics, many industry analysts believe that service providers will make substantial capital investments in deploying IP network communications equipment that allows switching and transport of voice traffic and services delivery over IP networks giving, service providers the opportunity to converge voice and data traffic onto a single IP network. IDC, an independent research firm, predicts that the market for media gateways and softswitches will grow from $1.8 billion in 2005 to $7.6 billion in 2010, representing a compound annual growth rate of 33%.

Equipment Vendor Challenges

The transition from legacy circuit-switched networks to IP networks poses new challenges to many telecommunications equipment vendors. Many service providers are focusing on moving voice and data traffic onto a single IP network to reduce expenses associated with building and managing multiple networks. Faced with increasing competition and declining voice margins, these service providers often are looking to equipment vendors to provide them with product solutions that help reduce costs and optimize network utilization.

Service providers are under pressure to rapidly deliver new and expanded service offerings, increase revenue and maximize average revenue per user. Equipment vendors are faced with the challenge of moving quickly enough to provide solutions that meet the demands of service providers for flexibility in delivering new services, while maintaining or increasing service quality.

Declining service prices and margins are forcing service providers to explore the most efficient and cost-effective migration paths to IP networks, while complying with current and emerging industry standards, such as IMS. At the same time, service providers need interoperable solutions that allow legacy and next generation equipment and applications to co-exist, maximizing returns on their existing infrastructure investments. Hence, equipment vendors need to offer products that are scalable to next generation

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standards and architectures, offer flexibility in network design and management, and are interoperable with legacy and next generation equipment, protocols and services.

Our Solution and Customer Benefits

We have developed innovative and proven IP product solutions that incorporate leading technologies and enable service providers to accomplish several objectives, including:

•  Seamless Migration of Legacy Networks to IP:  Our products give service providers the control and flexibility to incrementally migrate different parts of their legacy networks to IP networks.

•  Cost Reduction:  Our products enable service providers to reduce the expense of building and managing multiple networks by moving different traffic streams to a single IP network.

•  Rapid Introduction of New Services:  Our products offer service providers the flexibility to create, customize and rapidly deploy VoIP, IP video, unified communications and other multimedia services.

•  Revenue Growth and Margin Improvement:  Our products are designed to enable service providers to increase revenue and improve margins by expanding their services to new geographies and tailoring services, pricing and quality levels to meet end customers’ specific communications needs.

•  Compatibility of Existing Investment with Emerging Standards:  Our products allow service providers to continue to maximize returns from existing network infrastructure while ensuring compatibility with emerging standards such as IP multimedia system, or IMS, that enable wireless and wireline network convergence.

Our Competitive Strengths

We have established ourselves as a leading provider of innovative next generation IP network solutions. We believe our core competitive strengths are:

•  Programmable Softswitch Platform:  Our ControlSwitch incorporates a programmable interface that enables service providers to customize and deploy multimedia communication services offered by us and third parties to generate new revenue streams more rapidly than our competitors’ products. Our ControlSwitch also allows service providers to quickly deploy country-specific signaling standards and extend their networks and service offerings to new geographies. In addition, service providers can use the programmable interface in our ControlSwitch to implement and continually adapt routing plans and policies to efficiently manage their network traffic, reduce operating costs and improve margins.

•  Distributed Architecture Enables Flexible Network Design:  Our ControlSwitch solution is based on a distributed architecture that enables multiple switch elements and media gateways to be placed in different locations, offering flexibility in network design and rapid service extension to new geographies. This allows service providers to easily deploy networks in new regions ranging from a single site to a concurrent global deployment. Our solution also enables service providers to centrally manage their geographically dispersed network elements which reduces network management costs.

•  Leading Voice Compression Technology:  Our digital compression products have been used for over 20 years by leading service providers to compress voice traffic and optimize network bandwidth. This experience has helped us to deliver industry leading compression capabilities on our media gateways while maintaining high voice quality due to various sophisticated digital signal processing, or DSP, algorithms including echo cancellation and packet loss concealment.

•  Interoperable Solution with Multi-Protocol Connectivity:  Our softswitch solution supports most commonly used legacy and next generation communication protocols and standard network interfaces. This offers the capability to interconnect legacy local, long distance, international long distance, wireless and emerging IP networks. It also allows legacy and new voice and data services to

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co-exist on the same platform, which enables service providers to continue using existing network infrastructure while protecting their existing investments and facilitating their migration to next generation networks. Our ControlSwitch provides interfaces to non-proprietary media devices and application servers which enable our customers to choose best-of-breed solutions from a wide range of vendors to customize their network design and service offerings.

•  IMS Architecture:  Industry groups, service providers and vendors have promoted the adoption of IMS architecture as a logical future network roadmap towards fixed and mobile network convergence. Our softswitch architecture is an extensible solution fully mapped to IMS architectures. The IMS principles embedded in our distributed softswitch solution can form a fundamental part of a service provider’s IMS architecture as they seek to deploy IMS solutions. Our softswitch solution is capable of interconnecting wireline and wireless networks and delivering voice, data and other multimedia services to subscribers over most networks.

•  Global and Diversified Installed Customer Base:  We have established a diverse global customer base of leading wireless and wireline service providers, which we believe gives us a distinct competitive advantage in the industry. Our market leadership in digital compression multiplexing equipment, or DCME, technology has helped us develop strong relationships with established and emerging telecom service providers globally. Our experience in providing network solutions to a diverse customer base allows us to develop solutions that address our customers’ existing and emerging business needs. We also have a strong presence in emerging markets including Brazil, India, Indonesia, Pakistan, Russia and Vietnam, where growing traffic is increasing demand for our softswitch network solutions.

•  Highly Leverageable Business Model:  We have a highly leverageable business model that allows us to control costs while our business grows and expands. Our expertise in developing IP networking equipment coupled with our unique software architecture gives us the ability to rapidly add features and functionality to our products with little incremental cost. We believe our manufacturing and development operations in Israel also provide us with a lower cost of production.

Our Strategy

We intend to be the leading global provider of IP-based network solutions. Principal elements of our strategy include:

•  Deepen Our Existing Customer Relationships:  We are leveraging our installed base of global customers developed through our DCME leadership to sell more products at every stage of the evolution of our customers’ networks. As a result of our installed base of DCME customers and our existing relationships, we believe we are well positioned to capture a substantial share of the softswitch market as our existing customers migrate from DCME to media gateway to softswitch solutions, or directly from DCME to softswitch solutions. For example, we have secured multiple customer wins for our softswitch and media gateway products from our existing DCME customers including Belgacom and Bezeq International, among others.

•  Expand Our Customer Base and Addressable Markets:  We intend to build on our early success to penetrate new customer segments in both wireless and wireline. In the wireless service provider market, we believe that growth in the number of subscribers and fixed-mobile convergence-related services will drive growth in demand for our products. The extensibility of our platform allows us to customize our products to penetrate new markets, such as secure government communications. In the wireline service provider market, we believe a significant market opportunity exists for us to win more customers as service providers introduce voice over broadband services.

•  Continue to Enhance Our Technology Leadership:  We continue to add features and functionality to our solution to address emerging customer needs and industry standards. In particular, we are adding new interfaces to maintain compliance with emerging IMS specifications, allowing easier deployment

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and interoperability with other network elements. In an effort to expand our product portfolio, we may pursue selected acquisitions of complementary companies, products or technologies.

•  Expand Our Global Sales, Marketing, Support and Distribution Capabilities:  We will continue to expand our sales, marketing, support and distribution capabilities into new markets. In addition, we plan to augment our global sales effort by increasing the number of our international sales partners. We are also making a significant investment in our own professional services and customer support organization to better support our growing global customer base.

•  Grow Our Base of Software Applications and Development Partners:  We have established a broad range of partners to provide our customers with a variety of advanced services and application options. These partnerships allow us to deliver bundled products that enable new IP-based services, billing, provisioning, and advanced network management. We will continue to seek new partnerships with companies providing complementary products or services for IP networks. This will provide us with additional revenue opportunities, enable us to bring greater value to our customers and extend our leadership position over potential competitors. In addition, we will maintain our Veraz Open Service Alliance, or VOSA, which allows a broad range of alliance members to develop applications for our platform.

Our Products and Services

Our product portfolio consists of the ControlSwitch family of softswitch modules, the I-Gate 4000 family of media gateways, the DTX-600 DCME product for voice compression over legacy networks and Secure Communications Software enhancement to our DCME and I-Gate families of products. The combination of our media gateways and ControlSwitch forms a comprehensive solution that is capable of converging various wireline, wireless and IP networks. The media gateway is physically connected to both circuit and packet networks and serves as a bridge between the voice traffic carried over PSTN and packet-based IP network. The softswitch controls the media gateway and provides call control, call policy routing and other management functionality such as billing.

Our solution offers comparable functionality, reliability and equal or superior voice quality as that offered by legacy voice switches over both legacy and IP networks, and has additional capabilities such as flexibility in network design and management, compact size, open and multi-vendor architectures and programmability for new services.

ControlSwitch

Our ControlSwitch is a highly scalable and fully distributed software solution that provides control and management of calls in wireline and wireless networks. ControlSwitch software runs on off-the-shelf computing platforms and performs the following broad functions:

•  Call Control function instructs media gateways to originate and terminate calls over PSTN and IP networks.

•  Call Policy functions enables service providers to define and implement static and dynamic call policies including least cost, time of day and quality of service routing.

•  Element Management System is a centralized management tool that includes reporting, billing and troubleshooting for our softswitch solution.

I-Gate 4000 Media Gateways

Our high density I-Gate 4000 PRO and lower density I-Gate 4000 EDGE media gateways are hardware devices that transport and convert the voice traffic between PSTN and IP networks.

•  The I-Gate 4000 PRO, with up to 12,960 redundant compressed voice channels in a single shelf, is designed for medium and large-scale Central Office or co-location points of presence deployments used by service providers.

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•  The I-Gate 4000 EDGE, with up to 480 redundant compressed voice channels, is designed for low-density applications to extend the reach of service providers’ networks to low density markets and enterprises.

Both products support various PSTN interfaces including T1, E1 and IP interfaces including Fast Ethernet. In addition, I-Gate 4000 PRO also supports PSTN interfaces including DS3, STM-1, OC-3 and IP interfaces including Gigabit Ethernet.

DTX-600

Our DTX-600 DCME product can simultaneously compress voice, fax, data and signaling traffic between any two legacy networks. It is designed to serve as a network optimization platform for diverse network applications over heavy-traffic international and domestic routes or Point-Of-Presence, or POP.

Secure Communications Software

We also provide Secure Communications Software as an enhancement to the core technology of our DTX-600 and I-Gate 4000 EDGE. Secure Communications Software adds specific security protocols to enable transport and compression of secure voice, fax and other communications over satellite and other communication technologies used in security applications.

Global Customer Services

We provide comprehensive network support solutions consistent with the needs and requirements of our customers in all geographic markets. Our global services organization offers around the clock support services, a range of professional services, and training courses to help our customers design, install, deploy and maintain their networks.

Solutions Offered by Our Products

IP Static Trunking

Service providers can use our I-Gate 4000 family of media gateways for transporting both voice and data traffic in compressed or uncompressed formats between predetermined endpoints, or static trunking, over an IP network, substantially reducing their network bandwidth costs. This application is used by wireline and wireless service providers and enterprise customers.

Softswitch-based National and International Services also known as Class 4 Services

Service providers use our ControlSwitch and I-Gate 4000 family of media gateways to deliver softswitch-based services globally over an IP network. Our products are also used by service providers to bridge legacy and IP networks and also peer between their newly emerging multi-protocol voice over IP networks. This application is used by wireline and wireless service providers irrespective of whether they sell their services in a wholesale or retail model. Our ControlSwitch can also be used by service providers for switching IP-voice traffic in an all IP network.

Access Services also known as Class 5 Services

Our ControlSwitch can also be used to offer broadband voice over IP residential services. These services require interoperation with various industry standard access technologies such as broadband local loop, integrated access devices, IP phones and software-based IP phones running on personal computers or mobile devices.

Other Solutions

Additionally, Veraz and partner products enable service providers to provide innovative applications such as IP Centrex, pre-paid voice and data services, Unified Messaging, VPN and contact center services.

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Our Technology

Our Media gateway products support a wide range of interface types which allows service providers to connect to virtually any external circuit or IP.

We have developed in-house digital signal processing, or DSP, algorithms in the telephony compression market that enable our media gateways to optimize bandwidth usage and voice quality. Our in-house DSP and IP network algorithms and technologies include:

•  voice compression codecs such as G.711, G.729, G.723, EFR;

•  echo cancellation;

•  comfort noise generation;

•  voice activity detection;

•  fax/modem handling algorithms and T.38 fax compression codec;

•  smart packet loss concealment;

•  adaptive jitter buffer;

•  signal classification;

•  low system delay; and

•  robust signaling transmission.

Our IMS-compatible ControlSwitch software architecture is a distributed, scalable, high availability platform with open interfaces to media devices, application servers and back-office systems. Our architecture is highly programmable and facilitates a high degree of customization to enable service providers to deliver differentiated service offerings. Key components of our architecture include:

•  Signaling and control modules that provide protocol mediation enabling the ControlSwitch to interface with global legacy signaling variants such as SS7, PRI, CAS as well as IP Protocols such as H.323, SIP, H.248 and MGCP;

•  Service Logic Execution Environment offers a fully-distributed and dynamic service delivery mechanism allowing new services to be created separately using standard XML programming and integrated into the ControlSwitch. This enables service providers to rapidly create and modify services to meet their business needs;

•  Policy Engine utilizes a high performance distributed decision tree design and enables service providers to create, modify and customize various policies, including least cost, time of day and quality of service routing, which can be implemented though a web-based graphical user interface or through programmatic application interfaces;

•  Element Management System offers a single point of control for all softswitch solution elements, including FCAPS (fault, configuration, accounting, performance and security) management, device management, service management, subscriber management and subscriber web portal; and

•  Open interfaces, management and interoperability with various third party products, including session border controllers, application servers, media servers, access gateways and customer premise equipment, such as IP phones, soft clients and integrated access devices.

Our customers are able to utilize a high degree of control and flexibility to implement, customize and support distributed VoIP networks due to our in-house developed technologies and centralized management systems that can manage all Veraz provided resources as well as third party systems.

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Customers

We sell our products worldwide to emerging and incumbent wireline and wireless service providers. Some of our customers sell services directly to residential and enterprise customers while others sell services to other service providers. As of June 30, 2006, we had over 400 DCME customers and over 45 customers who had deployed our IP products. Sales to our three largest customers, ECI, Technoserv and Classica, all of whom are resellers or integrators, accounted for 21%, 13% and 10% of our revenues for the year ended December 31, 2005, respectively.

The six largest service providers that have deployed our products, in terms of revenue during the twelve months ended June 30, 2006, for each of our two primary product lines are listed alphabetically below.

DCME	IP
Belgacom International Carrier Services	Belgacom International Carrier Services
Meditelcom	Cable & Wireless Panama
Moessel (Jamaica) Limited (Digicel)	Equant
Multiregional Transit-Telecom (MTT)	Meditelcom Inc.
Telekom SA	Primus Telecommunications, Inc.
Vodacom SA	Vimplecom

We sell our products primarily through a direct sales force and also through resellers, including ECI. Our direct sales organization is divided into four regions including: North America; Caribbean and Latin America, or CALA; Europe, Middle East, and Africa; and Asia Pacific and India. We supplement our direct sales force with partners, including distributors, systems integrators and resellers.

Historically, ECI was one of our primary reseller channels representing Veraz Networks in a number of regions worldwide. During the past year, however, we have brought in-house many of the resources previously provided primarily by ECI and terminated our relationship with ECI as the primary sales partner in the United Kingdom, Germany and France. However, ECI continues to be a significant sales partner in Russia.

As of June 30, 2006, our sales, marketing and professional services organization included 134 employees and full time consultants.

Research and Development

Our research and development organization is responsible for the design, development, testing and certification of our products. As of June 30, 2006, we had 294 employees and full time consultants in research and development with virtually all of them dedicated to IP product development. Our engineers are responsible for new product development efforts while continuing to enhance existing product lines, and, in addition, provide critical support to our customers’ needs and requirements. We spent, net of grants received from the OCS, $19.9 million on research and development activities in fiscal 2004, $26.5 million in fiscal 2005 and $16.3 million for the six months ended June 30, 2006.

Competition

The market for carrier packet voice infrastructure solutions is intensely competitive, subject to rapidly changing technology and is significantly affected by new product introductions and the market activities of other industry participants. We expect competition to persist and intensify in the future. This market has historically been dominated by established telephony equipment providers, such as Alcatel, Ericsson, Lucent Technologies, Nortel Networks and Siemens Industries, all of which are our direct competitors. We also face competition from other telecommunications and networking companies, including Cisco Systems, Sonus Networks, Tekelec and Huawei, some of which have entered our market by acquiring companies that design competing products. In addition, these competitors have broader product portfolios and more extensive customer bases than we do. Some of our competitors also have significantly greater financial resources than we do and are able to devote greater resources to the development, promotion, sale and

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support of their products. Other smaller and mostly privately-held companies are also focusing on our target markets.

In order to compete effectively, we must continue to:

•  provide extremely high network reliability and voice quality;

•  provide products that scale easily and efficiently;

•  support interoperability with various network designs and other vendors’ equipment;

•  provide effective network management capabilities;

•  provide comprehensive customer support and professional services that enable our customers to rapidly deploy our products;

•  provide a cost-effective and space-efficient solution; and

•  provide the ability to migrate selective applications that reside on legacy voice switches.

Manufacturing

We outsource the manufacturing of our hardware products. Our I-Gate 4000 media gateways are manufactured for us by Flextronics. We buy our DCME products from ECI who subcontracts the manufacturing to Flextronics. Flextronics fulfills our manufacturing requirements in Migdal-Haemek, Israel and for our I-Gate products, in France and has other locations across the world at which our requirements may be fulfilled. Once products are manufactured, they are warehoused in Migdal-Haemek, Israel. Certain of our products are subsequently sent to our headquarters in San Jose, California or our facility in Fort Lauderdale, Florida where we perform final assembly and quality-control testing to ensure reliability. We believe that outsourcing our manufacturing enables us to conserve working capital, better adjust manufacturing volumes to meet changes in demand and more quickly deliver products.

We purchase component parts from outside vendors. Although there are multiple sources for most of these component parts, some components are purchased from a single source provider. We regularly monitor the supply of component parts and the availability of alternative sources. We do not have long-term supply contracts with any of our component suppliers.

Intellectual Property

Our business is dependent on the development, maintenance and protection of our intellectual property. We rely on the full spectrum of intellectual property rights afforded by patent, copyright, trademark and trade secret laws, as well as confidentiality procedures and licensing arrangements, to establish and protect our rights to our technology and other intellectual property.

We believe that our technological position depends primarily on the experience, technical competence and creative ability of our engineering and technology staff. We review our technological developments with our technology staff and business units to identify the features of our core technology that provide us with a technological or commercial advantage, and we file patent applications as necessary to protect these features in the United States and internationally in select countries. Our company policies require our employees to assign their intellectual property rights to us and to treat all technology as our confidential information. We have over eight patents in the United States and continue to prosecute patent applications pending in selected countries.

In addition to developing technology, we evaluate the acquisition of intellectual property from others in order to identify technology that provides us with a technological or commercial advantage.

We are the owner of numerous trademarks and service marks and have applied for registration of our trademarks and service marks in the United States and abroad to establish and protect our brand names as part of our intellectual property strategy, including the registered mark Veraz.

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We endeavor to protect our internally developed systems and maintain our trademarks and service marks. Typically, we enter into confidentiality or license agreements with our employees, consultants, customers and vendors in an effort to control access to and distribution of our technology, software, documentation and other information.

Employees

At June 30, 2006, we had 478 employees and full time consultants, including 134 employees and full time consultants in sales and marketing, 294 employees and full time consultants in research and development and engineering and 50 employees and full time consultants in general and administrative functions. None of our employees are represented by labor unions.

We are subject to labor laws and regulations in Israel and in other countries where our employees are located. Although our Israeli employees are not parties to any collective bargaining agreement, we are subject to certain provisions of collective bargaining agreements among the Government of Israel, the General Federation of Labor in Israel and the Coordinating Bureau of Economic Organizations, including the Industrialists’ Association, that are applicable to our Israeli employees by virtue of expansion orders of the Israeli Ministry of Labor and Welfare. Israeli labor laws are applicable to all of our employees in Israel. Those provisions and laws principally concern the length of the work day, minimum daily wages for workers, procedures for dismissing employees, determination of severance pay and other conditions of employment.

We contribute funds on behalf of our employees to an individual insurance policy known as Managers’ Insurance. This policy provides a combination of savings plan, insurance and severance pay benefits to the insured employee. It provides for payments to the employee upon retirement or death and secures a substantial portion of the severance pay, if any, to which the employee is legally entitled upon termination of employment. Each participating employee contributes an amount equal to 5% of such employee’s base salary, and we contribute 14.03% of the employee’s base salary. Employees who are not insured in this way are entitled to a pension fund to which the employee contributes an amount ranging from 5.5% to 6.5% of such employee’s base salary, and we contribute an amount ranging from 14.33% to 15.33% of the employee’s base salary. We also provide our employees with an Education Fund, to which each participating employee contributes an amount equal to 2.5% of the employee’s base salary, and we contribute an amount of up to 7.5% of the employee’s base salary. We also provide our employees with additional health insurance coverage for instances of severe illnesses.

Like all Israeli employers we are required to provide salary increases as partial compensation for increases in the Israeli consumer price index. The specific formula for such increases varies according to agreements reached among the Government of Israel, the Manufacturers’ Association and the General Federation of Labor in Israel. Employees and employers also are required to pay predetermined sums, which include a contribution to provide a range of social security benefits.

We have never experienced a work stoppage and believe our relations with our employees are good.

Facilities

We lease a 24,747 square-foot facility for our corporate headquarters in San Jose, California. We also lease sales office facilities in each of Dallas, Texas; Herndon, Virginia; the United Kingdom and Singapore. In addition, we lease approximately 46,400 square feet in Petach Tikva, Israel for sales, development, support and general and administrative functions and 19,026 square feet in Pune, India for sales and development. We do not own any real estate. We believe that our properties, taken as a whole, are in good operating condition and are suitable for our business operations. As we expand our business into new markets, we expect to lease additional facilities.

Legal Proceedings

We are not a party to any material legal proceeding. From time to time, we may be subject to various claims and legal actions arising in the ordinary course of business.

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MANAGEMENT

Directors and Executive Officers

The following table sets forth certain information with respect to our executive officers and directors and their respective ages as of July 31, 2006:

Name	Age		Position(s)
Douglas A. Sabella		48		President, Chief Executive Officer and Director
Albert J. Wood		49		Chief Financial Officer
Amit Chawla		44		Executive Vice President of Global Marketing
Israel Zohar		54		Vice President, Global Operations
Giora Bitan(2)		52		Director
Bob L. Corey(1)(4)		55		Director
Promod Haque(1)(2)(3)		58		Chairman of the Board of Directors
Morgan Jones(3)(4)		37		Director
Pascal Levensohn(1) (2)(4)		45		Director
Dror Nahumi(3)		43		Director

(1)	Member of the Audit Committee
(2)	Member of the Compensation Committee
(3)	Member of the Nominating Committee
(4)	Member of the Governance Committee

Douglas A. Sabella has served as our President, Chief Executive Officer and a member of our board of directors since December 2004. From July 2003 to May 2004, Mr. Sabella was Chief Operating Officer of Terayon, Inc., a network equipment company. From March 2001 to April 2003, Mr. Sabella was President and Chief Operating Officer and a member of the board of directors for Tumbleweed Communications Corp., a provider of e-mail security software. From February 2000 to March 2001, Mr. Sabella was the President and Chief Executive Officer of Bidcom, Inc., a provider of collaboration software. From 1985 to February 2000, Mr. Sabella held various senior management positions at Lucent Technologies, a provider of telecommunications equipment.

Albert J. Wood has served as our Chief Financial Officer since April 2005. From October 2002 to November 2004, Mr. Wood served as Chief Financial Officer of PalmSource, a provider of operating system software for handheld devices and from December 2002 to November 2004 served as their Treasurer. From March 2001 to October 2002, Mr. Wood was Chief Financial Officer of Insignia Solutions, Inc., a provider of Java virtual machine software. From June 1999 to March 2001, Mr. Wood was the Chief Financial Officer of Cohera Solutions, a catalog management and content integration software provider acquired by PeopleSoft, Inc. in August 2001.

Amit Chawla serves as our Executive Vice President of Global Marketing and was a member of our board of directors from January 2003 until he resigned in June 2006. In November 2001, Mr. Chawla founded and served as the CEO of Softswitch Enterprises, Inc. and NexVerse Networks, Inc., our predecessor companies. From April 2001 to September 2001, Mr. Chawla served as Vice President of Marketing of ipVerse, Inc., a provider of softswitch solutions. From 1987 to December 2000, Mr. Chawla held various positions in executive management, marketing, product line management, and design and architectural development in the telecommunications industry at Nortel Networks, most recently as Vice President of Product Line Management.

Israel Zohar has served as our Vice President, Global Operations of Veraz Networks, Inc. since December 2002. In 2001 he served as head of the VoIP business unit in ECI’s NGTS subsidiary. At the end of 2001 he was nominated to be the COO of the NGTS.

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Giora Bitan has been a member of our board of directors since December 2002. Mr. Bitan has served as Executive Vice President and Chief Financial Officer for ECI Telecom Ltd. since August 2002. From October 1997 to March 2002, Mr. Bitan was a General Partner at Giza Venture Capital, an Israeli venture capital firm, where he focused on investments in the areas of communications and software and served on the boards of numerous portfolio companies.

Bob L. Corey has been a member of our board of directors since May 2006. Mr. Corey has been an independent management consultant since January 2006. From May 2003 to January 2006, he served as Executive Vice President and Chief Financial Officer of Thor Technologies, Inc., a provider of enterprise provisioning software that was acquired by Oracle Corporation in November 2005. From May 2000 to August 2002, prior to joining Thor Technologies, Inc., Mr. Corey served as Executive Vice President and Chief Financial Officer of Documentum, Inc., a provider of enterprise content management software. From May 1998 to April 2000, Mr. Corey served as Senior Vice President of Finance and Administration and Chief Financial Officer for Forte Software, Inc., a provider of software development tools and services, and in February 1999, Mr. Corey was elected to its board of directors. Mr. Corey also serves on the board of directors of Extreme Networks, Inc., a provider of network infrastructure solutions and services, Interwoven, Inc., a provider of enterprise content management solutions and AmberPoint, Inc., a provider of service oriented architecture management software.

Promod Haque has served as the chairman of our board of directors since July 2001. Mr. Haque has been a Managing Partner of Norwest Venture Partners since 1990, focusing on investments in semiconductor and components, systems software and services. Mr. Haque also serves on the board of directors of AmberPoint, Inc., a provider of service oriented architecture visibility, management and security software, Cast Iron Systems, Inc., a provider of integration appliances, Open-Silicon, Inc., a provider of ASIC implementation solutions and services, FireEye, Inc., a provider of network access control solutions and services, Persistent Systems, a provider of outsourced software product development, Migliore Web Community Private Ltd, an online interactive website for Indian communities worldwide, Sonoa Systems, Inc., a provider of IT infrastructure solutions and services, Test Quest, Inc., a provider of automated functional test tools and solutions, Veveo.TV, Inc., a provider of content solutions and services to carriers and service providers, Virtela Communications, Inc., a provider of virtual network operating company, Yipes Enterprise Services, Inc., a provider of managed ethernet solutions and services, and Yatra, an Indian online travel company.

Morgan Jones has been a member of our board of directors since December 2002. Mr. Jones has been a Managing Partner of Battery Ventures since 1996. Mr. Jones also serves on the board of directors of Bright View Technologies, a provider of optical films for displays; IP Unity, a provider of enhanced services platforms for TDM and IP networks; Luminus Devices, Inc., a provider of LED light source for rear projection televisions; Nova Analytics Corporation, a provider of analytical instruments; Optium Corporation, a provider of modules for optical systems; and Quantum Leap Packaging, a provider of packaging solutions.

Pascal Levensohn has been a member of our board of directors since November 2001. Mr. Levensohn is the Founder and Managing Director of San Francisco-based Levensohn Venture Partners LLC, which he founded in 1996 and focuses on investing in early stage software, semiconductor and communications companies. Mr. Levensohn also serves as the chairman of the board of directors of Consolidated IP Holdings, Inc., which holds rights to various intellectual property portfolios in the telecommunications industry. He is also a director of Ubicom, Inc., a microprocessor company that develops processors specifically architected to deliver multimedia content for the digital home and Reconnex, Inc., a provider of security appliance solutions for electronic risk discovery.

Dror Nahumi has been a member of our board of directors since November 2004. Mr. Nahumi has been with ECI Telecom Ltd. since June 2004. He was nominated to the position of Executive Vice President and Chief Strategy Officer of ECI Telecom Ltd. on January 2006. From May 2002 to February 2004, Mr. Nahumi was the CEO of Axonlink, an optical components company. During the period of July 1997 to January 2001, Mr. Nahumi served in the positions of General Manager, and later as President of

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I-Link. Mr. Nahumi joined I-Link after the acquisition of MiBridge, a VoIP software company that he founded and managed. Before founding MiBridge, Mr. Nahumi was a research engineer at AT&T Bell Labs.

Our executive officers are elected by and serve at the direction of our board of directors. There are no family relationships between any of our directors or executive officers.

Board Composition

We have an authorized board of directors comprised of seven members. Upon the completion of this offering, we will have seven directors, consisting of Messrs. Bitan, Corey, Haque, Jones, Levensohn, Nahumi and Sabella. Our amended and restated certificate of incorporation provides that the authorized number of directors may be changed by resolution of the board of directors. We believe we are compliant with the independence criteria for boards of directors under applicable law and regulations, and we will continue to evaluate our compliance with these criteria over time. To the extent we determine necessary, we will seek to appoint or nominate for election by the stockholders additional independent directors. In accordance with the terms of our amended and restated certificate of incorporation and bylaws, each director is elected at each annual meeting to serve until the next annual meeting and until his or her successor is elected and qualified.

Our directors may be removed with or without cause by the affirmative vote of the holders of a majority of our voting stock. Upon completion of this offering, our board of directors will be divided into three classes. One class will be elected at each annual meeting of stockholders for a term of three years. The Class I directors, whose term will expire at the 2007 annual meeting of stockholders, are Messrs. Jones and Nahumi. The Class II directors, whose term will expire at the 2008 annual meeting of stockholders, are Messrs. Bitan, Levensohn and Sabella. The Class III directors, whose term will expire at the 2009 annual meeting of stockholders are Messrs. Corey and Haque. At each annual meeting of stockholders, the successors to directors whose terms will then expire will be elected to serve from the time of election and qualification until the third annual meeting following election or special meeting held in lieu thereof and until their successors are duly elected and qualified.

Board Committees

The board of directors has established an audit committee, compensation committee, nominating committee and corporate governance committee. In addition, from time to time, special committees may be established under the direction of the board of directors when deemed necessary to address specific issues. The composition and primary responsibilities of each committee are described below.

Audit Committee

The audit committee consists of Messrs. Corey, Haque and Levensohn. Mr. Corey is the chairman of the audit committee. Our board of directors has determined that all members of our audit committee satisfy the independence and financial literacy requirements of the Nasdaq Global Market. Our board of directors has also determined that Mr. Corey is an audit committee “financial expert” as defined by the rules and regulations of the SEC and any similar requirements of the NASDAQ Stock Market. The functions of the audit committee include:

•  meeting with our management periodically to consider the adequacy of our internal controls and the objectivity of our financial reporting;

•  appointing the independent auditors, determining the compensation of the independent auditors and pre-approving the engagement of the independent auditors for audit or non-audit services;

•  having oversight of our independent auditors, including reviewing the independence and quality control procedures and the experience and qualifications of our independent auditors’ senior personnel that are providing us audit services;

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•  meeting with the independent auditors and reviewing the scope and significant findings of the audits performed by them, and meeting with management and internal financial personnel regarding these matters;

•  reviewing our financing plans, the adequacy and sufficiency of our financial and accounting controls, practices and procedures, the activities and recommendations of our auditors and our reporting policies and practices, and reporting recommendations to our full board of directors for approval;

•  establishing procedures for the receipt, retention and treatment of complaints regarding internal accounting controls or auditing matters and the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters; and

•  following the completion of this offering, preparing the reports required by the rules of the SEC to be included in our annual proxy statement.

Each of our independent auditors and our financial personnel will have regular private meetings with the audit committee and will have unrestricted access to the audit committee.

Compensation Committee

The compensation committee consists of Messrs. Bitan, Haque and Levensohn. Mr. Haque is the chairman of the compensation committee. The functions of the compensation committee include:

•  establishing overall employee compensation policies and recommending to our board major compensation programs;

•  reviewing and approving the compensation of our corporate officers and directors, including salary and bonus awards;

•  administering our various employee benefit, pension and equity incentive programs;

•  reviewing executive officer and director indemnification and insurance matters; and

•  following the completion of this offering, preparing an annual report on executive compensation for inclusion in our proxy statement.

Mr. Bitan does not meet the independence requirements of the Nasdaq Global Market but will serve on the compensation committee pursuant to the phase-in exception provided by such rules. We will seek to find a suitable replacement for Mr. Bitan on the compensation committee following the offering during the period permitted by the rules.

Nominating Committee

The nominating committee consists of Messrs. Haque, Jones and Nahumi. Mr. Haque is the chairman of the nominating committee. The functions of our nominating committee include:

•  reviewing and recommending nominees for election as directors;

•  assessing the performance of the board of directors; and

•  developing guidelines for the composition of the board of directors.

Mr. Nahumi does not meet the independence requirements of the Nasdaq Global Market rules but will serve on the nominating committee pursuant to the phase-in exception provided by such rules. We will seek to find a suitable replacement for Mr. Nahumi on the nominating committee following the offering during the period permitted by the rules.

Governance Committee

The governance committee consists of Messrs. Corey, Jones and Levensohn. Mr. Levensohn is the chairman of the governance committee. The functions of our governance committee include overseeing all

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aspects of our corporate governance on behalf of the Board and making recommendations to the Board regarding corporate governance issues.

Compensation Committee Interlocks and Insider Participation

Prior to establishing the compensation committee, our board of directors as a whole made decisions relating to compensation of our executive officers. No current member of our compensation committee has been an officer or employee of ours. No member of our board of directors or our compensation committee serves as a member of the board of directors or compensation committee of any other entity that has one or more executive officers serving as a member of our board of directors or compensation committee.

Code of Business Conduct

Our board of directors has adopted a code of business conduct which establishes the standards of ethical conduct applicable to all directors, officers and employees of our company. The code addresses, among other things, conflicts of interest, compliance with disclosure controls and procedures and internal control over financial reporting, corporate opportunities and confidentiality requirements. The audit committee is responsible for applying and interpreting our code of business conduct in situations where questions are presented to it.

Director compensation

We currently provide cash compensation at a rate of $10,000 per year to each non-employee director for his services as a director. We also pay the chairperson of the audit committee a fee of $35,000 per year, and each of the chairpersons of the compensation, nominating and corporate governance committees a fee of $5,000 per year. We also pay each non-chair committee member a fee of $5,000 per year. In addition, we also reimburse our non-employee directors for all reasonable expenses incurred in attending meetings of the board of directors and its committees.

We have in the past granted directors options to purchase our common stock pursuant to the terms of our 2001 Equity Incentive Plan and/or our 2003 Israeli Share Option Plan. In June 2006, we adopted our 2006 Equity Incentive Plan which provides for the automatic grant of options to purchase shares of common stock to our non-employee directors who are not our employees or consultants or who cannot exercise voting power over 10% or more of our common stock. Under the applicable provisions of the 2006 Equity Incentive Plan any new non-employee director will receive an initial option to purchase 30,000 shares of common stock and each non-employee director, commencing with our annual meeting of stockholders in 2007, will receive an annual option grant to purchase 10,000 shares of our common stock. Annual grants vest in equal monthly installments over 48 months. Please refer to the section entitled “Equity Compensation and Defined Contribution Plans” for a more detailed explanation of the terms of these stock options.

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Executive Compensation

The following table shows the compensation awarded or paid to, or earned by, our Chief Executive Office and our three other executive officers serving in such capacity at December 31, 2005, whose total annual salary and bonus exceeded $100,000 for the year ended December 31, 2005. We refer to these employees collectively as our “named executive officers.”

Summary Compensation Table

					Long-Term
					Compensation
					Awards
	Annual				Securities
	Compensation				Underlying		All Other
Name and Position	Salary ($)		Bonus ($)		Options (#)		Compensation ($)
Douglas A. Sabella	$	250,000.00	$	98,000.00		—	$
President and Chief Executive Officer
Albert J. Wood	$	225,000.00	$	96,740.00		—		—
Chief Financial Officer
Amit Chawla	$	195,000.00	$	52,998.00		—		—
Executive Vice President of Global Marketing
Israel Zohar	$	143,000.00	$	42,043.00		—		—
Vice President, Global Operations

Stock Option Grants in Last Fiscal Year

We have granted and will continue to grant options to our executive officers and employees under our equity compensation plans. The percentage of total options granted to employees in 2005 is based on options to purchase a total of 5,949,488 shares of our common stock at exercise prices ranging from $0.25 per share to $0.81 per share, for a weighted average exercise price of $0.59 per share.

Generally, 25% of the shares subject to options initially granted to our employees vests one year from the date of hire and 1/48 of the shares subject to the option vests on the corresponding day of each month thereafter, such that the option can be fully vested four years from the date of hire. Options generally expire ten years from the date of grant but may terminate before their expiration dates if the optionee’s status as our employee, director or consultant is terminated.

The exercise price per share of each option granted is equal to, or greater than, the fair market value of the underlying common stock as determined by our board of directors on the date of the grant.

The following tables show information regarding options granted to our named executive officers for the fiscal year ended December 31, 2005:

Option Grants in Last Fiscal Year

	Individual Grants
			Percentage of						Potential Realizable
			Total Options		Exercise				Value at Assumed
	Number of		Granted to		or Base				Annual Rate of
	Securities Underlying		Employees		Price per		Expiration		Stock Price Appreciation for Option Term(1)
Name	Options Granted		in 2005		Share		Date		5%		10%
Douglas A. Sabella		3,100,000			$	0.52		01/09/2015
Albert J. Wood		600,000			$	0.57		04/19/2015
Amit Chawla		—		—		—		—		—		—
Israel Zohar		—		—		—		—		—		—

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(1) Potential realizable values set forth in this column have been calculated based on the term of the option at the time of grant, which is 10 years. The values are based on assumed rates of stock price appreciation of 5% and 10% compounded annually from the date of grant until their expiration date, minus the applicable exercise price, assuming with respect to option grants made immediately prior to our initial public offering of our common stock a value equal to $      per share, the price per share in our initial public offering. These numbers are calculated based on the requirements of the Securities and Exchange Commission and do not reflect our estimate of future stock price growth. Actual gains, if any, on stock option exercises will depend on the future performance of the common stock and the date on which the options are exercised.

Aggregate Option Exercises in Last Fiscal Year and Fiscal Year End Option Values

The following table sets forth the number of shares of our common stock exercised by our named executive officers in 2005 and the number of shares of our common stock subject to exercisable and unexercisable stock options held by each of our named executive officers as of December 31, 2005. Because there was not a public market for our common stock as of December 31, 2005, amounts described in the following table under the headings “Value Realized” and “Value of Unexercised In-the-Money Options at Fiscal Year End” are determined by multiplying the number of shares issued or issuable upon exercise of the option by the difference between the assumed initial public offering price of $      per share (the midpoint of the estimated price range shown on the cover page of this prospectus), and the per share option exercise price.

Value of Unexercised

Shares

Number of Unexercised

In-the-Money Options

Acquired on

Value

Options at Fiscal Year-End

at Fiscal Year-End

Name

Exercise

Realized

Exercisable

Unexercisable

Exercisable

Unexercisable

Douglas A. Sabella

—

—

—

—

—

—

Albert J. Wood

—

—

—

—

—

—

Amit Chawla

—

—

—

—

—

—

Israel Zohar

—

—

—

—

—

—

Employment Agreements

Douglas A. Sabella

We entered into an offer letter agreement with Mr. Sabella on November 17, 2004, which was subsequently amended on April 21, 2006. The offer letter, as amended, provides for an annual base salary of $280,000, as well as other customary benefits and terms. In addition, Mr. Sabella is entitled to receive an annual bonus of up to 40% of his annual salary, if he meets targets mutually agreed upon by him and our board of directors. Pursuant to the terms of the offer letter agreement, Mr. Sabella received a stock option to purchase 3,100,000 shares of our common stock at an exercise price of $0.52 per share. The option vested as to 25% of the shares underlying the option on December 1, 2005 and then vests in equal monthly installments over the next three years thereafter.

In the event that we terminate Mr. Sabella’s employment without cause or if he terminates his employment for good reason, Mr. Sabella is entitled to receive severance equal to twelve months of salary and the payment of all bonuses that are due at the time of such termination. In the event that we terminate Mr. Sabella’s employment without cause or if he terminates his employment for good reason, and either such event occurs within twelve months after a change of control, the vesting of the stock option mentioned above that was granted to Mr. Sabella shall be accelerated in full.

Under his offer letter, Mr. Sabella is subject to customary nondisclosure, confidentiality and non-competition covenants and a nonsolicitation covenant that remains in effect during the term of employment and for one year following termination of employment.

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Albert J. Wood

We entered into an offer letter agreement with Mr. Wood on April 13, 2005 which was subsequently amended on April 21, 2006. The offer letter, as amended, provides for an annual base salary of $225,000, as well as other customary benefits and terms. In addition, Mr. Wood is entitled to receive an annual bonus of up to 30% of his annual salary, if he meets targets determined by our board of directors. Pursuant to the terms of the offer letter agreement, Mr. Wood received a stock option to purchase 600,000 shares of our common stock at an exercise price of $0.57 per share. The option vested as to 25% of the shares underlying the option on April 20, 2006 and then vests in equal monthly installments over the next three years thereafter.

In the event that we terminate Mr. Wood’s employment without cause or if he terminates his employment for good reason, Mr. Wood is entitled to receive severance equal to twelve months of salary. In the event that we terminate Mr. Wood’s employment without cause or if he terminates his employment for good reason, and either such event occurs within twelve months after a change of control, the vesting of the stock option mentioned above that was granted to Mr. Wood shall accelerate in full and Mr. Wood shall receive any unpaid performance bonus for the prior calendar year.

Under his offer letter, Mr. Wood is subject to customary nondisclosure, confidentiality and non-competition covenants and a nonsolicitation covenant that remains in effect during the term of employment and for one year following termination of employment.

Amit Chawla

We entered into an employment agreement with Mr. Chawla on November 20, 2001. The employment agreement, as amended, provides for an annual base salary of $195,000, as well as other customary benefits and terms. In addition, Mr. Chawla is entitled to receive an annual bonus of up to 30% of his annual salary, if he meets targets mutually agreed upon by him, our Chief Executive Officer and our board of directors.

Pursuant to the terms of the employment agreement, Mr. Chawla purchased 174,656 shares of our common stock at a purchase price of $0.005 per share. In addition, Mr. Chawla has received a stock option to purchase 15,716 shares of our common stock at an exercise price of $0.15 per share, all of which are vested. Mr. Chawla also received a stock option to purchase 509,000 shares of our common stock at an exercise price of $0.15 per share. The option vested as to 25% of the shares underlying the option on October 1, 2003 and then vests in equal monthly installments over the next three years thereafter. Further, Mr. Chawla received a stock option to purchase 175,000 shares of our common stock at an exercise price of $0.90 per share. The option vests in equal monthly installments over the next four years commencing on May 15, 2007.

In the event that we terminate Mr. Chawla’s employment without cause or if he terminates his employment for good reason, provided that such a voluntary termination occurs within 30 days after the event which forms the basis for termination for good reason, Mr. Chawla is entitled to receive severance equal to continued payments of six months of salary and continued medical benefits for six months. In addition, the vesting of our unvested common stock, options to purchase our common stock and other stock awards granted to Mr. Chawla shall accelerate with respect to the number of shares that would otherwise vest if Mr. Chawla was to remain employed by us over the six month period following the date of such termination.

In the event that we terminate Mr. Chawla’s employment without cause or if he terminates his employment for good reason, and either such event occurs within eighteen months after a change of control, Mr. Chawla is entitled to severance equal to continued payments of six months of base salary and continued medical benefits for six months. In addition, the vesting of all of our unvested stock, stock options and other stock awards held by Mr. Chawla shall accelerate in full. However, if Mr. Chawla’s termination is due to willful misconduct or failure to substantially perform assigned duties after receiving written demands, Mr. Chawla is entitled to acceleration of the vesting of only 50% of the then unvested shares.

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Under his offer letter, Mr. Chawla is subject to customary nondisclosure, confidentiality and non-competition covenants and a nonsolicitation covenant that remains in effect during the term of employment and for one year following termination of employment.

Israel Zohar

We entered into an employment agreement with Mr. Zohar on January 1, 2003. The employment agreement, as amended, provides for an annual base salary of $143,000, as well as other customary Israeli benefits and terms. In addition, Mr. Zohar is entitled to receive an annual bonus of up to 30% of his gross salary, if he meets targets established by our board of directors.

Pursuant to the terms of the employment agreement, Mr. Zohar received a stock option to purchase 99,612 shares of our common stock at an exercise price of $0.15 per share, all of which are vested. In March 2003, Mr. Zohar received an additional option to purchase 250,076 shares of our common stock at an exercise price of $0.15 per share. The option vests in equal monthly installments over four years. In addition, in May 2006, Mr. Zohar received a stock option to purchase 150,000 shares of our common stock at an exercise price of $0.90 per share. The option vests in equal monthly installments over the next four years commencing on May 15, 2007.

A termination of Mr. Zohar’s employment by either side requires a 90-day prior written notice to the other side, unless we terminate such an employment for cause.

In the event that we terminate Mr. Zohar’s employment without cause or if he terminates his employment for good reason, and either such event occurs within eighteen months after a change of control, Mr. Zohar is entitled to a severance equal to six months of base salary and continued medical benefits for six months. In addition, the vesting of all of our unvested stock, stock options and other stock awards held by Mr. Zohar shall accelerate in full, provided that in no event will such acceleration result in Mr. Zohar having unvested shares in an amount less than the amount that would vest over the twelve month period following such termination.

Under his employment agreement, Mr. Zohar is subject to customary nondisclosure and confidentiality covenants and non-competition and nonsolicitation covenants that remain in effect during the term of employment and for twelve months following termination of employment.

Employee Compensation and Defined Contribution Plans

2001 Equity Incentive Plan

Our board of directors adopted, and our stockholders approved, the 2001 Equity Incentive Plan, or 2001 plan, in November 2001. An aggregate of 20,374,972 shares of common stock is reserved for issuance under the 2001 plan. The share reserve is reduced by the number of shares issued from or subject to outstanding options granted under our 2003 Israeli Share Option Plan (see below). The 2001 plan provides for the grant of incentive stock options, nonstatutory stock options, stock bonuses, and restricted stock awards. As of July 31, 2006, options to purchase 15,489,187 shares of common stock at a weighted average exercise price per share of $0.39 remained outstanding under the 2001 plan. No stock bonuses or restricted stock awards have been granted under the 2001 plan. As of July 31, 2006, 1,403,983 shares of common stock remained available for future issuance.

Our board of directors or its designee has the authority to construe and interpret the terms of the 2001 plan and the awards granted under it. Our board of directors or its designee may reduce the exercise price of any option to the then current fair market value of our common stock or cancel options and grant substitute options. Upon the signing of the underwriting agreement for this offering, the 2001 plan will terminate so that no further awards may be granted under the 2001 plan. Although the 2001 plan will terminate, all outstanding options will continue to be governed by their existing terms.

Stock Options.  The 2001 plan provides for the grant of incentive stock options under the federal tax laws or nonstatutory stock options. Incentive stock options may be granted to employees, including officers,

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and nonstatutory stock options may be granted to employees, including officers, non-employee directors, and consultants. The exercise price of incentive stock options may not be less than 100% of the fair market value of our common stock on the date of grant and in some cases, 110% of the fair market value of our common stock on the date of grant. The exercise price of nonstatutory stock options may not be less than 85% of the fair market value of our common stock on the date of grant. Shares subject to options under the 2001 plan generally vest in a series of installments over an optionee’s period of service.

In general, the term of options granted under the 2001 plan may not exceed ten years. Unless the terms of an optionee’s stock option agreement provide otherwise, if an optionee’s service relationship with us, or any of our affiliates, ceases for any reason other than disability or death, the optionee may exercise the vested portion of any options for three months after the date of such termination. If an optionee’s service relationship with us, or any of our affiliates, terminates by reason of disability, the optionee or a personal representative generally may exercise the vested portion of any options for 12 months after the date of such termination. If an optionee’s service relationship with us, or any of our affiliates, terminates by reason of death or the optionee dies within three months after his or her service relationship with us terminates, a personal representative generally may exercise the vested portion of any options for 18 months after the date of such termination. In no event, however, may an option be exercised beyond the expiration of its term.

Corporate Transactions.  In the event of a significant corporate transaction, the surviving or acquiring corporation may assume or substitute substantially similar stock awards for the outstanding stock awards granted under the 2001 plan. If the surviving or acquiring corporation elects not to assume or substitute for outstanding stock awards granted under the 2001 plan, then stock awards held by individuals whose service has not terminated prior to the corporate transaction will be accelerated in full. Upon consummation of the corporate transaction, all outstanding stock awards will terminate to the extent not exercised or assumed by the surviving or acquiring corporation.

2003 Israeli Share Option Plan

Our board of directors adopted the 2003 Israeli Share Option Plan, or 2003 plan, in January 2003, which is a sub-plan under the 2001 plan. The 2003 plan is intended to provide for the grant of stock options that qualify for favorable tax treatment for Israeli residents under Section 102 or Section 3(9) of the Israeli Income Tax Ordinance (New Version) 1961, or the “ordinance.” The 2003 plan shares a common share reserve with the 2001 plan. Any shares issued from or subject to outstanding options granted under the 2003 plan reduce the number of shares available for issuance under the 2001 plan. As of July 31, 2006, options to purchase 6,184,549 shares of common stock at a weighted average exercise price per share of $0.31 remained outstanding under the 2003 plan. As of July 31, 2006, 1,403,983 shares of common stock remained available for future issuance under the 2003 plan and the 2001 plan. Our board of directors or its designee has the authority to construe and interpret the terms of the 2003 plan and the awards granted under it.

Stock Options.  The 2003 plan provides for the grant of options to employees, including our officers, directors, consultants, and contractors. All grants of options to our employees, directors, and office holders (other than controlling shareholders) are made pursuant to the provisions of Section 102 of the ordinance. All grants of options to our consultants, contractors, and controlling shareholders are made pursuant to the provisions of Section 3(9) of the ordinance. In the event options are granted to a trustee designated by our board of directors (and with respect to Section 102 options, approved by the Israeli Commissioner of Income Tax), the trustee will hold the options and shares issued upon the exercise thereof in trust for the benefit of the grantee for a requisite period to qualify for favorable Israeli tax treatment for the grantee or until the grantee requests the release of vested options or shares issued upon the exercise thereof.

The exercise price of options under the 2003 plan may not be less than the par value of our common stock. Shares subject to options under the 2003 plan generally vest over four years of continuous service with us.

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In general, the term of options granted under the 2003 plan may not exceed ten years. Unless the terms of an optionee’s stock option agreement provide otherwise, if an optionee’s service relationship with us, or any of our affiliates, ceases for any reason other than disability or death, the optionee may exercise the vested portion of any options for three months after the date of such termination. If an optionee’s service relationship with us, or any of our affiliates, terminates by reason of disability, the optionee or a personal representative generally may exercise the vested portion of any options for 12 months after the date of such termination. If an optionee’s service relationship with us, or any of our affiliates, terminates by reason of death, or the optionee dies within three months after his or her service relationship with us terminates, a personal representative generally may exercise the vested portion of any options for 18 months after the date of such termination. In no event, however, may an option be exercised beyond the expiration of its term.

In the event of a significant corporate transaction, the surviving or acquiring corporation may assume or substitute substantially similar stock options for the outstanding stock options granted under the 2003 plan. If the surviving or acquiring corporation elects not to assume or substitute for outstanding stock options granted under the 2003 plan, then stock options held by individuals whose service has not terminated prior to the corporate transaction will be accelerated in full. Upon consummation of the corporate transaction, all outstanding stock options will terminate to the extent not exercised or assumed by the surviving or acquiring corporation.

2006 Equity Incentive Plan

Our board of directors adopted the 2006 Equity Incentive Plan, or 2006 incentive plan, in June 2006 and our stockholders approved the 2006 incentive plan in June 2006. The 2006 incentive plan will become effective immediately upon the signing of the underwriting agreement for this offering. The 2006 incentive plan will terminate on June 28, 2016, unless sooner terminated by our board of directors.

Stock Awards.  The 2006 incentive plan provides for the grant of incentive stock options, nonstatutory stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights, performance stock awards and other forms of equity compensation (collectively, “stock awards”), which may be granted to employees, including officers, non-employee directors, and consultants. However, only employees are eligible to receive incentive stock options and only non-employee directors are eligible to receive nonstatutory stock options under the non-discretionary grant program (see below).

Share Reserve.  Following this offering, the aggregate number of shares of common stock that may be issued initially pursuant to stock awards under the 2006 incentive plan is           shares. The number of shares of common stock reserved for issuance will increase from time to time by the number of shares issuable pursuant to the 2001 plan as of the effective date of this offering and that, but for the termination of the 2001 plan, would have reverted to the share reserve under that plan and automatically increase on each January 1st, from January 1, 2007 through January 1, 2016, by the lesser of (a) 3% of the total number of shares of common stock outstanding on December 31st of the preceding calendar year, or (b) a number of shares determined by our board of directors, but not in excess of 6,000,000 shares. The maximum number of shares that may be issued pursuant to the exercise of incentive stock options under the 2006 incentive plan is equal to the total share reserve, as increased from time to time pursuant to an annual increase and shares subject to options granted pursuant to the 2001 plan or 2003 plan that expire without being exercised in full.

No person may be granted awards covering more than 3,000,000 shares of common stock under the 2006 incentive plan during any calendar year pursuant to an appreciation-only stock award. An appreciation-only stock award is a stock award whose value is determined by reference to an increase over an exercise or strike price of at least 100% of the fair market value of our common stock on the date of grant. A stock option with an exercise price equal to the value of the stock on the date of grant is an example of an appreciation-only award. Such limitation is designed to help assure that any deductions to which we would otherwise be entitled upon the exercise of an appreciation-only stock award or upon the subsequent sale of shares purchased under such an award, will not be subject to the $1 million limitation on the income

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tax deductibility of compensation paid per covered executive officer imposed under Section 162(m) of the Internal Revenue Code.

The following types of shares issued under the 2006 incentive plan may again become available for the grant of new awards under the 2006 incentive plan: (a) stock that is forfeited to or repurchased by us prior to becoming fully vested; (b) shares withheld to satisfy income and employment withholding taxes; (c) shares used to pay the exercise price of an option in a net exercise arrangement; (d) shares tendered to us to pay the exercise price of an option; and (e) shares that are cancelled pursuant to an exchange or repricing program. In addition, if a stock award granted under the 2006 incentive plan expires or otherwise terminates without being exercised in full, an award is settled in cash or an appreciation distribution in respect of a stock appreciation right is paid in shares, the shares of common stock not issued or acquired pursuant to the award again become available for subsequent issuance under the 2006 incentive plan. Shares issued under the 2006 incentive plan may be previously unissued shares or reacquired shares bought on the market or otherwise. As of the date hereof, no shares of common stock have been issued under the 2006 incentive plan.

Administration.  Our board of directors has delegated its authority to administer the 2006 incentive plan (except the non-discretionary grant program) to our compensation committee. Subject to the terms of the 2006 incentive plan, our board of directors or an authorized committee, referred to as the plan administrator, determines recipients, dates of grant, the numbers and types of equity awards to be granted, and the terms and conditions of the equity awards, including the period of their exercisability and vesting. Subject to the limitations set forth below, the plan administrator will also determine the exercise price of options granted, the consideration to be paid for restricted stock awards, and the strike price of stock appreciation rights.

The plan administrator has the authority to

•  reduce the exercise price of any outstanding option;

•  cancel any outstanding option and to grant in exchange one or more of the following:

•  new options covering the same or a different number of shares of common stock,

•  new stock awards,

•  cash, and/or

•  other valuable consideration; or

•  engage in any action that is treated as a repricing under generally accepted accounting principles.

Stock Options.  Incentive and nonstatutory stock options are granted pursuant to incentive and nonstatutory stock option agreements adopted by the plan administrator. The plan administrator determines the exercise price for a stock option, within the terms and conditions of the 2006 incentive plan and applicable law, provided that the exercise price of a stock option cannot be less than 100% of the fair market value of our common stock on the date of grant. Options granted under the 2006 incentive plan vest at the rate specified by the plan administrator.

Generally, the plan administrator determines the term of stock options granted under the 2006 incentive plan, up to a maximum of ten years (except in the case of certain incentive stock options, as described below). Unless the terms of an optionee’s stock option agreement provide otherwise, if an optionee’s relationship with us, or any of our affiliates, ceases for any reason other than disability, death, termination for cause, the optionee may exercise any vested options for a period of three months following the cessation of service. If an optionee’s service relationship with us, or any of our affiliates, ceases for cause (as defined under the 2006 incentive plan), the option terminates immediately. If an optionee’s service relationship with us, or any of our affiliates, ceases due to disability or death (or an optionee dies within a certain period following cessation of service), the optionee or a beneficiary generally may exercise any vested options for a period of 12 months in the event of disability, and 18 months in the event of death. In no event, however, may an option be exercised beyond the expiration of its term.

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Acceptable consideration for the purchase of common stock issued upon the exercise of a stock option will be determined by the plan administrator and may include (a) cash or check, (b) a broker-assisted cashless exercise, (c) the tender of common stock previously owned by the optionee, (d) a net exercise of the option, and (e) other legal consideration approved by the plan administrator.

Unless the plan administrator provides otherwise, options generally are not transferable except by will, the laws of descent and distribution, or pursuant to a domestic relations order. An optionee may designate a beneficiary, however, who may exercise the option following the optionee’s death.

Tax Limitations on Incentive Stock Options.  Incentive stock options may be granted only to our employees. The aggregate fair market value, determined at the time of grant, of shares of our common stock with respect to incentive stock options that are exercisable for the first time by an optionee during any calendar year under all of our stock plans may not exceed $100,000. No incentive stock option may be granted to any person who, at the time of the grant, owns or is deemed to own stock possessing more than 10% of our total combined voting power or that of any of our affiliates unless (a) the option exercise price is at least 110% of the fair market value of the stock subject to the option on the date of grant, and (b) the term of the incentive stock option does not exceed five years from the date of grant.

Restricted Stock Awards.  Restricted stock awards are granted pursuant to restricted stock award agreements adopted by the plan administrator. Restricted stock awards may be granted in consideration for (a) cash or check, (b) past or future services rendered to us or an affiliate, or (c) any other form of legal consideration. Shares of common stock acquired under a restricted stock award may, but need not, be subject to forfeiture or to a share repurchase option in our favor in accordance with a vesting schedule to be determined by the plan administrator. Rights to acquire shares under a restricted stock award may be transferred only upon such terms and conditions as set by the plan administrator.

Restricted Stock Unit Awards.  Restricted stock unit awards are granted pursuant to restricted stock unit award agreements adopted by the plan administrator. Restricted stock unit awards may be granted in consideration for any form of legal consideration. A restricted stock unit award may be settled by cash, delivery of stock, a combination of cash and stock as deemed appropriate by the plan administrator, or in any other form of consideration set forth in the restricted stock unit award agreement. Additionally, dividend equivalents may be credited in respect to shares covered by a restricted stock unit award. Except as otherwise provided in the applicable award agreement, restricted stock units that have not vested will be forfeited upon the participant’s cessation of continuous service for any reason.

Performance Stock Awards.  Performance stock awards are either restricted stock awards or restricted stock unit awards that may be granted or may vest based solely upon the attainment of certain performance goals during a designated performance period. The length of any performance period, the performance goals to be achieved during the performance period, and the measure of whether and to what degree such performance goals have been attained are conclusively determined by the compensation committee in its sole discretion. The maximum benefit to be received by a participant in any calendar year attributable to performance stock awards may not exceed 3,000,000 shares of common stock.

Stock Appreciation Rights.  Stock appreciation rights are granted pursuant to stock appreciation rights agreements adopted by the plan administrator. The plan administrator determines the strike price for a stock appreciation right, which may not be less than 100% of the fair market value of our common stock on the date of grant. Upon the exercise of a stock appreciation right, we will pay the participant an amount equal to the product of (a) the excess of the per share fair market value of our common stock on the date of exercise over the strike price, multiplied by (b) the number of shares of common stock with respect to which the stock appreciation right is exercised. A stock appreciation right granted under the 2006 incentive plan vests at the rate specified in the stock appreciation right agreement as determined by the plan administrator.

The plan administrator determines the term of stock appreciation rights granted under the 2006 incentive plan. If a participant’s service relationship with us, or any of our affiliates, ceases other than for cause, then the participant, or the participant’s beneficiary, may exercise any vested stock appreciation right

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for three months (or such longer or shorter period specified in the stock appreciation right agreement) after the date such service relationship ends. In no event, however, may a stock appreciation right be exercised beyond the expiration of its term. Except as otherwise provided for in the stock appreciation right agreement, if a participant’s service relationship with us, or any of our affiliates ceases for cause (as defined under the 2006 incentive plan), the stock appreciation right will terminate upon the participant’s termination date.

Other Equity Awards.  The plan administrator may grant other awards based in whole or in part by reference to our common stock. The plan administrator will set the number of shares under the award, the purchase price, if any, the timing of exercise and vesting and any repurchase rights associated with such awards.

Non-Discretionary Grant Program

Pursuant to the non-discretionary grant program in effect under the 2006 incentive plan, our non-employee directors will automatically receive a series of grants of nonstatutory stock options over their period of service.

Terms of Options Under Non-Discretionary Grant Program

The exercise price of each option granted under the non-discretionary grant program is 100% of the fair market value of the common stock subject to the option on the date of grant. The maximum term of options granted under the non-discretionary grant program is ten years.

Options granted under the non-discretionary grant program generally are not transferable except by will, the laws of descent and distribution, or pursuant to a domestic relations order. However, an option may be transferred for no consideration upon written consent of our board of directors if (a) at the time of transfer, a Form S-8 registration statement under the Securities Act is available for the issuance of shares upon the exercise of such transferred option, or (b) the transfer is to the optionee’s employer or its affiliate at the time of transfer.

If a non-employee director’s service relationship with us, or any of our affiliates, whether as a non-employee director or subsequently as an employee, director or consultant of ours or an affiliate, ceases for any reason other than disability, death, or following a change in control, the optionee may exercise any vested options for a period of three months following the cessation of service. If such an optionee’s service relationship with us, or any of our affiliates, ceases due to disability or death (or an optionee dies within a certain period following cessation of service), the option will accelerate in full and the optionee or a beneficiary may exercise the options for a period of 12 months in the event of disability, and 18 months in the event of death. If such an optionee’s service terminates within 12 months following a specified change in control transaction, the optionee may exercise vested options for a period of 12 months following the effective date of such a transaction. In certain circumstances upon termination of service in connection with a change in control, the vesting of an optionee’s outstanding options will accelerate (see below). In no event, however, may an option be exercised beyond the expiration of its term.

Automatic Option Grants.  Pursuant to the express terms of the non-discretionary grant program, any individual who is serving as a non-employee director upon the date of the signing of the underwriting agreement for this offering will automatically be granted an option to purchase 30,000 shares of common stock. The shares subject to each such grant vest in a series of 48 successive equal monthly installments measured from the date of grant. In addition, any individual who first becomes a non-employee director after this offering will automatically be granted an option to purchase 30,000 shares of common stock. The shares subject to each initial grant vest as to 25% of the shares subject to the option upon the director’s one year of continuous services measured from the date of grant and the remaining shares in a series of 36 successive equal monthly installments measured from the first anniversary of the date of grant. Any individual who is serving as a non-employee director on the date of an annual meeting of our stockholders, commencing with the annual meeting in 2007, will automatically be granted an option to purchase

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10,000 shares of common stock on such date. The shares subject to each annual grant vest in a series of 48 successive equal monthly installments measured from the date of grant.

Changes to Capital Structure.  In the event that there is a specified type of change in our capital structure, such as a stock split, appropriate adjustments will be made to (a) the class and number of shares reserved under the 2006 incentive plan, (b) the class and maximum number of shares by which the share reserve may increase automatically each year, (c) the class and maximum number of appreciation-only stock awards, incentive stock options and performance stock awards that can be granted in a calendar year, (d) the class and number of shares and exercise price or strike price, if applicable, of all outstanding stock awards and (e) the class and number of shares subject to options under the non-discretionary grant program.

Corporate Transactions.  In the event of certain significant corporate transactions, all outstanding stock awards under the 2006 incentive plan may be assumed, continued or substituted for by any surviving or acquiring entity (or its parent company). If the surviving or acquiring entity (or its parent company) elects not to assume, continue or substitute for such stock awards, then (a) our board of directors has the discretion to accelerate the vesting and exercisability of such stock awards, and such stock awards will be terminated if not exercised prior to the effective date of the corporate transaction and (b) the vesting of options granted under our non-discretionary grant program will accelerate in full and will be terminated if not exercised prior to the effective date of the corporate transaction. Our board of directors may also provide that the holder of an outstanding stock award not assumed in the corporate transaction will surrender such stock award in exchange for a payment equal to the excess of (a) the value of the property that the optionee would have received upon exercise of the stock award, over (b) the exercise price otherwise payable in connection with the stock award.

Changes of Control.  Our board of directors has the discretion to provide that a stock award under the 2006 incentive plan will immediately vest as to all or any portion of the shares subject to the stock award (a) immediately upon the occurrence of certain specified change in control transactions, whether or not such stock award is assumed, continued, or substituted by a surviving or acquiring entity in the transaction, or (b) in the event a participant’s service with us or a successor entity is terminated actually or constructively within a designated period following the occurrence of certain specified change in control transactions. In general, stock awards held by participants under the 2006 incentive plan will not vest on such an accelerated basis unless specifically provided by the participant’s applicable award agreement. However, the vesting and exercisability of options granted under the non-discretionary grant program will accelerate in full if a non-employee director is required to resign his or her position in connection with a change in control transaction, or is removed from his or her position in connection with such a change in control.

2006 Employee Stock Purchase Plan

Our board of directors adopted our 2006 Employee Stock Purchase Plan, or 2006 purchase plan, in June 2006 and our stockholders approved the 2006 purchase plan in           2006. The 2006 purchase plan will become effective immediately upon the signing of the underwriting agreement for this offering although we have no current plans to commence an offering under the terms of the 2006 purchase plan.

Share Reserve.  Following this offering, the 2006 purchase plan authorizes the issuance of 750,000 shares of common stock pursuant to purchase rights granted to our employees or to employees of any of our designated affiliates. The number of shares of common stock reserved for issuance will automatically increase on January 1st, from January 1, 2007 through January 1, 2016, by the lesser of (a) 1% of the total number of shares of common stock outstanding on December 31st of the preceding calendar year, or (b) 1,500,000 shares. The 2006 purchase plan is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the Internal Revenue Code. As of the date hereof, no shares of common stock have been purchased under the 2006 purchase plan.

Administration.  Our board of directors has delegated its authority to administer the 2006 purchase plan to our compensation committee. The 2006 purchase plan is implemented through a series of offerings

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of purchase rights to eligible employees. Under the 2006 purchase plan, we may specify offerings with a duration of not more than 27 months, and may specify shorter purchase periods within each offering. Each offering will have one or more purchase dates on which shares of common stock will be purchased for employees participating in the offering.

Payroll Deductions.  Generally, all regular employees, including executive officers, employed by us or by any of our affiliates may participate in the 2006 purchase plan and may contribute, normally through payroll deductions, up to 15% of their earnings for the purchase of common stock under the 2006 purchase plan. Unless otherwise determined by our board of directors, common stock will be purchased for accounts of employees participating in the 2006 purchase plan at a price per share equal to the lower of (a) 85% of the fair market value of a share of our common stock on the first date of an offering, or (b) 85% of the fair market value of a share of our common stock on the date of purchase.

Reset Feature.  If the fair market value of a share of our common stock on any purchase date within a particular offering period is less than the fair market value on the start date of that offering period, then the employees in that offering period will automatically be transferred and enrolled in a new offering period which will begin on the next day following such a purchase date.

Limitations.  Employees may have to satisfy one or more of the following service requirements before participating in the 2006 purchase plan, as determined by our board of directors: (a) customarily employed for more than 20 hours per week, (b) customarily employed for more than five months per calendar year, or (c) continuous employment with us or one of our affiliates for a period of time not to exceed two years. No employee may purchase shares under the 2006 purchase plan at a rate in excess of $25,000 worth of our common stock valued based on the fair market value per share of our common stock at the beginning of an offering for each year such a purchase right is outstanding. No employee will be eligible for the grant of any purchase rights under the 2006 purchase plan if immediately after such rights are granted, such employee has voting power over 5% or more of our outstanding capital stock measured by vote or value.

Changes to Capital Structure.  In the event that there is a specified type of change in our capital structure, such as a stock split, appropriate adjustments will be made to (a) the class and number of shares reserved under the 2006 purchase plan, including the class and number of shares by which the share reserve may increase automatically each year, (b) the class and number of shares and purchase price of all outstanding purchase rights and (c) the class and number of shares under any purchase limits imposed under an offering period.

Corporate Transactions.  In the event of certain significant corporate transactions, any then-outstanding rights to purchase our stock under the 2006 purchase plan will be assumed, continued or substituted for by any surviving or acquiring entity (or its parent company). If the surviving or acquiring entity (or its parent company) elects not to assume, continue or substitute for such purchase rights, then the participants’ accumulated contributions will be used to purchase shares of our common stock within ten business days prior to such corporate transaction, and such purchase rights will terminate immediately thereafter.

Defined Contribution Plan

We sponsor a retirement and deferred savings plan for our eligible employees. The retirement and deferred savings plan is intended to qualify as a tax-qualified plan under Section 401 of the United States Internal Revenue Code. The retirement and deferred savings plan provides that each participant may contribute up to a statutory limit, which is $15,000 in calendar year 2006. Under the plan, each employee is fully vested in his or her deferred salary contributions. Employee contributions are held in trust and invested in accordance with the terms of the plan. The retirement and deferred savings plan also permits us to make discretionary contributions and matching contributions, subject to established limits and a vesting schedule. To date, we have not made any discretionary contributions or matching contributions to the retirement and deferred savings plan on behalf of participating employees.

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Limitations on Directors’ Liability and Indemnification Agreements

Our amended and restated certificate of incorporation limits the liability of current and former directors to the maximum extent permitted by Delaware law. Delaware law provides that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except liability for any of the following acts:

•  any breach of their duty of loyalty to the corporation or its stockholders;

•  acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;

•  unlawful payments of dividends or unlawful stock repurchases or redemptions; or

•  any transaction from which the director derived an improper personal benefit.

Such limitation of liability does not apply to liabilities arising under federal securities laws and does not affect the availability of equitable remedies such as injunctive relief or rescission.

As permitted by Delaware law, our bylaws also provide that we will indemnify our current and former directors, officers, employees and other agents to the fullest extent permitted by law. We believe that indemnification under our bylaws covers at least negligence and gross negligence on the part of indemnified parties. Our bylaws also permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in connection with their services to us, regardless of whether our bylaws permit such indemnification. We have obtained such insurance.

We have entered into separate indemnification agreements with each of our executive officers, our current and former directors and certain of our employees, in addition to the indemnification provided for in our bylaws. These agreements, among other things, will provide that we indemnify our current and former directors, executive officers and certain employees for any and all expenses, including attorneys’ fees, judgments, witness fees, damages, fines and settlement amounts incurred by such director, executive officer or employee in any action or proceeding arising out of their services as one of our directors, executive officers or employee, or any of our subsidiaries or any other company or enterprise to which the person provides services at our request. We believe that these provisions and agreements are necessary to attract and retain qualified persons as directors, executive officers and certain employment positions. There is no pending litigation or proceeding involving any of our directors, executive officers or employees as to which indemnification is required or permitted, and we are not aware of any threatened litigation or proceeding that may result in a claim for indemnification.

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

The following is a description of transactions since December 31, 2002 to which we have been a party, in which the amount involved in the transaction exceeds $60,000, and in which any of our directors, former or current executive officers or, to our knowledge, holders of more than 5% of our capital stock had or will have a direct or indirect material interest.

Agreements with ECI

Acquisition of Veraz Networks Ltd. and Veraz Networks International.  On December 31, 2002, we issued 13,669,440 shares of our common stock, 9,000,000 shares of our Series B-1 redeemable preferred stock and 11,655,008 shares of our Series C convertible preferred stock to ECI Telecom Ltd. in exchange for 100% of the outstanding shares of Veraz Networks Ltd. and Veraz Networks International and $10 million in cash. Veraz Networks Ltd. and Veraz Networks International are resellers of DCME equipment and providers of the I -Gate family of media gateways. As a result of this acquisition, (1) we combined our ControlSwitch and I-Gate media gateways and began delivering a combined solution for IP telephony, (2) ECI and an affiliate entity assigned certain intellectual property rights with respect to VoIP and granted an irrevocable license under certain patents and intellectual property to Veraz Networks Ltd., and (3) ECI has granted us a limited non-exclusive, royalty free non-transferable license under certain trademarks and service marks.

Other transactions with ECI.  With the acquisition of Veraz Networks International and Veraz Networks Ltd., ECI held approximately 42% (33% assuming full dilution) of our voting shares as of December 31, 2005 and had the right to appoint three of our nine authorized members of the board of directors, pursuant to a certain voting agreement entered into by certain of our stockholders. At June 30, 2006, ECI had appointed two of our existing seven directors. This voting agreement will terminate upon the closing of this offering.

We are the exclusive worldwide distributor of the DCME line of products manufactured by ECI under the DCME Master Manufacturing and Distribution Agreement, or the DCME Agreement, executed in December 2002. Under the DCME Agreement, ECI manufactures or subcontracts the manufacture of all DCME equipment sold by us and also provides certain supply, service and warranty obligations. The DCME Agreement is automatically renewed for successive one-year periods unless earlier terminated and was renewed for the period ending December 31, 2006. The DCME Agreement may only be terminated by ECI in the event we forecast DCME product revenues of less than $1,000,000 in a calendar year, or we breach a material provision of the agreement and fail to cure such breach within 30 days, or we become insolvent. Total DCME equipment purchases by us for service provider customers during 2005 and the six months ended June 30, 2006 was approximately $15.5 million and $7.1 million, respectively.

Through 2005, ECI also acted as the sole source supplier for our I-Gate line of media gateways, as governed under the VoIP Master Manufacturing and Distribution Agreement (the VoIP Agreement), which was executed in December 2002 and was effective through December 31, 2005. Under the VoIP Agreement, ECI was responsible for the manufacture of I-Gate media gateways as we placed purchase orders. Total purchases by us under the VoIP agreement during 2005 were $5.7 million. Although we transitioned to a direct manufacturing relationship with Flextronics in 2006, we made purchases from ECI under the VoIP Agreement for the period ended June 30, 2006 of $2.1 million, consisting primarily of work-in-process and previously ordered media gateways.

The DCME Agreement also provided for us to function as ECI’s collection agent for certain specified DCME related receivables that were outstanding as of September 30, 2002. Collection fees earned in the years ended December 31, 2003, 2004 and 2005, and in the six months ended June 30, 2006 are included in other income, in the consolidated statements of operations.

We have appointed ECI as an agent for selling IP and DCME products and services in Russia and other countries from the former Soviet Union. We compensate ECI for agent services in Russia by paying a commission based on sales. Further, we have appointed ECI 2005, an affiliate of ECI, as a partner to

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provide services directly to customers in Russia. Our Russian customers may purchase installation, training and maintenance services from ECI 2005. To the extent ECI 2005 needs assistance in providing installation, training and maintenance services to its customers in Russia, ECI 2005 may purchase these services from us. We also reimburse ECI 2005 for the costs associated with the services activity.

Total commission payments made to ECI for sales were approximately $1.0 million for the six months ended June 30, 2006. We received from ECI 2005 approximately $574,000 during 2005 and approximately $323,000 for the six months ended June 30, 2006 for costs associated with the services activity.

We currently sublease office space from ECI in Fort Lauderdale, Florida for a monthly rent of approximately $10,000. The rent is subject to an increase pursuant to the terms of the sublease agreement. The substantial portion of the space has a lease term that expires in September 2011 and the remainder expires per its terms on January 31, 2007, subject to our option for extension on an annual basis through September 2011.

We entered into a memorandum of understanding in June 2006 with ECI regarding the payment allocation of certain fees, costs, settlement amounts and other payments relating to the complaint filed against ECI Telecom, Inc., a subsidiary of ECI, by a former employee of ECI Telecom, Inc., who in the past had performed services for both us and ECI. Pursuant to this agreement, we agreed to pay 75% of such expenses and ECI and ECI Telecom, Inc. agreed to pay 25% of such expenses.

Preferred Stock Issuances

During 2002 and 2003, we sold an aggregate of 34,965,004 shares of our Series C convertible preferred stock at an adjusted price of $0.858 per share, in a private financing, net of the amount allocated to the Series C convertible preferred stock issued to ECI in connection with our purchase of certain assets of ECI.

The investors in our Series C convertible preferred stock financings included the following holders of more than 5% of our securities who, or the affiliates of whom, invested in excess of $60,000:

	Series C Convertible		Purchase
Investors	Preferred Stock		Price
5% Stockholders
Norwest Venture Partners(1)		5,419,572	$	4,650,000
ECI Telecom Ltd.(2)		11,655,008	$	10,000,000
Battery Ventures(3)		5,128,196	$	4,400,000
Argonaut Holdings		6,351,980	$	5,450,000
Liberty Mutual Insurance Co.		3,613,052	$	3,100,000
Levensohn Venture Partners, LLC(4)		2,680,648	$	2,300,000

(1)	Includes: (a) 5,274,244 shares of Series C convertible preferred stock owned of record by Norwest Venture Partners IX, L.P and (b) 145,328 shares of Series C convertible preferred stock owned of record by NVP Entrepreneurs Fund IX, L.P. Mr. Promod Haque, the chairman of our board of directors, is the Managing Director of Genesis VC Partners IX, LLC, which is the general partner of each of the Norwest entities, and he shares voting and investment power over the shares held by these entities. He disclaims beneficial ownership of the shares held by these entities, except to the extent of his proportionate pecuniary interest therein.
(2)	Mr. Giora Bitan, a member of our board of directors, is the Chief Financial Officer of ECI Telecom Ltd.
(3)	Includes 4,724,100 shares of Series C convertible preferred stock owned of record by Battery Ventures V, L.P.; 301,536 shares of Series C convertible preferred stock owned of record by Battery Ventures Convergence Fund, L.P.; and 102,560 shares of Series C convertible preferred stock owned of record by Battery Investment Partners V, LLC. Battery Ventures V, L.P., Battery Ventures Convergence Fund, L.P. and Battery Investment Partners V, LLC are part of an affiliated group of investment partnerships and limited liability companies commonly controlled by Battery Ventures. Morgan Jones,

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one of our directors, is a Member Manager of Battery Ventures and may be deemed to share dispositive and voting power over these shares, which are, or may be, deemed to be beneficially owned by Battery Ventures V, L.P.; Battery Ventures Convergence Fund, L.P.; and Battery Investment Partners V, LLC. Mr. Jones may be deemed to have an indirect pecuniary interest in an indeterminate portion of the shares held by Battery Ventures V, L.P.; Battery Ventures Convergence Fund, L.P.; and Battery Investment Partners V, LLC. Mr. Jones disclaims beneficial ownership of these shares, except to the extent of his pecuniary interest therein. The address of Battery Ventures and its affiliates is c/o Battery Ventures, 20 William Street, Suite 200, Wellesley, MA 02481.

(4)

Includes 963,280 shares of Series C convertible preferred stock owned of record by Star Bay Technology Ventures IV, L.P.; 1,659,420 shares of Series C convertible preferred stock owned of record by Star Bay Partners, L.P. (Rollover Fund); and 57,948 shares of Series C convertible preferred stock owned of record by Star Bay Associates Fund, L.P. Pascal Levensohn, a member of our board of directors, is the Managing Director of Levensohn Venture Partners, LLC, which is the Managing Member of Star Bay Technology Ventures IV, L.P. and Star Bay Partners, L.P. (Rollover Fund) and the General Partner of Star Bay Associates Fund, L.P. Mr. Levensohn is also the Managing Partner of Levensohn Capital Partners II LLC and APH Capital Management LLC, each the General Partner of Star Bay Technology Ventures IV, L.P. and Star Bay Technology Partners, L.P. (Rollover Fund), respectively. Mr. Levensohn may be deemed to share dispositive and voting power over these shares, which are, or may be, deemed to be beneficially owned by Star Bay Technology Ventures IV, L.P.; Star Bay Partners, L.P. (Rollover Fund); and Star Bay Associates Fund, L.P. Mr. Levensohn may be deemed to have an indirect pecuniary interest in an indeterminate portion of the shares held by Star Bay Technology Ventures IV, L.P.; Star Bay Partners, L.P. (Rollover Fund); and Star Bay Associates Fund, L.P. Mr. Levensohn disclaims beneficial ownership of these shares, except to the extent of his pecuniary interest therein. The address of Levensohn Venture Partners, LLC and its affiliates is 260 Townsend Street, Suite 600, San Francisco, CA 94107.

Registration Agreement

We have entered into a registration rights agreement with some of our stockholders. Under the agreement, the holders of our preferred stock have rights to register shares of our capital stock. For so long as the holders of registrable securities, as defined in the agreement, hold at least 1% of our common stock and all common stock held by and issuable to such holders (and its affiliates) may not be sold pursuant to Rule 144 under the Securities Act, such holders will have the right to require us to use reasonable efforts to effect registration under the Securities Act of their registrable securities, subject to specific value minimums and our board of directors’ right to defer the registration for a period of up to 120 days. These stockholders also have the right to cause us to register their securities on Form S-3 when it becomes available to us if they propose to register securities having a value of at least $500,000, subject to the board of directors’ right to defer the registration for a period of up to 120 days. In addition, if we propose to register securities under the Securities Act, then the stockholders who are party to the agreement will have a right (which they have waived for this offering), subject to quantity limitations we determine, or determined by underwriters if the offering involves an underwriting, to request that we register their registrable securities. We will bear all registration expenses incurred in connection with registrations. We have agreed to indemnify the investors against liabilities related to the accuracy of the registration statement used in connection with any registration effected under the agreement.

Stockholders Voting Agreement

We have entered into an agreement with some of our stockholders that, among other things, provides them with the right to designate some members of our board of directors and contains certain transfer restrictions on our shares. The stockholders agreement will terminate by its terms upon consummation of this offering.

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Employment and Consulting Agreements

We have entered into employment agreements with our current executive officers. For more information regarding these agreements, see “Management — Employment Agreements.”

We have also entered into a consulting agreement with Barak Hachamov, a former member of our board of directors. Mr. Hachamov resigned from the board of directors in June 2006. The term of the consulting agreement ended on January 1, 2005.

Other Agreements

On October 1, 2003, we entered into a Contractor Agreement with Persistent Systems Pvt. Ltd. Under the Contractor Agreement, Persistent provided independent contract research and development employees located at Persistent’s facility in Pune, India. At the end of the initial two-year period of the Contractor Agreement, we exercised our option under the contract to convert some of the Persistent employees performing services under the Contractor Agreement into full-time Veraz employees.

In May of 2006, we entered into an addendum to the Contractor Agreement formalizing the transfer arrangements of certain employees of Persistent during the period ending in December 2006. In November of 2005, Promod Haque, our Chairman, joined the board of directors of Persisent when Norwest Venture Partners, with whom Mr. Haque is affiliated, made an equity investment in Persistent that resulted in Norwest owning greater than 10% of Persistent’s outstanding capital stock. During the year ended December 31, 2005 and the six months ended June 30, 2006, we accrued expenses for payments to Persistent under the Contractor Agreement of $3.4 million and $2.1 million, respectively. As of December 31, 2005 and June 30, 2006, we had related party payables to Persistent in the amount of $637,000 and $750,000, respectively.

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PRINCIPAL AND SELLING STOCKHOLDERS

The following tables present information regarding the beneficial ownership of our common stock as of July 31, 2006 by:

•  each person, or group of affiliated persons, who is known by us to own beneficially 5% or more of our common stock;

•  each of our current directors;

•  each of our named executive officers;

•  all our current directors and executive officers as a group; and

•  each selling stockholder.

Percentage ownership in the tables prior to this offering is determined using 61,895,350 shares of common stock outstanding, which is based on the number of shares outstanding as of July 31, 2006, assuming the conversion of all of the outstanding shares of Series C convertible preferred stock into 34,965,004 shares of common stock. Percentage ownership after the offering also reflects the issuance of           shares of common stock in this offering by us. The information assumes no exercise of the underwriters’ option to purchase additional shares. Each individual or entity shown on the table has furnished information with respect to beneficial ownership. Except as otherwise noted below, the address for each beneficial owner listed on the table is c/o Veraz Networks, Inc., 926 Rock Avenue, Suite 20, San Jose, California 95131.

We have determined beneficial ownership in accordance with the rules of the Securities and Exchange Commission. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. In addition, the rules include shares of common stock issuable pursuant to the exercise of stock options that are either immediately exercisable or exercisable within 60 days of July 31, 2006. These shares are deemed to be outstanding and beneficially owned by the person holding those options for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to applicable community property laws.

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	Shares of							Shares of
	Common Stock							Common Stock
	Beneficially Owned					Shares		Beneficially Owned
	Before the Offering					Being		After the Offering
Beneficial Owner	Number		Percentage			Offered		Number		Percentage
5% Stockholders:
ECI Telecom Ltd.		25,324,448		40.9	%
Entities affiliated with Norwest Venture Partners(1)		8,067,688		13.0			—		8,067,688
Entities affiliated with Battery Ventures(2)		6,692,684		10.8			—		6,692,684
Entities affiliated with Argonaut Holdings(3)		6,351,980		10.3			—		6,351,980
Liberty Mutual Insurance Co.		4,713,052		7.6			—		4,713,052
Entities affiliated with Levensohn Venture
Partners, LLC(4)		4,407,368		7.1			—		4,407,368
Directors and Named Executive Officers:
Doug Sabella(5)		1,356,249		2.1			—		1,356,249
Al Wood(5)		212,500		*			—		212,500
Amit Chawla(6)		699,372		1.1			—		699,372
Israel Zohar(5)		344,478		*			—		344,478
Giora Bitan(7)		25,324,448		40.9			—		25,324,448
Bob L. Corey		—		*			—		—
Promod Haque(1)(8)		8,254,416		13.3			—		8,254,416
Morgan Jones(2)(9)		6,879,412		11.1			—		6,879,412
Pascal Levensohn(4)		4,407,368		7.1			—		4,407,368
Dror Nahumi		—		*			—		—
Directors and Executive Officers as Group(10)		47,478,243		76.6	%

*	Represents beneficial ownership of less than one percent of the outstanding shares of common stock.
(1)	Includes 7,862,076 shares owned of record by Norwest Venture Partners IX, L.P. (“NVP IX”) and 205,612 shares owned of record by NVP Entrepreneurs Fund IX, L.P. (“NEF IX”). Promod Haque, one of our directors, is a managing director of Genesis VC Partners IX, LLC, which is the general partner of NVP IX and NEF IX, the record owners of these shares. Mr. Haque may be deemed to share dispositive and voting power over these shares, which are, or may be, deemed to be beneficially owned by NVP IX and NEF IX. Mr. Haque may be deemed to have an indirect pecuniary interest in an indeterminate portion of the shares held by NVP IX and NEF IX. Mr. Haque disclaims beneficial ownership of these shares, except to the extent of his pecuniary interest therein. The address of Norwest Venture Partners and its affiliates is 525 University Avenue, Suite 800, Palo Alto, CA 94301.
(2)	Includes 6,165,308 shares owned of record by Battery Ventures V, L.P.; 393,528 shares owned of record by Battery Ventures Convergence Fund, L.P.; and 133,848 shares owned of record by Battery Investment Partners V, LLC. Battery Ventures V, LP, Battery Ventures Convergence Fund, LP and Battery Investment Partners V, LLC are part of an affiliated group of investment partnerships and limited liability companies commonly controlled by Battery Ventures. Morgan Jones, one of our directors, is a Member Manager of Battery Ventures and may be deemed to share dispositive and voting power over these shares, which are, or may be, deemed to be beneficially owned by Battery Ventures V, L.P.; Battery Ventures Convergence Fund, L.P.; and Battery Investment Partners V, LLC. Mr. Jones may be deemed to have an indirect pecuniary interest in an indeterminate portion of the shares held by Battery Ventures V, L.P.; Battery Ventures Convergence Fund, L.P.; and Battery Investment Partners V, LLC. Mr. Jones disclaims beneficial ownership of these shares, except to the

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	extent of his pecuniary interest therein. The address of Battery Ventures and its affiliates is c/o Battery Ventures, 20 William Street, Suite 200, Wellesley, MA 02481.
(3)	Argonaut Holdings, LLC, a limited liability company is managed by Argonaut Private Equity LLC, a limited liability company. Jason Martin and Steven Mitchell are managers, and George B. Kaiser is the majority owner, of Argonaut Private Equity, LLC. Jason Martin, Steven Mitchell and George B. Kaiser may be deemed to share dispositive and voting power over the shares, which are, or may be, deemed to be beneficially owned by Argonaut Holdings, LLC. Each of these individuals disclaim beneficial ownership of such shares, except to the extent of his pecuniary interest therein. The address of Argonaut Holdings, LLC and its affiliates is 6733 South Yale, Tulsa, Oklahoma 74136.
(4)	Includes 1,524,384 shares owned of record by Star Bay Technology Ventures IV, L.P.; 2,626,016 shares owned of record by Star Bay Partners, L.P. (Rollover Fund); 91,700 shares owned of record by Star Bay Associates Fund, L.P.; and 165,268 shared owned of record by Star Bay Entrepreneurs Fund, L.P. Pascal Levensohn, one of our directors, is the Managing Partner of Levensohn Venture Partners, LLC, which is the Managing Member of Star Bay Technology Ventures IV, L.P. and Star Bay Partners, L.P. (Rollover Fund) and the General Partner of Star Bay Associates Fund, L.P. and Star Bay Entrepreneurs Fund, L.P. Mr. Levensohn is also the Managing Partner of Levensohn Capital Partners II LLC and APH Capital Management LLC, each the General Partner of Star Bay Technology Ventures IV, L.P. and Star Bay Technology Partners, L.P. (Rollover Fund), respectively. Mr. Levensohn may be deemed to share dispositive and voting power over these shares, which are, or may be, deemed to be beneficially owned by Star Bay Technology Ventures IV, L.P.; Star Bay Partners, L.P. (Rollover Fund); Star Bay Associates Fund, L.P.; and Star Bay Entrepreneurs Fund, L.P. Mr. Levensohn may be deemed to have an indirect pecuniary interest in an indeterminate portion of the shares held by Star Bay Technology Ventures IV, L.P.; Star Bay Partners, L.P. (Rollover Fund); Star Bay Associates Fund, L.P.; and Star Bay Entrepreneurs Fund, L.P. Mr. Levensohn disclaims beneficial ownership of these shares, except to the extent of his pecuniary interest therein. The address of Levensohn Venture Partners, LLC and its affiliates is 260 Townsend Street, Suite 600, San Francisco, CA. 94107. Also includes 15,561 shares that are subject to repurchase as of the date 60 days after July 31, 2006 at $0.175 per share in the event that Mr. Levensohn ceases to provide services as a member of our board of directors.
(5)	Consists solely of shares issuable upon the exercise of options exercisable within 60 days after July 31, 2006.
(6)	Includes 524,716 shares issuable upon the exercise of options exercisable within 60 days after July 31, 2006.
(7)	Consists solely of shares held by ECI Telecom Ltd. Giora Bitan, one of our directors, is the Chief Financial Officer of ECI. Mr. Bitan disclaims beneficial ownership of these shares.
(8)	Includes 186,728 shares issuable upon the exercise of options exercisable within 60 days after July 31, 2006.
(9)	Includes 186,728 shares issuable upon the exercise of options exercisable within 60 days after July 31, 2006.
(10)	Includes shares issuable upon the exercise of options exercisable within 60 days after July 31, 2006. See footnotes 5, 6, 7, 8 and 9 above.

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DESCRIPTION OF CAPITAL STOCK

The following description of our capital stock is based as of July 31, 2006 and takes into account the conversion and redemption of our preferred stock that will occur prior to or upon the closing of this offering.

Upon the closing of this offering, our authorized capital stock will consist of 200,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, par value $0.001 per share.

The following description of our capital stock does not purport to be complete and is subject to and qualified in its entirety by our certificate of incorporation and bylaws, which are included as exhibits to the registration statement of which this prospectus forms a part, and by the provisions of applicable Delaware law.

Common Stock

Outstanding Shares.  As of July 31, 2006, we had 65 stockholders, and, assuming conversion of all outstanding Series C convertible preferred stock, 61,895,350 shares of common stock issued and outstanding. In addition, as of July 31, 2006, options to purchase 15,489,187 shares of common stock were issued and outstanding and will terminate on various dates through 2016 if not exercised.

Voting Rights.  Each holder of our common stock is entitled to one vote for each share on all matters submitted to a vote of the stockholders, including the election of directors. Under our amended and restated certificate of incorporation and bylaws, our stockholders will not have cumulative voting rights, unless we are subject to Section 2115(b) of the California General Corporation Law. Because of this, the holders of a majority of the shares of common stock entitled to vote in any election of directors can elect all of the directors standing for election, if they should so choose. Our amended and restated certificate of incorporation provides for our board of directors to be divided into three classes, with staggered three-year terms. Only one class of directors will be elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms.

Dividends.  Subject to preferences that may be applicable to any then outstanding preferred stock, holders of common stock are entitled to receive ratably those dividends, if any, as may be declared from time to time by the board of directors out of legally available funds.

Liquidation.  In the event of our liquidation, dissolution or winding up, holders of common stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of our debts and other liabilities and the satisfaction of any liquidation preference granted to the holders of any outstanding shares of preferred stock.

Rights and Preferences.  Holders of common stock have no preemptive, conversion or subscription rights, and there are no redemption or sinking fund provisions applicable to the common stock. The rights, preferences and privileges of the holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock, which we may designate in the future.

Fully Paid and Nonassessable.  All of our outstanding shares of common stock are, and the shares of common stock to be issued pursuant to this offering will be, fully paid and nonassessable.

Preferred Stock

As of July 31, 2006, assuming the closing of this offering, all outstanding shares of Series C convertible preferred stock would have been converted into 34,965,004 shares of common stock. In addition, there were 5,000,048 shares of our Series A-1 redeemable preferred stock issued and outstanding, one share of Series A-2 redeemable preferred stock issued and outstanding and 9,000,000 shares of Series B-1 redeemable preferred stock issued and outstanding. Upon the closing of the offering, each share of Series A-1, A-2 and B-1 redeemable preferred stock will redeemed by us for par value, or $0.001 per share and will not convert into common stock. As of July 31, 2006 we also had outstanding a warrant to purchase 32,450 shares

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of Series C convertible preferred stock at an exercise price of $0.858 per share. The warrant shall expire at the earlier of December 31, 2007 or our initial public offering date. See Note 10 to our consolidated financial statements for a description of the currently outstanding preferred stock.

Upon the closing of this offering, our board of directors will have the authority, without further action by the stockholders, to issue up to 10,000,000 shares of preferred stock in one or more series, to establish from time to time the number of shares to be included in each such series, to fix the rights, preferences and privileges of the shares of each wholly unissued series and any qualifications, limitations or restrictions thereon, and to increase or decrease the number of shares of any such series (but not below the number of shares of such series then outstanding). The board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of the common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring or preventing a change in control of Veraz Networks and may adversely affect the market price of the common stock and the voting and other rights of the holders of common stock. Immediately after the closing of this offering, no shares of our preferred stock will be outstanding.

Options

As of July 31, 2006, under our 2001 Equity Incentive Plan and our 2003 Israeli Share Option Plan, options to purchase a total of 15,489,187 shares of common stock were outstanding and 1,403,983 additional shares of common stock were available for future grant.

As of July 31, 2006, options to purchase 138,926 shares of our common stock were held by employees of ECI. The options were granted outside of our 2001 Equity Incentive Plan and 2003 Israeli Stock Option Plan.

Warrants

In December 2002, we issued a warrant to purchase 32,450 shares of our Series C convertible preferred stock to Comdisco Ventures, Inc., or Comdisco, at an exercise price of $0.858 per share. Pursuant to the early termination provisions of the warrant, the warrant will terminate unless exercised immediately prior to the closing of this offering. Otherwise, the warrant will expire on December 31, 2007.

This warrant has a net exercise provision under which its holder may, in lieu of payment of the exercise price in cash, surrender the warrant and receive a net amount of shares based on the fair market value of our common stock at the time of exercise of the warrant after deduction of the aggregate exercise price. This warrant also contains provisions for the adjustment of the exercise price and the aggregate number of shares issuable upon exercise of the warrant in the event of stock dividends, stock splits, reorganizations, reclassifications, mergers, certain sales or conveyances, and consolidations.

We have also granted registration rights to Comdisco pursuant to an investors’ rights agreement, which is more fully described below under “Registration Rights.”

Registration Rights

The holders of an aggregate of 34,997,454 shares of our common stock, which shares we refer to as “registrable securities,” have the following registration rights with respect to those shares:

Demand Registration Rights.  Beginning 180 days following the closing of this offering, the holders of an aggregate of 34,997,454 shares of our common stock may require us, upon written request from holders of a majority of these shares subject to specific value minimums, and on not more than two occasions, to file a registration statement under the Securities Act of 1933 with respect to their shares.

Piggyback Registration Rights.  Following this offering, if we propose to register any of our securities under the Securities Act of 1933 either for our own account or for the account of other stockholders, the holders of an aggregate of 34,997,454 shares of our common stock will be entitled to notice of the

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registration and will be entitled to include their shares of common stock in the registration statement. These registration rights are subject to specified conditions and limitations, including the right of the underwriters to limit the number of shares included in any such registration under certain circumstances. The holders of these rights have waived their rights to have their shares included in this offering. However, as set forth above under “Principal and Selling Stockholders” some of these holders are selling some of their shares in connection with this offering.

Registration on Form S-3.  Beginning 12 months following the effective date of this offering, the holders of an aggregate of 34,997,454 shares of our common stock will be entitled, upon their written request, to have us use reasonable efforts to register their shares on a Form S-3 registration statement at our expense provided that such requested registration has an anticipated aggregate offering size to the public of at least $500,000 and we have not already effected one registration on Form S-3 within the preceding 12-month period or four registrations on Form S-3 in the aggregate.

Expenses of Registration.  We will pay all expenses relating to any demand, piggyback or Form S-3 registrations, other than underwriting fees, discounts, allowances and commissions, subject to specified conditions and limitations.

Expiration of Registration Rights.  The rights granted to a holder under the registration agreement will terminate when we have completed this offering, the holder (together with its affiliates) holds less than 1% of our common stock and all common stock held by and issuable to such holder (and its affiliates) may be sold pursuant to Rule 144 under the Securities Act. Any shares sold in a registered offering or pursuant to Rule 144 will cease to be registrable securities.

Delaware Anti-Takeover Law and Certain Provisions of our Amended and Restated Certificate of Incorporation and Bylaws

Delaware Law.  We are governed by the provisions of Section 203 of the Delaware General Corporation Law. In general, Section 203 prohibits a public Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. A “business combination” includes mergers, asset sales or other transactions resulting in a financial benefit to the stockholder. An “interested stockholder” is a person who, together with affiliates and associates, owns, or within three years did own, 15% or more of the corporation’s outstanding voting stock. These provisions may have the effect of delaying, deferring or preventing a change in our control.

Amended and Restated Certificate of Incorporation and Amended and Restated Bylaw Provisions.  Our amended and restated certificate of incorporation and bylaws that will be effective following the completion of this offering include a number of provisions that may have the effect of deterring hostile takeovers or delaying or preventing changes in control of our management including the following:

•  our board of directors can issue up to 10,000,000 shares of preferred stock, with any rights or preferences, including the right to approve or not approve an acquisition or other change in control;

•  our amended and restated certificate of incorporation provides that all stockholder actions following the completion of this offering must be effected at a duly called meeting of stockholders and not by written consent, and that only the chairman of the board, the chief executive officer and the board of directors can call special meetings of stockholders. These provisions may make it difficult for stockholders to take action without the consent of our board of directors

•  our bylaws provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide timely notice in writing. Our bylaws also specify requirements as to the form and content of a stockholder’s notice. These provisions may delay or preclude stockholders from bringing matters before a meeting of stockholders or from making nominations for directors at a meeting of stockholders, which could delay or deter takeover attempts or changes in management;

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•  our amended and restated certificate of incorporation provides that all vacancies, including any newly created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of our directors then in office, even if less than a quorum. In addition, our amended and restated certificate of incorporation provides that our board of directors may fix the number of directors by resolution;

•  our amended and restated certificate of incorporation does not provide for cumulative voting for our directors. The absence of cumulative voting may make it more difficult for stockholders owning less than a majority of our stock to elect any directors to our Board or Directors;

•  Our board of directors can change the number of directors at any time, provided that it cannot change the number of directors to less than the number currently in office; and

•  the stockholders cannot amend many of these provisions except by a vote of two-thirds or more of our outstanding common stock.

Nasdaq Global Market Listing

We have applied for approval of quotation of our common stock on the Nasdaq Global Market under the trading symbol “VRAZ.”

Transfer Agent and Registrar

Upon the closing of this offering, the transfer agent and registrar for our common stock is          .

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SHARES ELIGIBLE FOR FUTURE SALE

If our stockholders sell substantial amounts of our common stock, including shares issued upon the exercise of outstanding options or warrants, in the public market following this offering, the market price of our common stock could decline. These sales also might make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem appropriate.

Prior to this offering, there has been no public market for our common stock. Upon completion of the offering, we will have outstanding an aggregate of          shares of our common stock, assuming no exercise of the underwriters’ over-allotment option and no exercise of outstanding options or warrants. Of these shares, all of the shares sold in this offering will be freely tradeable without restriction or further registration under the Securities Act, unless those shares are purchased by “affiliates” as that term is defined in Rule 144 under the Securities Act. This leaves shares eligible for sale in the public market as follows:

Number of Shares	Date
	As of the date of this prospectus.
	After 90 days from the date of this prospectus (subject, in some cases, to volume limitations).
	At various times after 180 days from the date of this prospectus as described below under “Lock-up Agreements.”

Rule 144

In general, under Rule 144 as currently in effect, beginning 90 days after the date of this prospectus, a person who has beneficially owned shares of our common stock for at least one year would be entitled to sell within any three-month period a number of shares that does not exceed the greater of:

•  1% of the number of shares of our common stock then outstanding, which will equal approximately           shares immediately after this offering; or

•  the average weekly trading volume of our common stock on the Nasdaq Global Market during the four calendar weeks preceding the filing of a notice on Form 144 with respect to that sale.

Sales under Rule 144 are also subject to manner of sale provisions and notice requirements and to the availability of current public information about us.

Rule 144(k)

Under Rule 144(k), a person who is not deemed to have been one of our affiliates at any time during the three months preceding a sale, and who has beneficially owned the shares proposed to be sold for at least two years, including the holding period of any prior owner other than an affiliate, is entitled to sell those shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144.

Rule 701

In general, under Rule 701 of the Securities Act as currently in effect, any of our employees, consultants or advisors who purchase shares of our common stock from us in connection with a compensatory stock or option plan or other written agreement is eligible to resell those shares 90 days after the effective date of this offering in reliance on Rule 144, but without compliance with some of the restrictions, including the holding period, contained in Rule 144.

Lock-up agreements

All of our officers and directors and substantially all of our stockholders have entered into lock-up agreements under which they have agreed not to transfer or dispose of, directly or indirectly, any shares of

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our common stock held by them as of the completion of this offering or any securities convertible into or exercisable or exchangeable for shares of our common stock for a period of at least 180 days after the date of this prospectus without the prior written consent of Credit Suisse Securities (USA) LLC and Lehman Brothers Inc. on behalf of the underwriters.

Options

Upon completion of this offering, stock options to purchase a total of          shares of our common stock will be outstanding. These stock options have a weighted average exercise price of $      and a weighted average of years until expiration.

Following this offering, we intend to file a registration statement on Form S-8 under the Securities Act covering approximately           shares of our common stock issued or issuable upon the exercise of stock options, subject to outstanding options or reserved for issuance under our employee and director stock benefit plans. Accordingly, shares registered under the registration statement will, subject to Rule 144 provisions applicable to affiliates, be available for sale in the open market, except to the extent that the shares are subject to vesting restrictions or the contractual restrictions described above. See “Management — Employee Benefits Plans.”

Warrants

Upon completion of this offering, there will be no warrants outstanding to purchase shares of our common stock.

Registration Rights

Upon completion of this offering, the holders of 34,997,454 shares of our common stock will have certain rights regarding the registration of those shares under the Securities Act. For a detailed description of certain of these registration rights see “Certain Relationships and Related Party Transactions — Registration rights agreement.”

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UNDERWRITING

Under the terms and subject to the conditions contained in an underwriting agreement dated          , we and the selling stockholder have agreed to sell to the underwriters named below, for whom Credit Suisse Securities (USA) LLC and Lehman Brothers Inc. are acting as representatives and joint book-running managers, the following respective numbers of shares of common stock:

	Number of
Underwriter	Shares
Credit Suisse Securities (USA) LLC
Lehman Brothers Inc.
Jefferies & Company, Inc.
Raymond James & Associates, Inc.
Total

The underwriting agreement provides that the underwriters are obligated to purchase all the shares of common stock in the offering if any are purchased, other than those shares covered by the over-allotment option described below, depending on the satisfaction of the conditions contained in the underwriting agreement including:

•  the representations and warranties made by us and the selling stockholder to the underwriters being true;

•  there being no material change in us or the financial markets; and

•  our delivering customary closing documents to the underwriters.

The underwriting agreement also provides that if an underwriter defaults the purchase commitments of non-defaulting underwriters may be increased or the offering may be terminated.

We and the selling stockholder have granted to the underwriters a 30-day option to purchase on a pro rata basis up to     additional shares from us and     additional outstanding shares from the selling stockholder at the initial public offering price less the underwriting discounts and commissions. The option may be exercised only to cover any over-allotments of common stock.

The underwriters propose to offer the shares of common stock initially at the public offering price on the cover page of this prospectus and to selling group members at that price less a selling concession of $      per share. The underwriters and selling group members may allow a discount of $      per share on sales to other broker/dealers. After the initial public offering the representatives may change the public offering price and concession and discount to broker/dealers.

The following table summarizes the compensation and estimated expenses we and the selling stockholder will pay:

	Per Share		Total
	Without	With	Without	With
	Over-Allotment	Over-Allotment	Over-Allotment	Over-Allotment
Underwriting Discounts and Commissions paid by us
Expenses payable by us
Underwriting Discounts and Commissions paid by selling stockholder
Expenses payable by the selling stockholder

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Prior to this offering, there has been no public market for our common stock. The initial public offering price will be negotiated between the representatives and us. In determining the initial public offering price of our common stock, the representatives will consider:

•  the history and prospects for the industry in which we compete;

•  our financial information, including our results of operations in recent periods;

•  the present stage of our development;

•  the ability of our management and our business potential and earning prospects;

•  the prevailing securities markets at the time of this offering; and

•  the recent market prices of, and the demand for, publicly traded shares of generally comparable companies.

The representatives have informed us that they do not expect sales to accounts over which the underwriters have discretionary authority to exceed 5% of the shares of common stock being offered.

We have agreed that we will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file or cause to be filed with the Securities and Exchange Commission a registration statement under the Securities Act of 1933, or the Securities Act, relating to, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, or publicly disclose the intention to make any offer, sale, pledge, disposition or filing, without the prior written consent of Credit Suisse Securities (USA) LLC and Lehman Brothers Inc. for a period of 180 days after the date of this prospectus, except issuances pursuant to the exercise of employee stock options outstanding on the date hereof or pursuant to our dividend reinvestment plan. Also, our officers, directors and greater than 1% stockholders have agreed that they will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, enter into a transaction that would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of our common stock, whether any of these transactions are to be settled by delivery of our common stock or other securities, in cash or otherwise, or publicly disclose the intention to make any offer, sale, pledge or disposition, or to enter into any transaction, swap, hedge or other arrangement, without, in each case, the prior written consent of Credit Suisse Securities (USA) LLC and Lehman Brothers Inc. for a period of 180 days after the date of this prospectus. However, in the event that either (1) during the last 17 days of the “lock-up” period, we release earnings results or material news or a material event relating to us occurs or (2) prior to the expiration of the “lock-up” period, we announce that we will release earnings results during the 16-day period beginning on the last day of the “lock-up” period, then in either case the expiration of the “lock-up” will be extended with respect to both us and our officers, directors and greater than 1% stockholders until the expiration of the 18-day period beginning on the date of the release of the earnings results or the occurrence of the material news or event, as applicable, unless Credit Suisse Securities (USA) LLC and Lehman Brothers Inc. waive, in writing, such an extension. Further, our officers, directors and greater than 1% stockholders have agreed that they will not, during the period commencing on the date of this prospectus and ending 180 days after the date of this prospectus, make any demand for or exercise any right with respect to, the registration of any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock. Credit Suisse Securities (USA) LLC and Lehman Brothers Inc., in their sole discretion, may release the common stock and other securities subject to the lock-up agreements described above in whole or in part at any time with or without notice. When determining whether or not to release common stock and other securities from lock-up agreements, Credit Suisse Securities (USA) LLC and Lehman Brothers Inc. will consider, among other factors, the holder’s reasons for requesting the release, the number of shares of common stock and other securities for which the release is being requested and market conditions at the time.

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We and the selling stockholder have agreed to indemnify the underwriters against liabilities under the Securities Act, or contribute to payments that the underwriters may be required to make in that respect.

We will apply to list the shares of common stock on The Nasdaq Global Market, subject to official notice of issuance, under the symbol “VRAZ”.

In connection with the listing of the common stock on The Nasdaq Global Market, the underwriters will undertake to sell round lots of 100 shares or more to a minimum of           beneficial owners.

In connection with the offering the underwriters may engage in stabilizing transactions, over-allotment transactions, syndicate covering transactions and penalty bids in accordance with Regulation M under the Securities Exchange Act of 1934, or the Exchange Act.

•  Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.

•  Over-allotment involves sales by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase, which creates a syndicate short position. The short position may be either a covered short position or a naked short position. In a covered short position, the number of shares over-allotted by the underwriters is not greater than the number of shares that they may purchase in the over-allotment option. In a naked short position, the number of shares involved is greater than the number of shares in the over-allotment option. The underwriters may close out any covered short position by either exercising their over-allotment option and/or purchasing shares in the open market.

•  Syndicate covering transactions involve purchases of the common stock in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option. If the underwriters sell more shares than could be covered by the over-allotment option, a naked short position, the position can only be closed out by buying shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering.

•  Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the common stock originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.

•  In passive market making, market makers in the common stock who are underwriters or prospective underwriters may, subject to limitations, make bids for or purchases of our common stock until the time, if any, at which a stabilizing bid is made.

These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common stock or preventing or slowing a decline in the market price of the common stock. As a result the price of our common stock may be higher than the price that might otherwise exist in the open market. These transactions may be effected on The Nasdaq Global Market, and if commenced, may be discontinued at any time.

A prospectus in electronic format may be made available on the web sites maintained by one or more of the underwriters, or selling group members, if any, participating in this offering and one or more of the underwriters participating in this offering may distribute prospectuses electronically. Other than the prospectus in electronic format, the information on any underwriter’s or selling group member’s web site and any information contained in any other web site maintained by an underwriter or selling group member is not part of the prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or any underwriter or selling group member in its capacity as underwriter or selling group member and should not be relied upon by investors.

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The representatives may agree to allocate a number of shares to underwriters and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the underwriters and selling group members that will make internet distributions on the same basis as other allocations.

The underwriters may in the future perform investment banking and advisory services for us from time to time for which they may in the future receive customary fees and expenses. The underwriters may, from time to time, engage in transactions with or perform services for us in the ordinary course of their business.

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NOTICE TO CANADIAN RESIDENTS

Resale Restrictions

The distribution of the common stock in Canada is being made only on a private placement basis exempt from the requirement that we and the selling stockholder prepare and file a prospectus with the securities regulatory authorities in each province where trades of common stock are made. Any resale of the common stock in Canada must be made under applicable securities laws which will vary depending on the relevant jurisdiction, and which may require resales to be made under available statutory exemptions or under a discretionary exemption granted by the applicable Canadian securities regulatory authority. Purchasers are advised to seek legal advice prior to any resale of the common stock.

Representations of Purchasers

By purchasing common stock in Canada and accepting a purchase confirmation a purchaser is representing to us the selling stockholder and the dealer from whom the purchase confirmation is received that:

•  the purchaser is entitled under applicable provincial securities laws to purchase the common stock without the benefit of a prospectus qualified under those securities laws,

•  where required by law, that the purchaser is purchasing as principal and not as agent,

•  the purchaser has reviewed the text above under “Resale Restrictions,” and

•  the purchaser acknowledges and consents to the provision of specified information concerning its purchase of the common stock to the regulatory authority that by law is entitled to collect the information.

Further details concerning the legal authority for this information is available on request.

Rights of Action — Ontario Purchasers Only

Under Ontario securities legislation, certain purchasers who purchase a security offered by this prospectus during the period of distribution will have a statutory right of action for damages, or while still the owner of the common stock, for rescission against us and the selling stockholder in the event that this prospectus contains a misrepresentation without regard to whether the purchaser relied on the misrepresentation. The right of action for damages is exercisable not later than the earlier of 180 days from the date the purchaser first had knowledge of the facts giving rise to the cause of action and three years from the date on which payment is made for the common stock. The right of action for rescission is exercisable not later than 180 days from the date on which payment is made for the common stock. If a purchaser elects to exercise the right of action for rescission, the purchaser will have no right of action for damages against us or the selling stockholder. In no case will the amount recoverable in any action exceed the price at which the common stock were offered to the purchaser and if the purchaser is shown to have purchased the securities with knowledge of the misrepresentation, we and the selling stockholder, will have no liability. In the case of an action for damages, we and the selling stockholder, will not be liable for all or any portion of the damages that are proven to not represent the depreciation in value of the common stock a result of the misrepresentation relied upon. These rights are in addition to, and without derogation from, any other rights or remedies available at law to an Ontario purchaser. The foregoing is a summary of the rights available to an Ontario purchaser. Ontario purchasers should refer to the complete text of the relevant statutory provisions.

Enforcement of Legal Rights

All of our directors and officers as well as the experts named herein and the selling stockholder may be located outside of Canada and, as a result, it may not be possible for Canadian purchasers to effect service of process within Canada upon us or those persons. All or a substantial portion of our assets and the assets

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of those persons may be located outside of Canada and, as a result, it may not be possible to satisfy a judgment against us or those persons in Canada or to enforce a judgment obtained in Canadian courts against us or those persons outside of Canada.

Taxation and Eligibility for Investment

Canadian purchasers of common stock should consult their own legal and tax advisors with respect to the tax consequences of an investment in the common stock in their particular circumstances and about the eligibility of the common stock for investment by the purchaser under relevant Canadian legislation.

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UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO
NON-UNITED STATES HOLDERS

The following is a summary of the material U.S. federal income tax consequences to non-U.S. holders of the ownership and disposition of our common stock, but does not purport to be a complete analysis of all the potential tax considerations relating thereto. This summary is based upon the provisions of the Internal Revenue Code of 1986, as amended, or the Code, Treasury regulations promulgated thereunder, administrative rulings and judicial decisions, all as of the date hereof. These authorities may be changed, possibly retroactively, so as to result in U.S. federal income tax consequences different from those set forth below. This summary is applicable only to non-U.S. holders who hold our common stock as a capital asset (generally, an asset held for investment purposes). We have not sought any ruling from the Internal Revenue Service, or the IRS, with respect to the statements made and the conclusions reached in the following summary, and there can be no assurance that the IRS will agree with such statements and conclusions.

This summary also does not address the tax considerations arising under the laws of any foreign, state or local jurisdiction. In addition, this discussion does not address tax considerations applicable to an investor’s particular circumstances or to investors that may be subject to special tax rules, including, without limitation:

•  banks, insurance companies, or other financial institutions;

•  persons subject to the alternative minimum tax;

•  tax-exempt organizations;

•  dealers in securities or currencies;

•  traders in securities that elect to use a mark-to-market method of accounting for their securities holdings;

•  partnerships or other pass-through entities or investors in such entities;

•  “controlled foreign corporations,” “passive foreign corporations,” “foreign personal holding companies” and corporations that accumulate earnings to avoid U.S. federal income tax;

•  U.S. expatriates or former long-term residents of the United States;

•  persons who hold our common stock as a position in a hedging transaction, “straddle,” “conversion transaction” or other risk reduction transaction; or

•  persons deemed to sell our common stock under the constructive sale provisions of the Code.

In addition, if a partnership holds our common stock, the tax treatment of a partner generally will depend on the status of the partner and upon the activities of the partnership. Accordingly, partnerships which hold our common stock and partners in such partnerships should consult their tax advisors.

This discussion is for general information only and is not tax advice. You are urged to consult your tax advisor with respect to the application of the U.S. federal income tax laws to your particular situation, as well as any tax consequences of the purchase, ownership and disposition of our common stock arising under the U.S. federal estate or gift tax rules or under the laws of any state, local, foreign or other taxing jurisdiction or under any applicable tax treaty.

Non-U.S. Holder Defined

For purposes of this discussion, you are a non-U.S. holder if you are a holder that, for U.S. federal income tax purposes, is not a U.S. person. For purposes of this discussion, you are a U.S. person if you are:

•  an individual who is a citizen or resident of the United States, including an alien individual who is a lawful permanent resident of the United States or who meets the “substantial presence” test under Section 7701(b) of the Code;

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•  a corporation or other entity taxable as a corporation for U.S. tax purposes created or organized in the United States or under the laws of the United States or of any state therein or the District of Columbia;

•  an estate whose income is subject to U.S. federal income tax regardless of its source; or

•  a trust (1) whose administration is subject to the primary supervision of a U.S. court and which has one or more U.S. persons who have the authority to control all substantial decisions of the trust or (2) which has made an election to be treated as a U.S. person.

Distributions

If distributions are made on shares of our common stock, those payments will constitute dividends for U.S. tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent those distributions exceed both our current and our accumulated earnings and profits, they will constitute a return of capital and will first reduce your basis in our common stock, but not below zero, and then will be treated as gain from the sale of stock.

Any dividend paid to you generally will be subject to U.S. withholding tax either at a rate of 30% of the gross amount of the dividend or such lower rate as may be specified by an applicable tax treaty. In order to receive a reduced treaty rate, you must provide us with an IRS Form W-8BEN or other appropriate version of IRS Form W-8 certifying qualification for the reduced rate.

Dividends received by you that are effectively connected with your conduct of a U.S. trade or business (and, where a tax treaty applies, are attributable to a U.S. permanent establishment maintained by you) are exempt from such withholding tax. In order to obtain this exemption, you must provide us with an IRS Form W-8ECI properly certifying such exemption. Such effectively connected dividends, although not subject to withholding tax, are taxed at the same graduated rates applicable to U.S. persons, net of any allowable deductions and credits. In addition, if you are a corporate non-U.S. holder, dividends you receive that are effectively connected with your conduct of a U.S. trade or business may also be subject to a branch profits tax at a rate of 30% or such lower rate as may be specified by an applicable tax treaty.

If you are eligible for a reduced rate of withholding tax pursuant to a tax treaty, you may obtain a refund of any excess amounts currently withheld if you file an appropriate claim for refund with the IRS in a timely manner.

Gain on Disposition of Common Stock

You generally will not be required to pay U.S. federal income tax on any gain realized upon the sale or other disposition of our common stock unless;

•  the gain is effectively connected with your conduct of a U.S. trade or business (and, where a tax treaty applies, is attributable to a U.S. permanent establishment maintained by you);

•  you are an individual who is present in the United States for a period or periods aggregating 183 days or more during the calendar year in which the sale or disposition occurs and certain other conditions are met; or

•  our common stock constitutes a U.S. real property interest by reason of our status as a “United States real property holding corporation” for U.S. federal income tax purposes (a “USRPHC”) at any time within the shorter of the five-year period preceding the disposition or your holding period for our common stock.

We believe that we are not currently and will not become a USRPHC. However, because the determination of whether we are a USRPHC depends on the fair market value of our U.S. real property relative to the fair market value of our other business assets, there can be no assurance that we will not become a USRPHC in the future. Even if we become USRPHC, however, as long as our common stock is

102

regularly traded on an established securities market, such common stock will be treated as U.S. real property interests only if you actually or constructively hold more than 5% of our common stock.

If you are a non-U.S. holder described in the first bullet above, you will be required to pay tax on the net gain derived from the sale under regular graduated U.S. federal income tax rates, and corporate non-U.S. holders described in the first bullet above may be subject to the branch profits tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. If you are an individual non-U.S. holder described in the second bullet above you will be required to pay a flat 30% tax on the gain derived from the sale, which tax may be offset by U.S. source capital losses. You should consult any applicable income tax treaties that may provide for different rules.

Backup Withholding and Information Reporting

Generally, we must report annually to the IRS the amount of dividends paid to you, your name and address, and the amount of tax withheld, if any. A similar report is sent to you. These information reporting requirements apply even if withholding was not required. Pursuant to tax treaties or other agreements, the IRS may make its reports available to tax authorities in your country of residence.

Payments of dividends made to you will not be subject to backup withholding if you establish an exemption, for example by properly certifying your non-U.S. status on a Form W-8BEN or another appropriate version of Form W-8. Notwithstanding the foregoing, backup withholding at a rate of up to 31%, with a current rate of 28%, may apply if either we or our paying agent has actual knowledge, or reason to know, that you are a U.S. person.

Payments of the proceeds from a disposition of our common stock effected outside the United States by a non-U.S. holder made by or through a foreign office of a broker generally will not be subject to information reporting or backup withholding.

However, information reporting (but not backup withholding) will apply to such a payment if the broker is a U.S. person, a controlled foreign corporation for U.S. federal income tax purposes, a foreign person 50% or more of whose gross income is effectively connected with a U.S. trade or business for a specified three-year period, or a foreign partnership with certain connections with the United States, unless the broker has documentary evidence in its records that the beneficial owner is a non-U.S. holder and specified conditions are met or an exemption is otherwise established.

Payments of the proceeds from a disposition of our common stock by a non-U.S. holder made by or through the U.S. office of a broker is generally subject to information reporting and backup withholding unless the non-U.S. holder certifies as to its non-U.S. holder status under penalties of perjury or otherwise establishes an exemption from information reporting and backup withholding.

Backup withholding is not an additional tax. Rather, the U.S. income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund or credit may be obtained, provided that the required information is furnished to the IRS in a timely manner.

LEGAL MATTERS

The validity of the shares of common stock offered hereby will be passed upon for us by our counsel, Cooley Godward Kronish LLP, Palo Alto, California. Certain legal matters will be passed upon for the underwriters by Wilson Sonsini Goodrich & Rosati, Professional Corporation.

EXPERTS

The consolidated financial statements of Veraz Networks, Inc., and subsidiaries as of December 31, 2003, 2004 and 2005, and for each of the years in the three-year period ended December 31, 2005, have been included herein in reliance upon the report of KPMG LLP, independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.

103

CHANGE IN ACCOUNTANTS

On December 19, 2005, the independent registered public accounting firm for Veraz Networks, Inc. (referred to as the “Company,” “we” or “our” in this paragraph), PricewaterhouseCoopers LLP, resigned. In January 2006, with the approval of the audit committee of our board of directors, we retained KPMG LLP to serve as the Company’s independent registered public accounting firm. PricewaterhouseCoopers LLP’s reports on our consolidated financial statements as of and for the years ended December 31, 2004 and 2003, which are not included in this prospectus because these periods were audited by KPMG LLP subsequent to the resignation of PricewaterhouseCoopers LLP, contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or accounting principle. In addition, during the years ended December 31, 2004 and 2003 and through December 19, 2005, there were no disagreements with PricewaterhouseCoopers LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of PricewaterhouseCoopers LLP, would have caused it to make reference thereto in its report on our financial statements for such years and there were no reportable events as defined in Regulation S-K Item 304(a)(1)(v). We did not consult with KPMG LLP on any financial or accounting reporting matters described in Item 304(a)(2)(i) and Item 304(a)(2)(ii) of Regulation S-K prior to their appointment.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement under the Securities Act of 1933, as amended, referred to as the Securities Act, with respect to the shares of our common stock offered by this prospectus. This prospectus, filed as a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits and schedules thereto as permitted by the rules and regulations of the SEC. For further information about us and our common stock, you should refer to the registration statement. This prospectus summarizes provisions that we consider material of certain contracts and other documents to which we refer you. Because the summaries may not contain all of the information that you may find important, you should review the full text of those documents. We have included copies of those documents as exhibits to the registration statement.

The registration statement and the exhibits thereto filed with the SEC may be inspected, without charge, and copies may be obtained at prescribed rates, at the public reference room maintained by the SEC at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may obtain information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330. The registration statement and other information filed by us with the SEC are also available at the SEC’s website at http://www.sec.gov. You may request copies of the filing, at no cost, by telephone at (408) 750-9400 or by mail at Veraz Networks, Inc., 926 Rock Avenue, Suite 20, San Jose, California 95131.

As a result of the offering, we and our stockholders will become subject to the proxy solicitation rules, annual and periodic reporting requirements, restrictions of stock purchases and sales by affiliates and other requirements of the Exchange Act. We are not currently subject to those requirements. We will furnish our stockholders with annual reports containing audited financial statements certified by independent auditors and quarterly reports containing unaudited financial statements for the first three quarters of each fiscal year.

104

VERAZ NETWORKS, INC. AND SUBSIDIARIES

Index to Financial Statements

	Page
Report of Independent Registered Public Accounting Firm		F-2
Consolidated Financial Statements:
Consolidated Balance Sheets		F-3
Consolidated Statements of Operations		F-4
Consolidated Statements of Redeemable and Convertible Preferred Stock, and Stockholders’ Deficit		F-5
Consolidated Statements of Cash Flows		F-6
Notes to Consolidated Financial Statements		F-7 — F-34

F-1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Veraz Networks, Inc.:

We have audited the accompanying consolidated balance sheets of Veraz Networks, Inc. and subsidiaries (the Company) as of December 31, 2004 and 2005, and the related consolidated statements of operations, redeemable and convertible preferred stock and stockholders’ deficit and cash flows for each of the years in the three-year period ended December 31, 2005. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above presents fairly, in all material respects, the financial position of Veraz Networks, Inc. and subsidiaries as of December 31, 2004 and 2005, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles.

/s/ KPMG LLP

October 20, 2006

Mountain View, California

F-2

VERAZ NETWORKS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

										Pro Forma
	December 31,						June 30,			June 30,
	2004			2005			2006			2006
							(Unaudited)			(Unaudited)
	(In thousands, except share and per share data)
ASSETS
Current assets:
Cash and cash equivalents	$	28,324		$	20,437		$	27,505		$	27,491
Restricted cash		1,273			2,192			1,162			1,162
Short-term investment		—			500			23			23
Accounts receivable (net of allowances of $647, $586 and $517 as of December 31, 2004 and 2005 and June 30, 2006, respectively)		16,868			20,365			26,166			26,166
Inventories		4,759			9,206			14,853			14,853
Prepaid expenses		1,459			641			1,107			1,107
Other current assets		1,362			2,227			3,373			3,373
Due from related parties		3,862			2,779			1,281			1,281
Total current assets		57,907			58,347			75,470			75,456
Property and equipment, net		4,088			6,266			7,116			7,116
Intangible assets, net		60			—			—			—
Other assets		42			56			77			77
Total assets	$	62,097		$	64,669		$	82,663		$	82,649
LIABILITIES, REDEEMABLE AND CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ (DEFICIT) EQUITY
Current liabilities:
Accounts payable	$	1,403		$	3,550		$	8,243		$	8,243
Accrued expenses		8,858			14,313			14,281			14,281
Current portion of long-term debt		—			—			1,667			1,667
Current portion of deferred revenue		10,401			20,155			28,811			28,811
Due to related parties		10,998			10,213			7,768			7,768
Total current liabilities		31,660			48,231			60,770			60,770
Long-term debt, net of current portion		—			—			13,333			13,333
Noncurrent portion of deferred revenue		342			—			1,364			1,364
Total liabilities		32,002			48,231			75,467			75,467
Commitments and contingencies (Note 6)
Redeemable and convertible preferred stock:
Redeemable preferred stock, Series A-1, $0.001 par value; 5,446,500 shares authorized; 5,000,048 shares issued and outstanding at December 31, 2004, 2005 and June 30, 2006 (none pro forma); liquidation preference of $8,000		15,871			15,871			15,871			—
Redeemable preferred stock, Series A-2, $0.001 par value; 1 share authorized; 1 share issued and outstanding at December 31, 2004, 2005 and June 30, 2006 (none pro forma) liquidation preference of $1,000		1,349			1,349			1,349			—
Redeemable preferred stock, Series B-1, $0.001 par value; 9,000,000 shares authorized; 9,000,000 shares issued and outstanding at December 31, 2004, 2005 and June 30, 2006 (none pro forma) liquidation preference of $13,500		2,576			2,576			2,576			—
Convertible preferred stock, Series C, $0.001 par value; 36,000,000 shares authorized; 34,965,004 shares issued and outstanding at December 31, 2004, 2005 and June 30, 2006 (none pro forma) liquidation preference of $60,000		38,197			38,197			38,197			—
Total redeemable and convertible preferred stock:		57,993			57,993			57,993			—
Stockholders’ (deficit) equity:
Common stock, $0.001 par value; 100,000,000 shares authorized; 23,791,036 and 26,005,789 and 26,928,595 shares issued and outstanding at December 31, 2004, 2005 and June 30, 2006, respectively (61,893,599 pro forma)		24			26			27			62
Additional paid-in capital		3,729			5,387			5,659			63,603
Deferred stock-based compensation		(26	)		(1,032	)		(868	)		(868	)
Accumulated deficit		(31,625	)		(45,936	)		(55,615	)		(55,615	)
Total stockholders’ (deficit) equity		(27,898	)		(41,555	)		(50,797	)		7,182
Total liabilities, redeemable and convertible preferred stock, and stockholders’ (deficit) equity	$	62,097		$	64,669		$	82,663		$	82,649

See accompanying notes to consolidated financial statements

F-3

VERAZ NETWORKS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

	Years Ended December 31,									Six Months Ended June 30,
	2003			2004			2005			2005			2006
										(Unaudited)			(Unaudited)
	(In thousands, except share and per share data)
Revenues:
DCME Products	$	42,430		$	48,105		$	41,681		$	23,136		$	19,551
IP Products		8,246			12,480			24,474			8,451			20,368
Services		8,852			8,522			10,089			4,912			4,774
Total revenues		59,528			69,107			76,244			36,499			44,693
Cost of Revenues:
DCME Products		19,703			20,090			16,953			9,099			7,525
IP Products		6,733			5,744			10,840			4,706			8,901
Services		3,985			4,200			5,353			2,379			4,570
Total cost of revenues		30,421			30,034			33,146			16,184			20,996
Gross profit		29,107			39,073			43,098			20,315			23,697
Operating Expenses:
Research and development (net of grants from the Office of the Chief Scientist in Israel of $2,294, $1,853, and $1,553, in 2003, 2004 and 2005, respectively, and $613 and $595 in the six months ended June 30, 2005 and 2006, respectively)		15,317			19,935			26,527			12,202			16,295
Sales and marketing		18,431			20,474			25,798			12,368			13,167
General and administrative		5,726			5,707			5,802			2,647			4,126
Total operating expenses		39,474			46,116			58,127			27,217			33,588
Loss from operations		(10,367	)		(7,043	)		(15,029	)		(6,902	)		(9,891	)
Other income (expense):
Interest income		598			649			919			454			333
Other income		1,015			647			350			130			429
Interest expense		(40	)		(2	)		(4	)		—			(324	)
Other expense		(53	)		(62	)		(512	)		(243	)		(204	)
Other income (expense), net		1,520			1,232			753			341			234
Loss before income taxes		(8,847	)		(5,811	)		(14,276	)		(6,561	)		(9,657	)
Income taxes		38			14			35			26			22
Net loss	$	(8,885	)	$	(5,825	)	$	(14,311	)	$	(6,587	)	$	(9,679	)
Net loss allocable to common stockholders per share — basic and diluted	$	(0.38	)	$	(0.25	)	$	(0.59	)	$	(0.28	)	$	(0.36	)
Weighted average shares outstanding used in computing net loss allocable to common stockholders per share — basic and diluted:		23,176,436			23,365,039			24,238,970			23,729,580			26,522,363

Related Party Transactions

The Consolidated Statements of Operations shown above include the following related party transactions:

	Years Ended December 31,						Six Months Ended June 30,
	2003		2004		2005		2005		2006
							(Unaudited)		(Unaudited)
Revenues:
DCME Products, related party sales	$	17,986	$	19,464	$	14,636	$	4,455	$	3,120
IP Products, related party sales		244		938		1,857		1,272		285
Cost of Revenues:
DCME Products, costs arising from related party purchases		19,619		19,644		15,511		7,846		7,070
IP Products, costs arising from related party purchases		3,249		3,870		5,737		1,449		2,138
Operating Expenses:
Research and development		591		675		1,501		296		2,650
Sales and marketing		4,500		4,707		3,839		2,061		1,842
General and administrative		470		475		576		226		339
Other income (expense):
Other income, related party		876		354		228		112		118

See accompanying notes to consolidated financial statements

F-4

VERAZ NETWORKS, INC. AND SUBSIDIARIES

Consolidated Statements of Redeemable and Convertible Preferred Stock, and Stockholders’ Deficit

Years Ended December 31, 2003, 2004, 2005 and Six Months Ended June 30, 2006

									Stockholders’ Deficit
	Redeemable				Convertible								Additional		Deferred						Total
	Preferred Stock				Preferred Stock				Common Stock				Paid-in		Stock-Based			Accumulated			Stockholders’
	Shares		Amount		Shares		Amount		Shares		Amount		Capital		Compensation			Deficit			Deficit
	(In thousands, except share and per share data)
Balance at January 1, 2003		14,000,049	$	19,796		28,088,547	$	32,302		23,453,180	$	23	$	3,622	$	(109	)	$	(16,915	)	$	(13,379	)
Issuance of Series C convertible preferred stock for cash		—		—		6,876,457		5,895		—		—		—								—
Exercise of stock options		—		—		—		—		22,056		—		5		—			—			5
Stock-based compensation in connection with stock options granted to non employees		—		—		—		—		—		—		29		—			—			29
Amortization of deferred stock-based compensation expense		—		—		—		—		—		—		—		55			—			55
Net loss		—		—		—		—		—		—		—		—			(8,885	)		(8,885	)
Balance at December 31, 2003		14,000,049		19,796		34,965,004		38,197		23,475,236		23		3,656		(54	)		(25,800	)		(22,175	)
Exercise of stock options		—		—		—		—		315,800		1		56		—			—			57
Stock-based compensation in connection with stock options granted to non employees		—		—		—		—		—		—		17		—			—			17
Amortization of deferred stock-based compensation expense		—		—		—		—		—		—		—		28			—			28
Net loss		—		—		—		—		—		—		—		—			(5,825	)		(5,825	)
Balance at December 31, 2004		14,000,049		19,796		34,965,004		38,197		23,791,036		24		3,729		(26	)		(31,625	)		(27,898	)
Exercise of stock options		—		—		—		—		2,214,753		2		335		—			—			337
Stock-based compensation in connection with stock options granted to non employees		—		—		—		—		—		—		5		—			—			5
Deferred stock-based compensation related to options granted to employees		—		—		—		—		—		—		1,318		(1,318	)		—			—
Amortization of deferred stock-based compensation expense		—		—		—		—		—		—		—		312			—			312
Net loss		—		—		—		—		—		—		—		—			(14,311	)		(14,311	)
Balance at December 31, 2005		14,000,049		19,796		34,965,004		38,197		26,005,789		26		5,387		(1,032	)		(45,936	)		(41,555	)
Exercise of stock options (unaudited)		—		—		—		—		922,806		1		160		—			—			161
Stock-based compensation in connection with stock options granted to employees (unaudited)		—		—		—		—		—		—		112		—			—			112
Amortization of deferred stock-based compensation expense (unaudited)		—		—		—		—		—		—		—		164			—			164
Net loss (unaudited)		—		—		—		—		—		—		—		—			(9,679	)		(9,679	)
Balance at June 30, 2006 (unaudited)		14,000,049	$	19,796		34,965,004	$	38,197		26,928,595	$	27	$	5,659	$	(868	)	$	(55,615	)	$	(50,797	)

See accompanying notes to consolidated financial statements

F-5

VERAZ NETWORKS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

	Years Ended December 31,									Six Months Ended June 30,
	2003			2004			2005			2005			2006
										(Unaudited)			(Unaudited)
	(In thousands)
Cash flows from operating activities:
Net loss	$	(8,885	)	$	(5,825	)	$	(14,311	)	$	(6,587	)	$	(9,679	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization		2,863			1,702			2,041			925			1,445
Provision for doubtful accounts		417			1,217			(61	)		(10	)		(69	)
Stock-based compensation		84			45			317			142			276
Net changes in operating assets and liabilities:
Accounts receivable		(7,417	)		(2,708	)		(3,436	)		3,779			(5,732	)
Inventories		(149	)		(1,583	)		(4,447	)		832			(5,647	)
Prepaid expenses and other current assets		(196	)		(219	)		(47	)		(230	)		(1,612	)
Due from related parties		(3,895	)		946			1,083			(933	)		1,498
Accounts payable		290			99			2,147			1,609			4,693
Accrued expenses		3,883			2,193			5,455			3,786			(32	)
Deferred revenue		6,794			3,446			9,412			4,289			10,020
Due to related parties		15,517			(4,519	)		(785	)		(2,569	)		(2,445	)
Net cash provided by (used in) operating activities		9,306			(5,206	)		(2,632	)		5,033			(7,284	)
Cash flows from investing activities:
Restricted cash		(1,000	)		(273	)		(919	)		(500	)		1,030
Short-term investment		—			—			(500	)		(500	)		477
Purchases of property and equipment		(2,143	)		(3,290	)		(4,159	)		(1,829	)		(2,295	)
Other assets		(24	)		12			(14	)		(12	)		(21	)
Net cash used in investing activities		(3,167	)		(3,551	)		(5,592	)		(2,841	)		(809	)
Cash flows from financing activities:
Proceeds from the exercise of stock options		5			57			337			9			161
Proceeds from issuance of Series C convertible preferred stock		5,895			—			—			—			—
Proceeds from bank borrowings		—			—			—			—			15,000
Net cash provided by financing activities		5,900			57			337			9			15,161
Net increase (decrease) in cash and cash equivalents		12,039			(8,700	)		(7,887	)		2,201			7,068
Cash and cash equivalents at beginning of period		24,985			37,024			28,324			28,324			20,437
Cash and cash equivalents at end of period	$	37,024		$	28,324		$	20,437		$	30,525		$	27,505
Supplemental disclosure of cash flow information:
Cash paid:
Interest	$	40		$	2		$	4		$	—		$	324
Income taxes	$	1		$	38		$	16		$	—		$	—

See accompanying notes to consolidated financial statements

F-6

VERAZ NETWORKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Information as of and for the six months ended June 30, 2005 and 2006 is unaudited)

(1)   The Company

Veraz Networks, Inc. (the Company), formerly known as NexVerse Networks, Inc., was incorporated under the laws of the State of Delaware on October 18, 2001.

On December 31, 2002, the Company issued to ECI Telecom Ltd. (ECI Telecom) 13,669,440 shares of Common Stock, 9,000,000 shares of Series B-1 redeemable preferred stock and 11,655,008 shares of Series C convertible preferred stock, valued at approximately $22.8 million in the aggregate, in exchange for shares held by ECI Telecom of Veraz Networks Ltd. (Veraz Ltd.) and Veraz Networks International Inc. (Veraz Int’l) and $10 million in cash. Veraz Ltd. and Veraz Int’l became wholly owned subsidiaries of the Company. As of December 31, 2005, ECI Telecom owned approximately 42% of the voting shares of the Company. Concurrent with the acquisition of Veraz Ltd. and Veraz Int’l, the Company became the exclusive worldwide distributor of a line of voice compression telecommunications products, or Digital Circuit Multiplication Equipment (DCME), for ECI Telecom under the DCME Master Manufacturing and Distribution Agreement (DCME Agreement) (see Note 3).

The Company is a provider of Internet Protocol, or IP, softswitches, media gateways and digital compression products to established and emerging wireline, wireless and broadband service providers. Service providers use the products to transport, convert and manage voice traffic over legacy and IP networks, while enabling voice over IP, or VoIP, and other multimedia communications services. The Company’s ControlSwitch softswitch solution and I-Gate 4000 family of media gateway products, enable service providers to deploy IP networks and efficiently migrate from their legacy circuit-switched networks to IP networks.

The Company has not achieved profitability since inception. The Company’s accumulated deficit aggregated $45,936,000 at December 31, 2005 and $55,615,000 at June 30, 2006, and the Company expects to incur losses in future periods. The Company’s future operations are dependent on a number of factors, including market acceptance of the Company’s products, the Company’s ability to maintain relationships with its indirect channel partners and the Company’s ability to deliver products that are competitive in the market place.

The Company plans to finance its operations through raising additional capital and revenues from future sales. While management believes it has sufficient capital to fund operations through at least December 31, 2006, there is no assurance that the Company will be successful in obtaining adequate level of sales and financing needed for the long-term development of its products.

(2)   Summary of Significant Accounting Policies

The significant accounting policies of the Company are as follows:

  (a)   Principles of Consolidation

The consolidated financial statements include the accounts of Veraz Networks, Inc. and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

  (b)   Interim Financial Information

The consolidated financial information as of June 30, 2006 and for the six months ended June 30, 2005 and 2006, and the related notes, are unaudited but, in management’s opinion, includes all adjustments, consisting only of normal recurring adjustments, that the Company considers necessary for a fair presentation, in all material respects, of its consolidated financial position, operating results, stockholders’ deficit and

F-7

VERAZ NETWORKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

cash flows for the interim date and periods presented. Operating results for the six months ended June 30, 2006 are not necessarily indicative of results for the full year or other future periods.

  (c)   Pro Forma Consolidated Balance Sheet Data (Unaudited)

Upon the consummation of the initial public offering (IPO) contemplated herein, all of the outstanding shares of Series C convertible preferred stock automatically convert into Common Stock, and the Series A-1, Series A-2 and Series B-1 redeemable preferred stock are automatically redeemed at par value and cancelled. The June 30, 2006, unaudited pro forma consolidated balance sheet has been prepared assuming the conversion of the Series C convertible preferred stock outstanding as of June 30, 2006, into common stock and the redemption and cancellation of the Series A-1, Series A-2 and Series B-1 redeemable preferred stock. The June 30, 2006, unaudited pro forma consolidated balance sheet does not include shares of common stock that may be issued upon the exercise of a warrant outstanding as of June 30, 2006 to purchase 32,450 shares of Series C convertible preferred stock, which expires upon the consummation of the initial public offering contemplated herein.

  (d)   Use of Estimates

The preparation of consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Significant items subject to such estimates and assumptions include account receivables valuation, deferred tax asset valuation, revenue recognition, contingencies, and stock options valuation. Actual results could differ materially from those estimates.

  (e)   Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original or remaining maturity of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents are maintained with several high credit quality financial institutions. Cash equivalents consist primarily of commercial paper and money market investments and amounted to $11,318,000, $9,160,000, and $20,505,000 at December 31, 2004, 2005, and June 30, 2006, respectively.

  (f)   Restricted Cash

Restricted cash represents collateral securing guarantee arrangements with banks. The amounts expire upon achievement of certain agreed objectives, typically customer acceptance of the product, completion of installation and commissioning services or expiration of the term of the product warranty or maintenance period.

  (g)   Inventories

Inventories are stated at the lower of cost or market on a first-in, first-out basis. The Company periodically reviews its inventories and reduces the carrying value for the difference between the estimated market value and the carrying value for slow-moving or obsolete items, if lower, based upon assumptions about future demand and market conditions.

When the Company’s products have been shipped, but not yet installed or accepted, the revenue associated with the product has been deferred as a result of not meeting the revenue recognition criteria for delivery (see Note 2(i)). During the period between product shipment and acceptance, the Company recognizes all labor-related expenses as incurred but defers the cost of the related equipment in accordance with American

F-8

VERAZ NETWORKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

Institute of Certified Public Accountants (AICPA) Accounting Research Bulletin (ARB) No. 43, Restatement and Revision of Accounting Research Bulletins, Chapter 4: Inventory Pricing, and classifies the deferred costs as “Work in process at customers’ locations” within the inventory line item (see Note 4). These deferred costs are then expensed in the same period that the deferred revenue is recognized as revenue (generally upon customer acceptance). In arrangements for which revenue recognition is limited to amounts due and payable, or of cash received, all related inventory costs are expensed at the date of customer acceptance.

  (h)   Concentration of Credit Risk

Cash and cash equivalents are maintained with several financial institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and therefore bear minimal risk.

The Company enters into certain forward foreign exchange contracts and certain derivative arrangements where the counterparty is generally a bank. The Company does not consider the risk of non-performance by the counterparty to be significant.

The Company performs credit evaluations of its customers and, with the exception of certain financing transactions, does not require collateral from its customers. However, when the Company uses integrators or resellers affiliated with ECI Telecom, a related party, from time to time, prior to fulfillment of the Company’s order for a particular customer, ECI Telecom has requested that the Company obtain either a letter of credit or accounts receivable insurance to mitigate any collection risk (see Note 3).

The following customers contributed 10% or more of the Company’s revenues for the years ended December 31, 2003, 2004 and 2005, and for the six months ended June 30, 2005 and 2006, respectively, or accounts receivable and due from related parties as of December 31, 2003, 2004 and 2005, and as of June 30, 2006, respectively.

										Six Months Ended
	Years Ended December 31,									June 30,
	2003			2004			2005			2005			2006
										(Unaudited)			(Unaudited)
Revenues:
ECI Telecom and its subsidiaries		30	%		29	%		21	%		16	%		*
Technoserv		*			13	%		13	%		15	%		*
Classica		*			*			10	%		13	%		11	%

	December 31,						June 30,
	2004			2005			2006
							(Unaudited)
Accounts Receivable and Due from Related Parties:
ECI Telecom and its subsidiaries		19	%		12	%		*
Technoserv		*			*			*
HTL Ltd		19	%		*			*
United Telecom		14	%		*			*
Belgacom		*			17	%		*
Classica		*			12	%		13	%

* Represents less than 10%

Pursuant to the DCME Agreement with ECI Telecom, a related party, the Company derives a significant portion of its revenues from sales of DCME products (71%, 70% and 55% of revenues during

F-9

VERAZ NETWORKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

2003, 2004 and 2005, respectively) and related services (13%, 9% and 8% of revenues during 2003, 2004 and 2005, respectively). Through 2005, ECI Telecom also acted as the sole source supplier for the Company’s I-Gate line of media gateways (see Note 3).

The Company receives certain of its components from other sole suppliers. Additionally, the Company relies on a limited number of contract manufacturers to provide manufacturing services for its products. The inability of any contract manufacturer, supplier or ECI Telecom to fulfill supply requirements of the Company could materially impact future operating results.

The substantial majority of the manufacturing of the Company’s hardware products occurs in Israel. In addition, a substantial portion of the Company’s operations is located in Israel, which includes the Company’s entire media gateway research and development team. The continued threat of terrorist activity or other acts of war or hostility against Israel have created uncertainty throughout the Middle East. To the extent this results in a disruption of the Company’s operations or delays of its manufacturing capabilities or shipments of its products, then the Company’s business, operating results and financial condition could be adversely affected.

  (i)   Revenue Recognition

DCME product revenues consists of revenues from the sale of the DCME hardware products. IP product revenues consists of revenues from the sale of the I-Gate family of media gateway hardware products, the ControlSwitch family of softswitch modules, and the Secure Communications Software. Services revenue consists of revenues from separately-priced maintenance and extended warranty contracts, post-contract customer support (PCS), installation training and other professional services.

As discussed in Notes 1, 2(h) and 3, the Company is the exclusive distributor of DCME products under the DCME Agreement with ECI Telecom, a related party. The Company has determined that revenues from sales of DCME products should be reported on a gross basis after considering the indicators included in Emerging Issues Task Force Issue No. 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent (EITF Issue No. 99-19). Specifically, the Company is the primary obligor, maintains the general inventory risk, and determines the product specifications based on the customer’s order.

Revenue from standalone sales of DCME products is recognized in accordance with Securities and Exchange Commission (SEC) Staff Accounting Bulletin No. 104, Revenue Recognition (SAB 104). When sales of DCME are bundled with installation services, the hardware and services are accounted for as separate units of accounting as the arrangement meets the separation criteria in EITF Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables”. Revenue for each deliverable is recognized in accordance with SAB 104.

All of the Company’s IP products may be sold in a bundled arrangement that includes PCS, installation, training, and other professional services. The Company’s media gateway hardware, when sold in a bundled arrangement, is referred to as a static trunking solution, and when sold in a bundled arrangement that includes the Company’s softswitch module software is referred to as a VoIP solution. When the Company’s Secure Communications Software is sold in a bundled arrangement with DCME hardware, it is referred to as a Secure Communications solution.

In sales of static trunking solutions, VoIP solutions or Secure Communications solutions, the software is considered more than incidental to the arrangement and essential to the functionality of the hardware. Therefore, all revenue from these arrangements is recognized in accordance with AICPA Statement of Position 97-2, Software Revenue Recognition (SOP 97-2), as amended by SOP 98-9, Modification of SOP 97-2, Software Revenue Recognition, with Respect to Certain Transactions.

F-10

VERAZ NETWORKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

In accordance with both SAB 104 and SOP 97-2, the Company recognizes revenue when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the fee is fixed or determinable, and (iv) collectibility is probable. The Company evaluates each of the four criteria as follows:

(i) Persuasive evidence of an arrangement exists

The Company’s customary practice is to have a written contract, which is signed by both the customer and the Company, or a purchase order or other written or electronic order documentation for those customers who have previously negotiated a standard arrangement with the Company.

(ii) Delivery has occurred

For standalone sales of DCME products, revenue is recognized when title and risk of loss has passed to the customer, which is typically at time of shipment. Revenue is recognized for installation services, if any, as the services are performed. The Company sells its DCME products through its direct sales force and channel partners. For DCME products sold through indirect channels, revenue is recognized either on a sell-in basis or when the channel partner sells the product to the end user, depending on the Company’s experience with the individual channel partner.

For sales of static trunking solutions, revenue is deferred until installation and training services are completed because the Company does not yet have vendor-specific objective evidence of fair value (VSOE) for those services. However, the Company has established VSOE for related PCS based on stated renewal rates. Therefore, upon completion of the installation services, the Company recognizes revenue using the residual method. Under the residual method, upon completion of the installation services, PCS revenue equal to its VSOE is deferred and recognized ratably over the PCS term.

VoIP solution arrangements typically require evidence of customer acceptance of the implementation of the VoIP solution in the customer’s network, including the ability of the network to carry live data traffic. As a result, delivery of the software, hardware and services is not considered to have occurred until evidence of acceptance is received from the customer. For most arrangements, the Company has established VSOE for the related PCS based on stated renewal rates. Therefore, upon customer acceptance, the Company recognizes revenue using the residual method. For arrangements in which the Company is unable to establish VSOE for its PCS, the entire arrangement fee is deferred and recognized ratably over the PCS term after delivery and acceptance of the software, hardware and services.

For sales of Secure Communications solutions, delivery of the DCME hardware and Secure Communications Software is considered to have occurred when title and risk of loss has passed to the customer, which is typically at time of shipment. The installation services are not considered essential to the functionality of the hardware or software and the Company has established VSOE of fair value for those services based on separate sales of similar services. Therefore, for sales of Secure Communication solutions that do not include PCS, the Company recognizes revenue using the residual method after deferring revenue for installation services based on VSOE which is recognized upon completion of those services. The Company has not yet established VSOE of fair value for the related PCS. Therefore, for sales of Secure Communication solutions that also include PCS, the entire arrangement fee is deferred and recognized ratably over the PCS term, which always exceeds the period over which the installation services are performed.

Revenue from sales of standalone training courses is recognized when the services are completed. Revenues from separately priced hardware maintenance or extended hardware warranty contracts are recognized ratably over the contract term. The amount recognized is based on the amount on the invoice.

F-11

VERAZ NETWORKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

(iii) The fee is fixed or determinable

The Company does not offer a right of return to its customers. Arrangement fees are generally due within one year or less from the later of the date of delivery or acceptance. Some arrangements may have payment terms extending beyond these customary payment terms and therefore the arrangement fees are considered not to be fixed or determinable. For multiple element arrangements with payment terms that are considered not to be fixed or determinable, revenue is recognized equal to the cumulative amount due and payable after allocating a portion of the cumulative amount due and payable to any undelivered elements (generally PCS) based on VSOE, after delivery and acceptance of the software, hardware and services, and assuming all other revenue recognition criteria are satisfied. As discussed in Note 2(g), “Inventory,” the Company defers the cost of inventory when products have been shipped, but have not yet been installed or accepted, and expenses those costs in full in the same period that the deferred revenue is recognized as revenue (generally upon customer acceptance). In arrangements for which IP revenue recognition is limited to amounts due and payable, all related inventory costs are expensed at the date of acceptance; this will initially result in lower or negative product margins and cause higher margins in subsequent periods, as compared to similar arrangements with customary payment terms.

(iv) Collectibility is probable

Collectibility is assessed on a customer-by-customer basis. The Company evaluates the financial position, payment history, and ability to pay of new customers, and of existing customers that substantially expand their commitments. If it is determined prior to revenue recognition that collectibility is not probable, recognition of the revenue is deferred and recognized upon receipt of cash, assuming all other revenue recognition criteria are satisfied. In arrangements for which IP revenue recognition is limited to amounts of cash received, all related inventory costs are expensed at the date of acceptance; this will initially result in lower or negative product margins and cause higher margins in subsequent periods, as compared to similar arrangements with customary payment terms.

Revenues include amounts billed to customers in sales transactions for shipping and handling. Shipping and handling fees represent less than 1% of revenues in each of 2003, 2004 and 2005. Shipping and handling costs are included in cost of revenues.

For purposes of classification in the consolidated statements of operations, revenue from sales of static trunking solutions, VoIP solutions, and Secure Communications solutions is allocated between DCME Products, IP Products and Services, as applicable, based on VSOE for any elements for which VSOE exists or based on the relative stated invoice amount for elements for which VSOE does not exist.

  (j)   Deferred Revenue

Deferred revenue represents fixed or determinable amounts billed to or collected from customers for which the related revenue has not been recognized because one or more of the revenue recognition criteria have not been met. The current portion of deferred revenues represents deferred revenue that is expected to be recognized as revenue within 12 months from the balance sheet date.

  (k)   Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Estimated useful lives used consist of three years for furniture, computer equipment and related software and five years for production, engineering and other equipment. Depreciation of leasehold improvements is computed using the shorter of the remaining lease term or five years.

F-12

VERAZ NETWORKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

  (l)   Intangible Assets

In accordance with Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets, intangible assets considered to have finite useful lives are amortized to expense over their respective useful lives. Acquired patents, copyrights and trademarks are amortized on a straight-line basis with estimated useful lives of two years. The amortization of patents, copyrights and trademarks is included in general and administrative expenses and amounted to $633,000, $0 and $0 in 2003, 2004 and 2005, respectively. Acquired maintenance contracts and customer relationships are amortized on a straight-line basis with estimated useful lives of three years. The amortization of maintenance contracts and customer relationships is included in cost of revenues for DCME products and amounted to $60,000, $59,000 and $60,000 in 2003, 2004 and 2005, respectively. Core and developed technology is amortized based on units sold that incorporate the technology acquired. The amortization of core and developed technology is included in cost of revenues for IP products and amounted to $300,000, $310,000 and $0 in 2003, 2004 and 2005, respectively.

In 2003, 2004, 2005, amortization expense totaled $993,000, $369,000 and $60,000, respectively. All intangible assets are fully amortized as of December 31, 2005.

  (m)   Impairment of Long-Lived Assets

Long-lived assets, such as property and equipment, and purchased intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposal group classified as held for sale would be presented separately in the appropriate asset and liability sections of the balance sheet.

  (n)   Advertising Costs

The Company expenses all advertising costs as incurred. Advertising costs have not been material to date.

  (o)   Capitalized Software Development Costs

Software development costs are included in research and development and are expensed as incurred. After technological feasibility is established, material software development costs are capitalized until the product is available for general release. The capitalized cost is then amortized on a straight-line basis over the estimated product life, or on the ratio of current revenues to total projected product revenues, whichever is greater. To date, the period between achieving technological feasibility, which the Company has defined as the establishment of a working model which typically occurs when the quality assurance testing commences, and the general availability of such software has been short and software development costs qualifying for capitalization have been insignificant. Accordingly, the Company has not capitalized any software development costs.

F-13

VERAZ NETWORKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

  (p)   Research and Development

Research and development expenses include payroll, employee benefits, equipment depreciation, materials, and other personnel-related costs associated with product development and are charged to expense as incurred.

  (q)   Government-Sponsored Research and Development

The Company records grants received from the Office of the Chief Scientist of the Israel Ministry of Industry and Trade (OCS) as a reduction of research and development expenses. Royalties payable to the OCS are classified as cost of revenues.

  (r)   Foreign Currency Translation

The functional currency of the Company’s non-U.S. subsidiaries is the U.S. dollar. Transactions and monetary balances denominated in non-dollar currencies are remeasured into dollars using current exchange rates. Transaction gains or losses are recorded in other income (expense), net.

  (s)   Derivatives

The Company enters into forward foreign exchange contracts where the counterparty is generally a bank. The Company purchases forward foreign exchange contracts to mitigate the risk of changes in foreign exchange rates on payroll expenses. Although the Company believes that these contracts are effective as hedges from an economic perspective, they do not qualify for hedge accounting under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended. Any derivative that is either not designated as a hedge, or is so designated but is ineffective per SFAS No. 133, is recorded at fair value and changes in fair value are recognized in income immediately. As of December 31, 2004, and 2005, and June 30, 2006, the Company had $900,000, $5,400,000 and $5,400,000, respectively, in forward contract for the purchase of new Israeli shekels. As of December 31, 2004 and 2005, and June 30, 2006, the fair value of the forward contracts were $13,000, $20,000 and $335,000, respectively. The contracts outstanding as of June 30, 2006 expire on various dates through December 2006.

  (t)   Income Taxes

The Company accounts for income taxes under SFAS No. 109, Accounting for Income Taxes (SFAS No. 109), using an asset and liability approach, which requires the recognition of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. The measurement of current and deferred tax liabilities and assets are based on provisions of the enacted tax law. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be more likely than not realized.

Income taxes payable are recorded whenever there is a difference between amounts reported by the Company in its tax returns and the amounts the Company believes it would likely pay in the event of an examination by the taxing authorities.

  (u)   Stock-Based Compensation

The Company has stock-based compensation plans, which are described in Note 13. Prior to January 1, 2006, the Company accounted for options granted to employees and directors using the intrinsic-value-based method in accordance with Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees (APB Opinion No. 25), and Financial Accounting Standards Board (FASB) Interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensation, an Interpretation

F-14

VERAZ NETWORKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

of APB Opinion No. 25 (FIN 44), and had adopted the disclosure only provisions of SFAS No. 123, Accounting for Stock-Based Compensation (SFAS No. 123) and SFAS No. 148, Accounting for Stock-Based — Compensation Transition and Disclosure (SFAS No. 148).

In accordance with APB Opinion No. 25, stock-based compensation expense, which is a non-cash charge, resulted from stock option grants at exercise prices that, for financial reporting purposes, were determined to be below the estimated fair value of the underlying common stock at date of grant. During the period January through September 2005, the Company granted options to employees to purchase a total of 4,727,188 shares of common stock at an exercise price of $0.25 per share. At the respective dates of grant, the fair value of the common stock was determined by the board of directors with input from management. Because there has been no public market for the Company’s common stock, the board of directors determined the fair value of the common stock by considering a number of objective and subjective factors, including the Company’s operating and financial performance, corporate milestones, the price at which the Company sold shares of convertible preferred stock, the superior rights and preferences of the convertible preferred stock and the risk and non-liquid nature of the Company’s common stock. The Company did not obtain contemporaneous valuations from an independent valuation specialist during this period. Instead, the Company relied on its board of directors to determine a reasonable estimate of the then current value of the Company’s common stock.

In November 2005, in response to the adoption by the Internal Revenue Service of Internal Revenue Code Section 409A, the Company re-evaluated the estimated fair value of its common stock for financial reporting purposes for the year ended December 31, 2005. The Company engaged an independent valuation specialist to perform retrospective valuations as of January 1, 2005 and April 15, 2005, and a contemporaneous valuation as of December 15, 2005.

Through the provision of valuation reports dated March 17, 2006, the valuation specialist estimated the fair value of the Company’s common stock at $0.52 as of January 1, 2005, at $0.57 as of April 15, 2005, and $0.77 as of December 15, 2005. Based upon the reassessment, management determined that the fair value of the common stock underlying options to purchase 4,727,188 shares of common stock granted during the period from January through September 2005 exceeded the option exercise price. The exercise prices on these options were modified and increased to the respective reassessed fair value at date of grant. In November 2005, the board of directors granted options to employees to purchase 1,222,300 shares of common stock at an exercise price of $0.81 per share based on a preliminary valuation. As the exercise price of those options exceeded the final valuation of $0.77 per share, the Company did not modify the options to reduce the exercise price.

Determining the fair value of the Company’s common stock requires making complex and subjective judgments. The estimated fair value of the Company’s common stock as of January 1, April 15, and December 15, 2005, was determined by the valuation specialist using a two-step approach that first estimated the fair value of the Company as a whole, and then allocated the enterprise value to the Company’s common stock.

The valuation specialist utilized an income approach and two market approaches to estimate the enterprise value. The income approach consisted of the discounted cash flow method which involved applying appropriate discount rates to estimated future cash flows that are based on forecasts of revenue and costs. These cash flow estimates were consistent with the plans and estimates that management used to manage the business. There is inherent uncertainty in making these estimates. The risks associated with achieving the forecasts were assessed in selecting the appropriate discount rates which ranged from 22% to 26%. If different discount rates had been used, the valuations would have been different. The market approaches that the valuation specialist used were a comparable public company analysis and a comparable acquisition analysis. Based on the three approaches, the valuation specialist arrived at a high and low range

F-15

VERAZ NETWORKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

for the total equity value of the Company and concluded on the average of the three as the estimated enterprise value.

The valuation specialist then utilized the option-pricing method to allocate the total equity value to the various securities that comprised the Company’s capital structure. Application of this method involved making estimates of the anticipated timing of a potential liquidity event such as a sale of the Company or an IPO. The anticipated timing and likelihood of each scenario was based on the plans of the Company’s board of directors and management as of the respective valuation date. Under each scenario, the enterprise value of the Company was allocated to preferred and common shares using the option-pricing method under which values are assigned to each class of the Company’s preferred stock and the common stock is viewed as an option on the remaining equity value. The options were valued using the Black-Scholes option-pricing model which required estimates of the volatility of the Company’s equity securities. Estimating volatility of the share price of a privately held company is complex because there is no readily available market price for the shares. The volatility of the stock was based on available information on volatility of stocks of public traded companies in the industry. Had the Company used different estimates of volatility, the allocations between preferred and common shares would have been different. The option-pricing method resulted in an estimated fair value per share of the Company’s common stock that was reduced for lack of marketability by a discount of 40%, 40%, and 26% in the January 2005, April 2005 and December 2005 valuations, respectively. The discounts for lack of marketability at each valuation date were determined by considering restricted stock and studies of pre-IPO company valuations.

Information on employee stock options granted during 2005 is summarized as follows:

			Original		Reassessed Fair
	Number of		Exercise		Value per		Intrinsic
	Options		Price		Share/Modified		Value
Period of Issuance	Granted		per Share		Exercise Price		per Share
Jan - Mar 2005		3,608,000	$	0.25	$	0.52	$	0.27
Apr - Jun 2005		754,000	$	0.25	$	0.57	$	0.32
Jul - Sep 2005		365,188	$	0.25	$	0.65	$	0.40
Oct - Dec 2005		1,222,300	$	0.81	$	0.77	$	—

As a result of the reassessed fair value of options granted during the nine months ended September 30, 2005, the Company recorded deferred stock-based compensation related to these options of $1,318,000 during the year ended December 31, 2005, which is being amortized over the vesting period of the applicable options on a straight-line basis. During the year ended December 31, 2005, and the six months ended June 30, 2006, the Company amortized $286,000 and $164,000, respectively, of deferred stock-based compensation, leaving $868,000 to be amortized in future periods. The total unamortized deferred stock-based compensation recorded for all outstanding option grants made through December 31, 2005 is expected to be amortized as follows: $165,000 in the remainder of 2006, $330,000 in 2007, $330,000 in 2008, and $43,000 in 2009.

The Company accounts for stock options granted to non-employees on a fair-value basis in accordance with EITF Issue No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services, and FASB Interpretation No. 28, Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans. As a result, the amount of stock-based compensation expense recorded for non-employee options with vesting or other performance criteria is affected each reporting period by changes in the estimated fair value of the Company’s common stock.

F-16

VERAZ NETWORKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

For disclosure purposes under SFAS No. 123, the fair value of each employee and director option granted was estimated on the date of grant using the minimum-value method with the following weighted average assumptions:

	Years Ended December 31,
	2003			2004			2005
Expected term in years		5			5			5
Risk-free interest rate		2.83	%		3.47	%		3.91	%
Volatility		0	%		0	%		0	%
Dividend yield		—			—			—

The weighted average minimum value per share of options granted to employees for the years ended December 31, 2003, 2004 and 2005 under the minimum-value method amounted to approximately $0.02, $0.04 and $0.10, respectively.

For pro forma disclosure purposes, the estimated minimum value of the options granted to employees is amortized using the straight-line method over the vesting period, typically four years. The pro forma information follows (in thousands, except per share data):

	Years Ended December 31,
	2003			2004			2005
Net loss, as reported	$	(8,885	)	$	(5,825	)	$	(14,311	)
Add:
Employee stock-based compensation included in reported loss as determined under the intrinsic-value method, net of related tax effects		55			28			312
Deduct:
Total employee stock-based compensation expense determined under minimum- value-based methods, net of related tax effects		(123	)		(111	)		(487	)
Pro forma net loss	$	(8,953	)	$	(5,908	)	$	(14,486	)
Net loss per common share basic and diluted:
As reported	$	(0.38	)	$	(0.25	)	$	(0.59	)
Pro forma	$	(0.39	)	$	(0.25	)	$	(0.60	)

Effective January 1, 2006, the Company adopted the fair value recognition provisions of SFAS No. 123 (Revised 2004), Share-Based Payment, (SFAS No. 123R), using the prospective transition method, which requires the Company to apply the provisions of SFAS No. 123R only to new awards granted, and to awards modified, repurchased or cancelled, after the effective date. Under this transition method, total employee stock-based compensation expense recognized beginning January 1, 2006 is based on the following: (a) the grant-date fair value of stock option awards granted or modified after January 1, 2006; and (b) the balance of deferred stock-based compensation related to stock option awards granted prior to January 1, 2006, which was calculated using the intrinsic value method as previously permitted under APB Opinion No. 25.

Under SFAS No. 123R, the Company estimated the fair value of stock options granted using the Black-Scholes option-pricing model. This fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. The expected term represents the period that stock-based awards are expected to be outstanding, giving consideration to the contractual

F-17

VERAZ NETWORKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

terms of the stock-based awards, vesting schedules and expectations of future employee behavior as influenced by changes to the terms of the Company’s stock-based awards. The computation of expected volatility for the six months ended June 30, 2006 is based on the historical and implied volatility of comparable companies from a representative peer group based on industry and market capitalization data. As required by SFAS No. 123R, management made an estimate of expected forfeitures and is recognizing compensation costs only for those equity awards expected to vest.

In April and May 2006, the Company granted options to employees to purchase a total of 1,382,700 shares of common stock at an exercise price of $0.90 per share. At the respective dates of grant, the fair value of the common stock was determined by the board of directors with input from management. The board of directors determined the fair value of the common stock by considering a number of objective and subjective factors, including the December 2005 valuation of the Company’s common stock at $0.77. The Company did not obtain contemporaneous valuations from an independent valuation specialist during this period. Instead, the Company relied on its board of directors to determine a reasonable estimate of the then current value of the Company’s common stock.

In August 2006, the Company again engaged the independent valuation specialist to perform a valuation of the Company’s common stock. The valuation specialist estimated the fair value of the Company’s common stock at $3.09 per share as of August 15, 2006, using the same approaches and methods as described above on a consistent basis. The significant increase in valuation as of August 2006, as compared to the December 2005 valuation, was partially due to a reduced discount rate used to estimate future cash flows to 20%, a reduced discount used for lack of marketability to 15%, and an increase in the weighted probability of an IPO as a potential liquidity event. The discount for lack of marketability at the valuation date was determined by considering restricted stock and pre-IPO studies and was further supported by use of the put-option method under which the fair value of a restricted share of stock is estimated as the fair value of a similar unrestricted share less the fair value of an at-the-money put option on those shares. After reviewing the valuation report as of August 15, 2006, management decided to use the $3.09 per share valuation of the underlying common stock when estimating the fair value, and related compensation expense, associated with the options granted in April and May 2006.

The assumptions used to value options granted during the six months ended June 30, 2006 were as follows:

	Six Months Ended
	June 30, 2006
	(Unaudited)
Expected term in years		6.41
Risk-free interest rate		5.00	%
Volatility		79	%
Dividend yield		—
Estimated fair value per share of underlying common stock	$	3.09

The weighted average fair value per share of options granted to employees for the six months ended June 30, 2006, was approximately $2.70.

For the six months ended June 30, 2006, the total compensation cost related to stock-based awards granted under SFAS No. 123R to employees and directors was approximately $3,167,000. This cost will be amortized on a straight-line basis over a period of approximately four years. Amortization in the six months ended June 30, 2006 was $112,000. As a result of adopting SFAS No. 123R on January 1, 2006, the Company’s loss from operations and net loss for the six months ended June 30, 2006 are each $5,000 greater than if the Company had continued to account for stock-based compensation under APB Opinion

F-18

VERAZ NETWORKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

No. 25. Net loss per share for the six months ended June 30, 2006 would not have changed if the Company had not adopted SFAS No. 123R.

In accordance with SFAS No. 123R, unamortized compensation expense on stock option grants after January 1, 2006 is not included in deferred stock-based compensation. The balance in deferred stock-based compensation as of June 30, 2006 is $868,000, which is comprised of employee stock option grants prior to December 31, 2005, subject to vesting.

  (v)   Net Loss Allocable to Common Stockholders per Share

Net loss allocable to common stockholders per share is computed in accordance with SFAS No. 128, Earnings per Share, by dividing the net loss allocable to common stockholders by the weighted average number of shares of common stock outstanding. The Company has outstanding stock options, warrants, and convertible preferred stock, which have not been included in the calculation of diluted net loss allocable to common stockholders per share because to do so would be anti-dilutive. As such, the numerator and the denominator used in computing both basic and diluted net loss allocable to common stockholders per share for each period are the same.

The following table sets forth potential common stock that was not included in the diluted net loss allocable to common stockholders per share calculations because to do so would be anti-dilutive:

	Years Ended December 31,						Six Months Ended June 30,
	2003		2004		2005		2005		2006
							(Unaudited)		(Unaudited)
Stock options		12,371,637		13,338,939		15,297,310		17,081,593		15,509,232
Stock options granted outside of plans		296,600		251,767		147,300		162,467		138,926
Warrants		32,450		32,450		32,450		32,450		32,450
Convertible preferred stock		34,965,004		34,965,004		34,965,004		34,965,004		34,965,004

  (w)   Fair Value of Financial Instruments

The fair value of financial instruments represents the amount at which the instruments could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation. Significant differences can arise between the fair value and the carrying amounts of financial instruments that are recognized at historical amounts.

The carrying amounts of the Company’s financial instruments, which include cash equivalents, accounts receivable, accounts payable, long-term liabilities and foreign exchange contracts, approximate their fair value.

  (x)   Comprehensive Income (Loss)

SFAS No. 130, Reporting Comprehensive Income, establishes standards for reporting and displaying comprehensive income (loss) and its components in a full set of general-purposes financial statements. There was no difference between the Company’s net loss and its total comprehensive loss for the years ended December 31, 2003, 2004, 2005 and the six months ended June 30, 2005 and 2006, respectively.

  (y)   Recent Accounting Pronouncements

In July, 2006, the FASB issued Financial Accounting Standards Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes

F-19

VERAZ NETWORKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

recognized in an enterprises’ financial statements in accordance with SFAS No. 109. FIN 48 prescribes a recognition and measurement method of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosures and transitions. FIN 48 is effective for fiscal years beginning after December 15, 2006. Management is currently analyzing the effects of FIN 48 on the Company’s consolidated financial position and results from operations.

(3)   Related Party Transactions

On December 31, 2002, the Company issued 13,669,440 shares of its Common Stock, 9,000,000 shares of its Series B-1 redeemable preferred stock and 11,655,008 shares of its Series C convertible preferred stock to ECI Telecom Ltd. in exchange for 100% of the outstanding shares of Veraz Networks Ltd. and Veraz Networks International and $10 million in cash. Veraz Networks Ltd. and Veraz Networks International are resellers of DCME equipment and providers of the I -Gate family of media gateways. As a result of this acquisition, (1) the Company combined its ControlSwitch and I-Gate media gateways and began delivering a combined solution for IP telephony, (2) ECI Telecom Ltd. and an affiliate entity assigned certain intellectual property rights with respect to VoIP and granted an irrevocable license under certain patents and intellectual property to Veraz Networks Ltd., and (3) ECI Telecom Ltd. granted the Company a limited non-exclusive, royalty free non-transferable license under certain trademarks and service marks.

As a result of the acquisition of Veraz Networks Ltd. and Veraz Networks International in December 2002, at December 31, 2005 ECI Telecom holds approximately 42% (33% assuming full dilution) of the Company’s voting shares. As a result of certain voting agreements entered into by the stockholders of the Company, ECI Telecom has the right to appoint three of the Company’s nine authorized members of the board of directors. At December 31, 2005, ECI Telecom had appointed three of the Company’s existing eight directors.

The Company is the exclusive worldwide distributor of the DCME line of products manufactured by ECI Telecom under the DCME Agreement, which was executed in December 2002 and was effective through December 31, 2005 (the Initial Term). Under the DCME Agreement, ECI Telecom manufactures or subcontracts the manufacture of all DCME equipment sold by the Company and also provides certain supply, service and warranty repairs. The DCME Agreement is automatically renewed for successive one-year periods unless earlier terminated and was renewed for the period ending December 31, 2006. The DCME Agreement may only be terminated by ECI Telecom in the event the Company projects DCME revenues of less than $1,000,000 in a calendar year, the Company breaches a material provision of the agreement and fails to cure such breach within 30 days, or the Company becomes insolvent.

The Company pays ECI Telecom a purchase price for the DCME products that is computed as a percentage of revenue. The purchase price declined each year during the Initial Term and is subject to negotiation in all later periods. The percentage decrease in the purchase price was 11%, 10% and 9% in 2003, 2004 and 2005, respectively. From time to time, prior to fulfillment of the Company’s order for a particular customer, ECI Telecom has requested that the Company obtain either a letter of credit or accounts receivable insurance to mitigate any collection risk. Amounts accrued under this arrangement are included in DCME Products, costs of revenue in the consolidated statements of operations.

The DCME Agreement also provided for the Company to function as ECI Telecom’s collection agent for certain specified DCME related receivables that were outstanding as of September 30, 2002. The Company received a collection fee of 10% or 20% of the receivable collected. Collection fees earned in the years ended December 31, 2003, 2004 and 2005, and in the six months ended June 30, 2006 are included in other income in the consolidated statements of operations.

F-20

VERAZ NETWORKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

Through 2005, ECI Telecom also acted as the sole source supplier for the Company’s I-Gate line of media gateways, as governed under the VoIP Master Manufacturing and Distribution Agreement (the VoIP Agreement), which was executed in December 2002 and was effective through December 31, 2005. Under the VoIP Agreement, ECI Telecom was responsible for the manufacture of products pursuant to purchase orders placed by the Company. The price for each product was calculated in accordance with a pricing model that established a fixed profit percentage for ECI Telecom. In addition to the inventory purchased, as of December 31, 2003, 2004 and 2005, and June 30, 2006, the Company had open purchase commitments with ECI Telecom totaling approximately $3.3 million, $3.7 million, $1.0 million and $0.3 million, respectively. Costs of these products are included in IP Products, cost of revenues in the consolidated statements of operations.

At the end of 2005, the Company gave notice to ECI Telecom that it would not renew the VoIP Agreement. Beginning in 2006, the Company purchases raw material and components to its I-Gate line of media gateways, under binding purchase orders for each product covered by a product forecast, from an unrelated third party located in Israel.

The Company has also contracted with ECI Telecom for the use of certain of its European subsidiaries for selling and support activities. The Company records revenue related to sales to the subsidiaries either on a sell-in basis or when a binding sales agreement with an end-user has been made, depending on the Company’s experience with the individual integrator or reseller. Revenues generated from sales under these arrangements are included in DCME Product, and IP Product, revenues, in the consolidated statements of operations, depending on the nature of the products sold. The Company also reimburses these subsidiaries for certain operating expenses, such as local sales and marketing support. The Company has also contracted with ECI Telecom and certain of its European subsidiaries for local support, technology and administrative services. The Company allocates such expenses between research and development, sales and marketing, and general and administrative, in the consolidated statements of operations.

On December 31, 2002, the Company entered into a sublease agreement with ECI Telecom for office space of 4,951 square feet located in Florida for a term that ended on September 30, 2004. On August 31, 2004, the Company entered into a new sublease agreement with ECI Telecom that commenced on October 1, 2004 for office space of 4,279 square feet located in Florida, which was amended on January 31, 2006 to include an additional 652 square feet. The substantial portion of the space has a lease term that expires in September 2011 and the remainder expires per its terms on January 31, 2007, subject to the Company’s option for extension on an annual basis through September 2011. The monthly rent for the sublease in 2003, 2004, 2005 and 2006 amounted to approximately $7,000, $9,000, $9,000, and $10,000, respectively. ECI Telecom rent is included in general and administrative expense, in the consolidated statements of operations.

On October 1, 2003, the Company entered into a Contractor Agreement with Persistent Systems Pvt. Ltd. Under the Contractor Agreement, Persistent provided independent contract research and development employees located at Persistent’s facility in Pune, India. At the end of the initial two-year period of the Contractor Agreement, the Company exercised its option under the contract to convert some of the Persistent employees performing services under the Contractor Agreement into full-time Veraz employees. In May of 2006, the Company entered into an addendum to the Contractor Agreement formalizing the transfer arrangements of certain employees of Persistent during the period ending in December 2006. In November of 2005, Promod Haque, the Company’s Chairman, joined the board of directors of Persistent when Norwest Venture Partners, with whom Mr. Haque is affiliated, made an equity investment in Persistent that resulted in Norwest owning greater than 10% of Persistent’s outstanding capital stock. During the year ended December 31, 2005 and the six months ended June 30, 2006, the Company accrued expenses for payments to Persistent under the Contractor Agreement of $3.4 million and $2.1 million,

F-21

VERAZ NETWORKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

respectively. As of December 31, 2005 and June 30, 2006, the Company had related party payables to Persistent in the amount of approximately $637,000 and $750,000, respectively.

In December 2005, one of the significant stockholders of the Company purchased 400,000 shares of common stock from an employee of the Company at a price per share that approximated the then current fair value, for total proceeds of $324,000.

In June 2006, the Company entered into a memorandum of understanding with ECI Telecom regarding the payment allocation of certain fees, costs, potential settlement amounts and other payments relating to a complaint filed against ECI Telecom, Inc., by a former employee who in the past had performed services for both the Company and ECI Telecom. Pursuant to this agreement, the Company agreed to pay 75% of such expenses and ECI Telecom agreed to pay 25% of such expenses.

(4)   Balance Sheet Components

The following tables provide details of selected balance sheet items as of December 31, 2004 and 2005, and June 30, 2006 (in thousands):

	December 31,				June 30,
	2004		2005		2006
					(Unaudited)
Inventories:
Finished products	$	1,481	$	2,171	$	2,377
Work in process at customers locations		2,996		5,294		7,816
Raw material and components		282		1,741		4,660
	$	4,759	$	9,206	$	14,853

	December 31,						June 30,
	2004			2005			2006
							(Unaudited)
Property and equipment, net:
Production, engineering and other equipment	$	6,748		$	8,457		$	8,936
Computer equipment and software		5,066			7,419			8,989
Furnitures, fixtures and improvements		286			340			349
Leasehold improvements		51			94			331
Vehicles		50			50			50
		12,201			16,360			18,655
Accumulated depreciation		(8,113	)		(10,094	)		(11,539	)
	$	4,088		$	6,266		$	7,116

Depreciation expense in 2003, 2004 and 2005 was $1,870,000, $1,333,000 and $1,981,000, respectively, and for the six months ended June 30, 2005 and 2006 was $895,000 and $1,445,000, respectively.

	December 31,				June 30,
	2004		2005		2006
					(Unaudited)
Accrued expenses:
Accrued compensation and benefits	$	3,906	$	6,112	$	5,536
Accrued agent commissions		2,305		4,147		3,994
Other accrued expenses		2,647		4,054		4,751
	$	8,858	$	14,313	$	14,281

F-22

VERAZ NETWORKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

(5)   Bank Loan

In March 2006, the Company secured a loan with Bank Leumi le-Israel B.M. in the amount of $15.0 million. The loan bears interest at LIBOR plus 2.35%, (8.12% as of June 30, 2006) until the date of an IPO, and at LIBOR plus 1.4% following an IPO. The loan is granted for a period of three years with the principal due in nine equal consecutive quarterly installments commencing on April 1, 2007. The loan agreement includes financial and non-financial covenants. In the event that the Company’s consolidated balance of cash and cash equivalents, as defined in the loan agreement, becomes less than $20 million, the bank is entitled to declare the loan, in whole or in part, to be immediately due and payable. The Company is in breach of certain non-financial loan covenants, with respect to financial reporting, and has received a waiver from Bank Leumi le-Israel B.M. waiving any demand payment rights that they may have as a result of such breach.

(6)   Commitments and Contingencies

  (a)   Leases

The Company leases its offices and certain vehicles under noncancelable operating leases expiring on various dates through 2011. Rent expense for all leases for the years ended December 31, 2003, 2004 and 2005 was approximately $1,643,000, $1,528,000 and $1,867,000, respectively. At June 30, 2006, future minimum lease obligations under leases with noncancellable lease terms in excess of one year were approximately $849,000 in 2006, $1,726,000 in 2007, $1,391,000 in 2008, $634,000 in 2009, $508,000 in 2010 and $508,000 in 2011. Amounts include sublease obligation with ECI Telecom, a related party (see Note 3).

  (b)   Office of the Chief Scientist Grants

Veraz Ltd’s research and development efforts, including efforts prior to its acquisition by the Company on December 31, 2002, have been partially financed through grants from the OCS. In return for the OCS’s participation, Veraz Ltd. is committed to pay royalties to the Israeli Government at the rate of 3% to 3.5% of sales of products in which the Israeli Government has participated in financing the research and development, up to the amounts granted. The grants received bear annual interest at LIBOR as of the date of approval. The grants are presented in the consolidated statements of operations as an offset to related research and development expenses. Repayment of the grants is not required in the event that there are no sales of products developed within the framework of such funded programs. However, under certain limited circumstances, the OCS may withdraw its approval of a research program or amend the terms of its approval. Upon withdrawal of approval, the grant recipient may be required to refund the grant, in whole or in part, with or without interest, as the OCS determines. Royalties payable to the OCS are recorded as they become due and are classified as cost of revenues. Royalty expenses relating to OCS grants included in cost of IP product revenues for the years ended December 31, 2003, 2004, and 2005, and for the six months ended June 30, 2005 and 2006 amounted to $43,000, $360,000, $594,000, $185,000, and $513,000, respectively. As of December 31, 2004, and 2005, and June 30, 2006, the royalty payable amounted to $195,000, $351,000 and $670,000, respectively. The maximum amount of the contingent liability related to royalties payable to the Israeli Government was approximately $16.4 million as of December 31, 2005.

  (c)   Indemnification Obligations

The Company enters into agreements in the ordinary course of business with, among others, customers, systems integrators, resellers, service providers, lessors, sub-contractor, sales representatives and parties to other transactions with the Company, with respect to certain matters. Most of these agreements require the Company to indemnify the other party against third party claims alleging that its product infringes a patent or copyright. Certain of these agreements require the Company to indemnify the other party against losses

F-23

VERAZ NETWORKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

arising from: a breach of representations or covenants, claims relating to property damage, personal injury or acts or omissions of the Company, its employees, agents or representatives. In addition, from time to time the Company has made certain guarantees regarding the performance of its products to its customers.

The Company has procurement or license agreements with respect to technology that is used in the Company’s products. Under certain of these agreements, the Company has agreed to indemnify the supplier for certain claims that may be brought against such party with respect to Company’s acts or omissions relating to the supplied products or technologies or claims alleging that the vendor’s product in combination with Company’s product infringes a patent or copyright.

The duration and scope of these indemnities, commitments and guarantees varies, and in certain cases, is indefinite.

  (d)   Guarantees

From time to time, customers require the Company to issue bank guarantees for stated monetary amounts that expire upon achievement of certain agreed objectives, typically customer acceptance of the product, completion of installation and commissioning services or expiration of the term of the product warranty or maintenance period. Restricted cash represents the collateral securing these guarantee arrangements with banks. At December 31, 2003, 2004, and 2005 and June 30, 2006 the maximum potential amount of future payments Veraz Networks, Ltd. could be required to make under the guarantees, amounted to $718,000, $1,086,000, $2,422,000, and $1,264,000, respectively. The guarantee term generally varies from six months to two years. The guarantees are usually provided for approximately 10% of the contract value.

At December 31, 2003, 2004, 2005, and June 30, 2006 the Company had $140,000, $140,000, $172,000, and $185,000, respectively, invested in a bank guarantee as a security for the Company’s office lease in Israel.

  (e)   Purchase Commitments

The Company purchases raw material and components for its I-Gate line of media gateways, under binding purchase orders for each product covered by a product forecasts. In addition to the inventory purchased, as of December 31, 2003, 2004 and 2005 and June 30, 2006 the Company had open purchase commitments totaling $3.3 million, $3.7 million, $2.7 million and $4.5 million, respectively. The amounts include purchase commitments with ECI Telecom, a related party (see Note 3).

  (f)   Litigation

From time to time, the Company is engaged in various legal proceedings incidential to its normal business activity. Although the results of litigation and claims cannot be predicted with certainty, the Company believes the final outcome of such matters will not have a material adverse effect on its financial position, results of operations or cash flows.

(7)   Employee Benefit Plans

The Company has a 401(k) plan covering all eligible employees. The Company is not required to contribute to the plan and has made no contributions through December 31, 2005.

Israeli law generally requires payment of severance pay upon dismissal of an employee or upon termination of employments in certain other circumstances. The Company’s liability for severance payments are not reflected in the financial statements as the risks have been irrevocably transferred via payments made to funds in the name of the employee.

F-24

VERAZ NETWORKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

(8)   Income Taxes

The components of the Company’s income before income taxes for the years ended December 31, 2003, 2004 and 2005 was as follows (in thousands):

	Years Ended December 31,
	2003			2004			2005
United States	$	(4,202	)	$	(8,383	)	$	(15,738	)
Foreign		(4,645	)		2,572			1,462
Loss before income taxes	$	(8,847	)	$	(5,811	)	$	(14,276	)

The Company’s provisions for income taxes for the years ended December 31, 2003, 2004 and 2005 were as follows (in thousands):

	Years Ended December 31,
	2003		2004		2005
Current:
Federal	$	29	$	—	$	—
State		9		14		22
Foreign		—		—		13
	$	38	$	14	$	35

The differences between income taxes computed by applying the statutory federal income tax rate of 34% to income (loss) before taxes and the amounts reported in the consolidated statements of operations are summarized as follows (in thousands):

	Years Ended December 31,
	2003			2004			2005
Income tax benefit computed at statutory rate	$	(3,008	)	$	(1,975	)	$	(4,854	)
State taxes		6			9			14
Permanent differences		38			49			143
Domestic net operating losses not benefitted		1,394			2,805			5,216
Foreign rate differential		882			(874	)		(484	)
Foreign tax losses not benefitted		697			—			—
Alternative minimum tax		29			—			—
Total income taxes	$	38		$	14		$	35

F-25

VERAZ NETWORKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets as of December 31, 2004 and 2005 are as follows (in thousands):

	December 31,
	2004			2005
Deferred tax assets:
Net operating loss carryforwards	$	9,811		$	14,974
Research and development credits		1,834			2,807
Accruals and reserves		1,731			2,380
Depreciation and amortization		1,911			1,593
		15,287			21,754
Valuation allowance		(15,287	)		(21,754	)
Net deferred tax assets	$	—		$	—

The net change in the valuation allowance was an increase of approximately $3,558,000, $4,879,000 and $6,467,000 for the years ended December 31, 2003, 2004 and 2005, respectively. The Company does not believe it is more likely than not that the deferred tax assets as of December 31, 2005 will be fully realizable. Accordingly, the Company has provided a full valuation allowance for these amounts.

At December 31, 2005, the Company had federal and state net operating loss carryforwards of approximately $39,812,000 and $15,943,000, respectively. These federal and state net operating loss carryforwards expire in varying amounts from 2021 to 2025, and 2013 to 2015, respectively. The Company also has foreign net operating loss carryforwards of approximately $1,641,000, which have an unlimited carryover period. At December 31, 2005, the Company had federal research credits of approximately $1,592,000, which expire in varying amounts from 2022 to 2025, and state research credits of approximately $1,771,000, which have no expiration date.

Utilization of the Company’s net operating loss carryforwards and tax credits may be subject to substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. Such an annual limitation could result in the expiration of the net operating loss before utilization. The Company has not determined whether an ownership change has occured.

In 2003, the Company’s subsidiary in Israel received approval as an “Approved Enterprise” and became eligible for tax benefits under Israel’s Law for the Encouragement of Capital Investments, 1959 (the Law). Subject to compliance with applicable requirements, the portion of the Israeli subsidiary’s undistributed income derived from its Approved Enterprise program will be exempt from corporate tax for a period of two years. In addition, the subsidiary in Israel will enjoy a reduced tax rate of 15% commencing in the first year in which it generates taxable income. The period of tax benefits is subject to limits of the earlier of 12 years from the commencement of production, or 14 years from receiving the approval. Dividend distributions originating from the income of the approved enterprise will be subject to tax at the rate of 15%, provided that the dividend is distributed during the period stipulated under Israeli Law. In the event of a dividend distribution (including withdrawals and charges that are deemed to be dividends) out of the income originating from the approved enterprise, and on which the company received a tax exemption, the distribution is subject to corporate taxes at rates varying from 10% to 25% depending on the percentage of foreign investment holding in the company, as defined by the Law.

F-26

VERAZ NETWORKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

(9)   Stock Split

In March 2003, the Company effected a twenty-for-one (20:1) reverse stock split of common stock and Series C convertible preferred stock. All share and per share information in the consolidated financial statements and notes thereto has been restated to reflect the effect of this reverse stock split.

In June 2005, the Company effected a one-for-four (1:4) stock split of common stock and Series C convertible preferred stock. All share and per share information in the consolidated financial statements and notes thereto has been restated to reflect the effect of this stock split. In connection with the stock split, the Company amended its Certificate of Incorporation to reflect an increase in the total number of shares which the Company is authorized to issue to 150,446,501 shares, of which 100,000,000 were designated common stock and 50,446,501 were designated preferred stock.

(10)   Preferred Stock

As of December 31, 2005 the Company had 50,446,501 shares of preferred stock authorized for issuance with the following shares and preferences for each designated series of preferred stock (in thousands, except share and per share amounts):

			Shares		Liquidation		Aggregate		Aggregate
	Shares		Issued and		Preference		Liquidation		Redemption
	Authorized		Outstanding		per Share		Preference		Value
Redeemable preferred stock:
Series A-1		5,446,500		5,000,048	$	1.60	$	8,000	$	5
Series A-2		1		1	$	1,000,000		1,000		—
Series B-1		9,000,000		9,000,000	$	1.50		13,500		9
Subtotal		14,446,501		14,000,049				22,500		14
Convertible preferred stock:
Series C		36,000,000		34,965,004	$	1.716		60,000		—
		50,446,501		48,965,053			$	82,500	$	14

The Company’s redeemable and convertible preferred stock are reported at their respective issuance date fair values in the accompanying consolidated balance sheets in accordance with EITF Topic No. D-98 Classification and Measurement of Redeemable Securities (EITF Topic No. D-98). The rights, preferences and privileges of the holders of preferred stock are as follows:

  (a)   Dividends

Holders of Series C convertible preferred stock, in preference to the holders of Common Stock, shall be entitled to receive, when and as declared by the board of directors, cash dividends equivalent to 8% of the original issue price of $0.858, per year on each outstanding share of Series C convertible preferred stock. Such dividends shall be payable only when declared by the Board and shall be noncumulative.

In the event dividends are paid on any share of common stock, the Company shall pay an additional dividend on all outstanding shares of Series C convertible preferred stock in a per share amount equal (on an as-if-converted to common stock basis) to the amount paid or set aside for each share of common stock. This right shall not apply to dividends payable in common stock, or any repurchase of any outstanding securities of the Company that is unanimously approved by the Board.

The Series A-1 redeemable preferred stock, Series A-2 redeemable preferred stock, and Series B-1 redeemable preferred stock are not entitled to any dividends.

F-27

VERAZ NETWORKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

Through December 31, 2005, no dividends have been declared.

  (b)   Voting

Each holder of shares of the Series C convertible preferred stock is entitled to the number of votes equal to the number of shares of common stock, into which such shares of Series C convertible preferred stock could be converted. Except as otherwise provided in the Articles of Incorporation or as required by law, the Series C convertible preferred stock votes together with the common stock at any annual or special meeting of the stockholders.

The holders of Series A-1 redeemable preferred stock, Series A-2 redeemable preferred stock and Series B-1 redeemable preferred stock do not have any voting rights.

As long as at least 1,000,000 shares of Series C convertible preferred stock (subject to adjustment for any stock split or reverse stock split or other similar events) remain outstanding, the vote or written consent of at least two-thirds of the outstanding Series C convertible preferred stock is necessary for effecting or validating any change to the Certificate of Incorporation or the Bylaws of the Company; any change in the authorized number of shares of preferred stock; any new series of stock or other convertible securities ranking on a parity with or senior to the Series C convertible preferred stock in right of redemption, liquidation preference, voting or dividends; any redemption, repurchase, payment of dividends or other distributions with respect to common stock or preferred stock (except for acquisitions of common stock by the Company and the redemption of Series A-1 and Series B-1 redeemable preferred stock); any agreement by the Company or its stockholders regarding an asset transfer or acquisition; any action that results in payment or declaration of dividends on common stock or preferred stock; any voluntary dissolution of the Company; any grant of rights to intellectual property of the Company other than to customers in the ordinary course of business.

As long as 6,000,000 shares of Series C convertible preferred stock remain outstanding (subject to adjustment for stock split or reverse split or other similar events), the holders of Series C convertible preferred stock, voting as a separate class, are entitled to elect six members of the board of directors.

The holders of common stock, voting as a separate class are entitled to elect two members of the board of directors.

The holders of common stock and Series C convertible preferred stock, voting together as a single class on an as-if-converted basis, are entitled to elect the remaining member of the board of directors for a total of nine members.

Due to voting agreements in effect among the stockholders, at December 31, 2005, the Board consisted of three directors appointed by ECI Telecom, three directors appointed by three different investors, two directors chosen by management and one independent director.

  (c)   Liquidation

Upon any liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary, owners of Series C convertible preferred stock will be paid, in preference to all other share classes, an amount per share equal to two times the original issue price for the Series C convertible preferred stock (as adjusted for any stock dividends, splits, combinations, recapitalizations, and the like) plus any and all declared and unpaid dividends.

After payment of the full liquidation preference of the Series C convertible preferred stock, the holder of Series A-2 redeemable preferred stock will be paid an amount equal to $1,000,000.

F-28

VERAZ NETWORKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

After payment of the full liquidation preference to Series C convertible preferred stockholders and Series A-2 redeemable preferred stockholder, the Series A-1 redeemable preferred stockholders and Series B-1 redeemable preferred stockholders will be paid $1.00 for each share held. After this payment, the Series A-1 redeemable preferred stockholders will be entitled to an additional $0.60 for each share held and the Series B-1 redeemable preferred stockholders will be entitled to an additional $0.50 for each share held.

If upon occurrence of any such event, the assets and funds of the Company legally available for distribution are insufficient to permit payment of the aforesaid preferential amounts, then the assets and funds of the Company legally available for distribution shall be distributed among preferred stock holders in accordance with the preferences noted above. After fulfillment of the aforesaid preferences, any remaining assets of the Company legally available for distribution shall be distributed ratably to the holders of Common Stock.

A merger or consolidation of the Company into another entity or the merger of any other entity into the Company in which the stockholders’ of the Company own less than a majority of the outstanding voting stock of the surviving company or sale of all or substantially all of the assets of the Company will be deemed a liquidation, dissolution or winding up of the Company. These liquidation characteristics require classification of the convertible preferred stock outside of the stockholders’ equity section of the consolidated financial statements in accordance with EITF Topic D-98.

  (d)   Conversion

The Series A-1 redeemable preferred stock, Series A-2 redeemable preferred stock, and Series B-1 redeemable preferred stock shall not be convertible into common stock. At December 31, 2004, each share of Series C convertible preferred stock was convertible at the stockholder’s option into one share of common stock, subject to certain dilution adjustments. Each share of Series C convertible preferred stock automatically converts to common stock upon the earlier of (a) immediately upon the closing of a firmly underwritten public offering of the Company’s common stock in which the pre-offering valuation of the Company is at least $90 million (a Qualified IPO), or (b) the affirmative election of the holders of at least a majority of the outstanding shares of the Series C convertible preferred stock. Upon any such automatic conversion, any and all declared and unpaid dividends shall be (i) paid in cash or to the extent that sufficient funds are not then legally available, in common stock and (ii) in cash the value of any fractional share of common stock otherwise issuable to any holder of Series C convertible preferred stock.

  (e)   Redemption of Series A-1, Series A-2 and Series B-1 Redeemable Preferred Stock

Each share of Series A-1 redeemable preferred stock, Series A-2 redeemable preferred stock and Series B-1 redeemable preferred stock is automatically redeemed and cancelled upon the earlier of (a) the affirmative election of the holders of at least a majority of the outstanding shares of each series, or (b) immediately upon the closing of a Qualified IPO. The Company shall effect such redemptions by paying to the holders of such shares as soon as practicable on or after the applicable redemption date in cash in exchange for the redeemed shares a sum equal to the par value of such shares.

(11)   Warrants

In December 2002, the Company issued a warrant to purchase 32,450 shares of Series C convertible preferred stock at an exercise price of $0.858 per share to a financing institution. The warrant vested immediately and expires at the earlier of five years from the issue date or the Company’s initial public offering date. As of June 30, 2006, this warrant is still outstanding. The Company recognized $13,000 as a non-cash interest expense, based on the estimated fair value of the warrant at date of grant. The Company

F-29

VERAZ NETWORKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

estimated the fair value by using the Black-Scholes pricing model with the following assumptions: risk-free interest rate of 3.9%; expected volatility of 50% and the contractual term of 5 years. As of June 30, 2006, this warrant is still outstanding.

(12)   Common Stock

In November 2001, the Company sold 698,624 shares of common stock to the founders of the Company and recorded deferred stock-based compensation of approximately $171,000 for the difference between the fair value and the purchase price, which was amortized over the vesting period of four years. In January 2003, the Company accelerated the vesting of unvested shares held by one of the founders. As a result of the modification, the Company recognized additional compensation expense of $26,000 in January 2003. In 2003, 2004 and 2005, the Company amortized deferred stock-based compensation relating to the founders shares in the amount of approximately $55,000, $28,000 and $26,000, respectively. Deferred compensation relating to the founders shares was fully amortized as of December 31, 2005. At December 31, 2003, 2004 and 2005, 219,681, 105,057 and none of these shares were subject to repurchase, respectively.

In November 2003, the Company issued options to purchase 296,600 shares of common stock at a price of $0.18 per share to certain employees of ECI Telecom and its subsidiaries. Such options were issued outside of the Company’s stock option plans. The Company recorded compensation expense of approximately $22,000, $11,000 and $3,000 in 2003, 2004 and 2005, respectively, which was determined using the Black-Scholes pricing model, with the following assumptions: risk-free interest rates of 3.8% to 4.7%, expected volatility of 100% to 113%, dividend yield of 0% and expected term of 10 years. As of December 31, 2003, 2004, and 2005, and June 30, 2006, 296,600, 198,607, 127,300 and 118,926 of these options were outstanding, respectively.

In February 2004, the Company issued options to purchase 33,160 shares of common stock, at a price of $0.18 per share and in October 2004, the Company issued options to purchase 20,000 shares of common stock, at a price of $0.25 per share, to certain employees of ECI Telecom and its subsidiaries. Such options were issued outside of the Company’s stock option plans. The Company recorded compensation expense of approximately $5,000 and $2,000 in 2004 and 2005, respectively, which was determined using the Black-Sholes pricing model, with the following assumptions: risk-free interest rates of 3.8% to 4.7%, expected volatility of 100% to 111%, dividend yield of 0% and expected term of 10 years. As of December 31, 2004, and 2005, and June 30, 2006, 53,160, 20,000 and 20,000 of these options were outstanding, respectively.

(13)   Stock Option Plans

In November 2001, the Company adopted the 2001 Equity Incentive Plan (the Plan). The Plan provides for grants of stock options to employees, directors, and consultants of the Company. Options granted under the Plan may be either incentive stock options (ISO) or nonqualified stock options (NSO). ISOs may be granted only to employees (including officers and directors who are also employees with certain limitations). NSOs may be granted to employees, directors and consultants.

In March 2003, the Company adopted the 2003 Israeli Share Option Plan (the Israeli Plan). The Israeli Plan provides for grants of stock options to employees, directors, consultants and contractors of the Company. Options granted under the Israeli Plan are done so pursuant to the Capital Gains Option for taxation of stock options granted to employees under the Israeli Plan, in accordance with Section 102 (b)(2) of the Israel Income Tax Ordinance, so that stock options (or shares resulting from the exercise thereof) granted under the Israeli Plan shall be taxed at a rate of 25% and the Company shall not be allowed a deduction for any expense resulting from such grants. Further, grantees are not entitled to sell shares received upon exercise prior to the lapse of two years from the end of the tax year in which the options were granted.

F-30

VERAZ NETWORKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

The Company has reserved 20,374,972 shares of common stock for issuance under the Plan and the Israeli Plan. Options may be granted for periods of up to ten years and at prices equal to the estimated fair value of the shares on the date of grant, as determined by the board of directors, provided, however, that the exercise price of an ISO or NSO granted under the Plan shall not be less than 100% or 85% of the estimated fair value of the shares on the date of grant, respectively. To date, options granted generally vest over periods ranging from 27 months to four years. Options generally terminate three months following the end of a grantee’s continuous service to the Company.

In June 2006, the Company adopted the 2006 Equity Incentive Plan and the 2006 Employee Stock Purchase Plan, which become effective immediately upon the signing of the underwriting agreement to be entered in connection with the Company’s IPO contemplated herein.

A summary of the options activity under the Company’s stock option plans is presented below:

	Number of
	Shares			Number of			Weighted
	Available			Options			Average
	for Grant			Outstanding			Exercise Price
Balance at December 31, 2002		10,171,389			1,304,091		$	0.22
Authorized		4,468,656			—			—
Granted		(11,282,560	)		11,282,560		$	0.15
Exercised		—			(22,056	)	$	0.21
Cancelled		192,958			(192,958	)	$	0.16
Balance at December 31, 2003		3,550,443			12,371,637		$	0.16
Granted		(2,201,040	)		2,201,040		$	0.23
Exercised		—			(315,800	)	$	0.18
Cancelled		917,938			(917,938	)	$	0.16
Balance at December 31, 2004		2,267,341			13,338,939		$	0.17
Authorized		2,501,200			—			—
Granted		(5,949,488	)		5,949,488		$	0.59
Exercised		—			(2,214,753	)	$	0.15
Cancelled		1,776,364			(1,776,364	)	$	0.20
Balance at December 31, 2005		595,417			15,297,310		$	0.34
Authorized (unaudited)		1,925,000			—			—
Granted (unaudited)		(1,382,700	)		1,382,700		$	0.90
Exercised (unaudited)		—			(922,806	)	$	0.17
Cancelled (unaudited)		247,972			(247,972	)	$	0.35
Balance at June 30, 2006 (unaudited)		1,385,689			15,509,232		$	0.39

F-31

VERAZ NETWORKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

The following table summarizes information about options outstanding as of December 31, 2005:

				Weighted
				Average
				Remaining
		Number		Contractual		Options
Exercise Price		Outstanding		Life (in Years)		Exercisable
$	0.15		5,610,810		7.20		4,993,690
$	0.18		1,727,440		8.04		1,169,999
$	0.25		2,158,272		7.84		1,150,131
$	0.52		3,546,500		9.03		790,416
$	0.57		714,000		9.30		16,250
$	0.65		325,988		9.54		—
$	0.81		1,214,300		9.88		27,301
$	0.15-0.81		15,297,310		8.17		8,147,787

The weighted average exercise price of options exercisable at December 31, 2005 was $0.21 per share.

During 2003, the Company issued options to purchase 79,056 shares of Common Stock at a price of $0.15 per share to certain consultants, each of whom subsequently became employees of the Company. The Company recorded compensation charges of approximately $7,000 and $1,000 in 2003 and 2004, respectively, for options vested prior to employment, which was determined using the Black-Scholes pricing model, with the following assumptions: risk-free interest rates of 3.3% to 4.7%, expected volatility of 105% to 119%, dividend yield of 0% and expected term of 10 years. As of December 31, 2004, all of these options had been cancelled.

(14)   Segment and Geographic Information

SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is the Company’s Chief Executive Officer. The Chief Executive Officer reviews financial information presented on a consolidated basis, accompanied by information about revenue by geographic region for purposes of allocating resources and evaluating financial performance. The Company has one business activity and there are no segment managers who are held accountable for operations, operating results and plans for levels or components below the consolidated unit level. Accordingly, the Company is considered to be in a single reporting segment and operating unit structure.

F-32

VERAZ NETWORKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

Revenue by geography is based on the billing address of the customer. The following table sets forth revenue and long-lived assets by geographic area (in thousands):

							Six Months Ended
	Years Ended December 31,						June 30,
	2003		2004		2005		2005		2006
							(Unaudited)		(Unaudited)
Revenues:
Europe, Middle East and Africa	$	35,643	$	40,691	$	53,887	$	25,131	$	35,583
North America		12,375		14,002		13,248		6,719		6,069
Asia Pacific and India		9,714		13,029		6,666		4,444		1,711
Caribbean and Latin America		1,796		1,385		2,443		205		1,330
	$	59,528	$	69,107	$	76,244	$	36,499	$	44,693

							Six Months Ended
	Years Ended December 31,						June 30,
	2003		2004		2005		2005		2006
							(Unaudited)		(Unaudited)
Sales originating from:
United States	$	20,373	$	23,308	$	29,554	$	14,001	$	9,325
Israel		39,155		45,799		46,690		22,498		35,283
Other foreign countries		—		—		—		—		85
	$	59,528	$	69,107	$	76,244	$	36,499	$	44,693

	December 31,						June 30,
	2003		2004		2005		2006
							(Unaudited)
Long-lived assets, net:
United States	$	1,281	$	2,040	$	3,090	$	3,473
Israel		1,279		2,106		2,989		3,397
Other foreign countries		—		2		187		246
	$	2,560	$	4,148	$	6,266	$	7,116

(15)   Factoring

During the year ended December 31, 2005, and the six months ended June 30, 2006, the Company sold trade receivables to Israeli financial institutions in a total amount of $3,468,000 and $10,707,000, respectively. Control and risk of those trade receivables were fully transferred in accordance with SFAS No. 140 “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”.

F-33

VERAZ NETWORKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

(16)   Supplemental Disclosures

The following is supplemental disclosure of valuation and qualifying accounts (in thousands).

			Charges
	Beginning		(Reductions) to						Ending
	Balance		Operations			Write-Offs			Balance
Accounts receivable allowances
Year ended December 31, 2003	$	87		417			(20	)	$	484
Year ended December 31, 2004	$	484		1,217			(1,054	)	$	647
Year ended December 31, 2005	$	647		(44	)		(17	)	$	586
Six months ended June 30, 2006 (unaudited)	$	586		(69	)		—		$	517

F-34

Part II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

Item 13.   Other expenses of issuance and distribution

Set forth below is a table of the registration fee for the Securities and Exchange Commission, the filing fee for the National Association of Securities Dealers, Inc., the listing fee for the Nasdaq Global Market and estimates of all other expenses to be incurred in connection with the issuance and distribution of the securities described in the registration statement, other than underwriting discounts and commissions:

SEC registration fee	$	12,305
NASD filing fee		9,000
Nasdaq Global Market listing fee		150,000
Printing and engraving expenses		175,000
Legal fees and expenses		800,000
Accounting fees and expenses		*
Transfer agent and registrar fees		10,000
Miscellaneous		50,000
Total		*

* To be filed by amendment.

Item 14.   Indemnification of directors and officers

Our amended and restated certificate of incorporation contains provisions permitted under Delaware law relating to the liability of directors. These provisions eliminate a director’s personal liability for monetary damages resulting from a breach of fiduciary duty, except in circumstances involving wrongful acts, such as:

•  any breach of the director’s duty of loyalty;

•  acts or omissions which involve a lack of good faith, intentional misconduct or a knowing violation of the law;

•  payment of dividends or approval of stock repurchases or redemptions that are unlawful under Delaware law; or

•  any transaction from which the director derives an improper personal benefit.

These provisions do not limit or eliminate our rights or any stockholder’s rights to seek non-monetary relief, such as an injunction or rescission, in the event of a breach of director’s fiduciary duty. These provisions will not alter a director’s liability under federal securities laws.

As permitted by Section 145 of the Delaware General Corporation Law, our amended and restated bylaws require us to indemnify our directors and executive officers to the fullest extent not prohibited by the Delaware law. We may limit the extent of such indemnification by individual contracts with our directors and executive officers. Further, we may decline to indemnify any director or executive officer in connection with any proceeding initiated by such person or any proceeding by such person against us or our directors, officers, employees or other agents, unless such indemnification is expressly required to be made by law or the proceeding was authorized by our board of directors.

We have entered into indemnity agreements with each of our current and former directors and certain of our executive officers to give these directors and officers additional contractual assurances regarding the scope of the indemnification set forth in our amended and restated certificate of incorporation and bylaws and to provide additional procedural protections. At present, there is no pending litigation or proceeding

II-1

involving any of our directors, officers or employees for which indemnification is sought, nor are we aware of any threatened litigation that may result in claims for indemnification.

We have the power to indemnify our other officers, employees and other agents, as permitted by Delaware law, but we are not required to do so.

We maintain a directors’ and officers’ insurance and registrant reimbursement policy. The policy insures directors and officers against unindemnified losses arising from certain wrongful acts in their capacities as directors and officers and reimburses the registrant for those losses for which the registrant has lawfully indemnified the directors and officers. The policy contains various exclusions, none of which apply to this offering.

The underwriting agreement filed as Exhibit 1.1 to this registration statement provides for indemnification under certain circumstances by the underwriters of the Registrant and certain of its officers and directors for liabilities arising under the Securities Act of 1933, as amended, or otherwise.

At present, there is no pending litigation or proceeding involving any of our directors or officers where indemnification will be required or permitted. We are not aware of any threatened litigation or proceeding that might result in a claim for such indemnification.

Reference is made to the following documents filed as exhibits to this registration statement regarding relevant indemnification provisions described above and elsewhere herein:

Exhibit Document	Number
Form of Underwriting Agreement		1.1
Amended and Restated Certificate of Incorporation		3.1
Amended and Restated Bylaws		3.3
Amended and Restated Investor Rights Agreement		10.10
Form of Indemnity Agreement		10.36

Item 15.   Recent Sales of Unregistered Securities

The following list sets forth information regarding all securities sold by us since December 31, 2002 to December 31, 2005:

(1) We granted stock options and stock awards to approximately 312 employees, directors and consultants under our 2001 Equity Incentive Plan and our 2003 Israeli Share Option Plan covering an aggregate of 19,433,088 shares of common stock, at exercise prices ranging from $0.15 to $0.90 per share. Of these, options covering an aggregate of 2,887,260 were canceled without being exercised, and an aggregate of 2,552,609 shares were issued upon the exercise of stock options or issued in connection with stock awards granted.

(2) We granted stock options and stock awards to 13 employees and consultants outside of our 2001 Equity Incentive Plan and our 2003 Israeli Share Option Plan covering an aggregate of 349,760 shares of common stock, at exercise prices ranging from $0.18 to $0.25 per share. Of these, options covering an aggregate of 202,460 were canceled without being exercised, and no shares were issued upon the exercise of stock options or issued in connection with stock awards granted.

(3) In December 2002, we issued and sold an aggregate of 34,965,004 shares of Series C convertible preferred stock at a purchase price per share of $0.858 to 12 purchasers, for an aggregate purchase price of $29,999,973.43, net of amount allocated to the Series C convertible preferred stock issued to ECI Telecom, Ltd. in connection with our purchase of certain assets of ECI Telecom, Ltd.

(4) In December 2002, we issued an aggregate of 9,000,000 shares of Series B-1 redeemable preferred stock and 13,669,440 shares of common stock to ECI Telecom, Ltd. in connection with our purchase of certain assets of ECI Telecom, Ltd.

II-2

(5) In December 2002, we issued an aggregate of 5,000,048 shares of Series A-1 redeemable preferred stock and an aggregate of 9,080,480 shares of common stock to the holders of record of Series A preferred stock and Series B preferred stock in connection with the voluntary conversion of 12,974,738 shares of Series A preferred stock and 30,000,000 shares of Series B preferred stock.

(6) In December 2002, we issued one share of Series A-2 redeemable preferred stock and a warrant to purchase 32,450 shares of Series C convertible preferred stock at an exercise price per share of $0.858 to Comdisco Ventures, Inc. for an aggregate exercise price of $27,842.10.

We claimed exemption from registration under the Securities Act for the sales and issuances of securities in the transactions described in paragraphs 1 and 2 above by virtue of Section 4(2) of the Securities Act as transactions not involving any public offering or under Rule 701 promulgated under the Securities Act, in that they were offered and sold either pursuant to written compensatory plans or pursuant to a written contract relating to compensation, as provided by Rule 701.

We claimed exemption from registration under the Securities Act for the sales and issuances of securities in the transactions described in paragraphs 3, 4, 5 and 6 by virtue of Section 4(2) of the Securities Act and/or Regulation D promulgated thereunder as transactions not involving any public offering. We claim these exemptions on the basis that the purchasers in each case represented their intention to acquire the securities for investment only and not with view to or the distribution thereof and appropriate legends were affixed to the share certificates and instruments issued in such transactions. All recipients had adequate access, through their relationships with us, to information about us made without general solicitation or advertising and each purchaser was a sophisticated investor with access to all relevant information necessary to evaluate the investment and represented to us that the shares were being acquired for investment.

Item 16.   Exhibits and financial statement schedule

  (a)   Exhibits

Exhibit No.			Description
	1	.1	Form of Underwriting Agreement.*
	2	.1	Share Exchange Agreement, dated October 30, 2002, by and among ECI Telecom Ltd., ECI Telecom — NGTS Inc. and the Registrant.
	2	.2	Amendment No. 1 to the Share Exchange Agreement, dated December 31, 2002, by and among ECI Telecom Ltd., ECI Telecom — NGTS Inc. and the Registrant.
	3	.1	Amended and Restated Certificate of Incorporation.
	3	.2	Amended and Restated Certificate of Incorporation to be effective immediately following completion of this offering.
	3	.3	Bylaws.
	3	.4	Amended and Restated Bylaws to be effective immediately prior to completion of this offering.
	4	.1	Reference is made to Exhibits number 3.1, 3.2, 3.3 and 3.4.
	4	.2	Form of Specimen Stock Certificate.*
	5	.1	Opinion of Cooley Godward Kronish LLP.*
	10	.1	Warrant to Purchase Series C Preferred Stock, dated as of December 31, 2002, issued by the Registrant to Comdisco Ventures, Inc.
	10	.2	U.S. Separation and Asset Purchase Agreement, dated as of December 31, 2002, by and between ECI Telecom-NGTS Inc. and Veraz Networks International, Inc.
	10	.3	Separation and Assets Purchase Agreement, dated December 31, 2002, by and among ECI Telecom Ltd., ECI — Telecom NGTS, Ltd. and Veraz Networks Ltd.
	10	.4	DCME — Master Manufacturing and Distribution Agreement, dated as of December 31, 2002, by and among ECI Telecom Ltd, Veraz Networks Ltd. and the Registrant.
	10	.5	Trademark License Agreement, dated as of December 31, 2002, by and between the Registrant and ECI Telecom, Ltd.

II-3

Exhibit No.			Description
	10	.6	Intellectual Property License Agreement, made as of October 2002, by and among ECI Telecom Ltd., ECI Telecom — NGTS Ltd. and Veraz Networks, Ltd.
	10	.7	Intellectual Property Assignment Agreement, dated December 31, 2002, by and among ECI Telecom Ltd., ECI Telecom NGTS Ltd. and Veraz Networks, Ltd.
	10	.8	License Agreement, dated as of October 2002, by and between ECI Telecom Ltd. and Veraz Networks Ltd.
	10	.9	Assignment and Assumption Agreement, dated as of December 31, 2002, by and among ECI Telecom Ltd., ECI Telecom — NGTS Ltd. and the Veraz Networks, Ltd.
	10	.10	Assignment and Assumption Agreement, dated as of December 31, 2002, by and between ECI Telecom — NGTS Inc. and the Veraz Networks International, Inc.
	10	.11	Series C Preferred Stock Purchase Agreement, dated October 30, 2002, by and among the Registrant and the Purchasers listed on Exhibit A thereto.
	10	.12	Amended and Restated Investor Right Agreement, dated as of October 30, 2002, by and among the Registrant and the Investors listed on Exhibit A thereto.
	10	.13	Amended and Restated Voting Agreement, dated October 30, 2002, by and among the Registrant and the stockholders listed on Exhibit A and Exhibit B thereto.
	10	.14	2001 Equity Incentive Plan and forms of related agreements.
	10	.15	2003 Israeli Share Option Plan.
	10	.16	2006 Equity Incentive Plan and forms of related agreements.
	10	.17	2006 Employee Stock Purchase Plan.
	10	.18	Offer of Employment with the Registrant, dated as of November 17, 2004, by and between the Registrant and Doug Sabella.
	10	.19	Amendment to Offer of Employment with the Registrant, dated November 17, 2004, made by and between the Registrant and Doug Sabella, as of April 21, 2006.
	10	.20	Employment Agreement, dated as of November 20, 2001, by and between the Registrant and Amit Chawla and Personnel Action Notice, dated June 30, 2005.
	10	.21	Offer of Employment with the Registrant, dated April 13, 2005, by and between the Registrant and Al Wood.
	10	.22	Amendment to Offer of Employment with the Registrant, dated April 13, 2005, made by and between the Registrant and Al Wood, as of April 21, 2006.
	10	.23	Letter of Employment Agreement, dated January 1, 2003, by and between Veraz Networks, Ltd. and Israel Zohar.
	10	.24	Sublease Agreement, dated August 31, 2004. by and between the Registrant and ECI Telecom, Inc.
	10	.25	Amendment to Sublease Agreement, dated January 31, 2006. by and between the Registrant and ECI Telecom, Inc.
	10	.26	Standard Industrial/Commercial Multi-Tenant Lease — Net American Industrial Real Estate Association, dated December 2001, by and between the Registrant and Balch LLC.
	10	.27	Letter Amendment to Industrial Lease Agreement, dated April 15, 2002, issued by Balch LLC to the Registrant.
	10	.28	First Amendment to Industrial Lease Agreement, dated January 18, 2004, by and between the Registrant and Balch LLC.
	10	.29	Second Amendment to Industrial Lease Agreement, dated April 7, 2005, by and between the Registrant and Balch LLC.
	10	.30	Unprotected Lease Agreement, dated December 31, 2003, by and between Veraz Networks Ltd. and Amcol Engineering and Industrial Company Ltd.
	10	.31	Addendum to Unprotected Lease Agreement, dated November 3, 2005, by and between Veraz Networks Ltd. and Amcol Engineering and Industrial Company Ltd.
	10	.32	Letter, dated October 26, 2003, issued by ECI Telecom Ltd. and addressed to Veraz Networks Ltd.

II-4

Exhibit No.			Description
	10	.33	Letter, dated February 23, 2005, issued by Amcol Engineering and Industrial Company Ltd. and addressed to Veraz Networks Ltd.
	10	.34	Unprotected Lease Agreement, dated November 3, 2005, by and between Veraz Networks Ltd. and Amcol Engineering and Industrial Company Ltd.
	10	.35	Master Manufacturing Agreement dated October 1, 2005, by and between Flextronics (Israel), Ltd. and Veraz Networks Ltd.*
	10	.36	Form of Indemnity Agreement.
	16	.1	Letter re change in certifying accountant from PricewaterhouseCoopers LLP.
	23	.1	Consent of Independent Registered Public Accounting Firm.
	23	.2	Consent of Cooley Godward Kronish LLP. Reference is made to Exhibit 5.1.*
	24	.1	Power of Attorney. Reference is made to the signature page.

* To be filed by amendment.

Item 17.   Undertakings

Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the “Securities Act”) may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issues.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act, the information omitted from this form of prospectus filed as part of the registration statement in reliance upon Rule 430A and contained in this form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of the registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

The undersigned Registrant hereby undertakes to provide to the underwriters at the closing specified in the Underwriting Agreement, certificates in such denomination and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

II-5

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Jose, State of California on October 20, 2006.

VERAZ NETWORKS, INC.

By:  /s/  Douglas A. Sabella

Douglas A. Sabella

President and Chief Executive Officer

Power of attorney

Each director whose signature appears below authorizes Douglas A. Sabella and Albert J. Wood, or either of them, as his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, to execute in his name and on his behalf, in any and all capacities, this Registrant’s registration statement on Form S-1 relating to the common stock and any amendments thereto (and any additional registration statement related thereto permitted by Rule 462(b) promulgated under the Securities Act of 1933, and all further amendments, including post-effective amendments thereto), necessary or advisable to enable the registrant to comply with the Securities Act of 1933, as amended, and any rules, regulations and requirements of the Securities and Exchange Commission, in respect thereof, in connection with the registration of the securities which are the subject of such registration statement, which amendments may make such changes in such registration statement as such attorney may deem appropriate, and with full power and authority to perform and do any and all acts and things whatsoever which any such attorney or substitute may deem necessary or advisable to be performed or done in connection with any or all of the above-described matters, as fully as each of the undersigned could do if personally present and acting, hereby ratifying and approving all acts of any such attorney or substitute.

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  Douglas A. Sabella Douglas A. Sabella	President and Chief Executive Officer and Director	October 20, 2006
/s/  Albert J. Wood Albert J. Wood	Chief Financial Officer	October 20, 2006
/s/  Promod Haque Promod Haque	Chairman of the Board	October 20, 2006
/s/  Giora Bitan Giora Bitan	Director	October 20, 2006
/s/  Bob L. Corey Bob L. Corey	Director	October 20, 2006
/s/  Morgan Jones Morgan Jones	Director	October 20, 2006
/s/  Pascal Levensohn Pascal Levensohn	Director	October 20, 2006
/s/  Dror Nahumi Dror Nahumi	Director	October 20, 2006

II-6

EXHIBIT INDEX

Exhibit No.			Description
	1	.1	Form of Underwriting Agreement.*
	2	.1	Share Exchange Agreement, dated October 30, 2002, by and among ECI Telecom Ltd., ECI Telecom — NGTS Inc. and the Registrant.
	2	.2	Amendment No. 1 to the Share Exchange Agreement, dated December 31, 2002, by and among ECI Telecom Ltd., ECI Telecom — NGTS Inc. and the Registrant.
	3	.1	Amended and Restated Certificate of Incorporation.
	3	.2	Amended and Restated Certificate of Incorporation to be effective immediately following completion of this offering.
	3	.3	Bylaws.
	3	.4	Amended and Restated Bylaws to be effective immediately prior to completion of this offering.
	4	.1	Reference is made to Exhibits number 3.1, 3.2, 3.3 and 3.4
	4	.2	Form of Specimen Stock Certificate.*
	5	.1	Opinion of Cooley Godward Kronish LLP.*
	10	.1	Warrant to Purchase Series C Preferred Stock, dated as of December 31, 2002, issued by the Registrant to Comdisco Ventures, Inc.
	10	.2	U.S. Separation and Asset Purchase Agreement, dated as of December 31, 2002, by and between ECI Telecom-NGTS Inc. and Veraz Networks International, Inc.
	10	.3	Separation and Assets Purchase Agreement, dated December 31, 2002, by and among ECI Telecom Ltd., ECI — Telecom NGTS, Ltd. and Veraz Networks Ltd.
	10	.4	DCME — Master Manufacturing and Distribution Agreement, dated as of December 31, 2002, by and among ECI Telecom Ltd, Veraz Networks Ltd. and the Registrant.
	10	.5	Trademark License Agreement, dated as of December 31, 2002, by and between the Registrant and ECI Telecom, Ltd.
	10	.6	Intellectual Property License Agreement, made as of October 2002, by and among ECI Telecom Ltd., ECI Telecom — NGTS Ltd. and Veraz Networks, Ltd.
	10	.7	Intellectual Property Assignment Agreement, dated December 31, 2002, by and among ECI Telecom Ltd., ECI Telecom NGTS Ltd. and Veraz Networks, Ltd.
	10	.8	License Agreement, dated as of October 2002, by and between ECI Telecom Ltd. and Veraz Networks Ltd.
	10	.9	Assignment and Assumption Agreement, dated as of December 31, 2002, by and among ECI Telecom Ltd., ECI Telecom — NGTS Ltd. and the Veraz Networks, Ltd.
	10	.10	Assignment and Assumption Agreement, dated as of December 31, 2002, by and between ECI Telecom — NGTS Inc. and the Veraz Networks International, Inc.
	10	.11	Series C Preferred Stock Purchase Agreement, dated October 30, 2002, by and among the Registrant and the Purchasers listed on Exhibit A thereto.
	10	.12	Amended and Restated Investor Right Agreement, dated as of October 30, 2002, by and among the Registrant and the Investors listed on Exhibit A thereto.
	10	.13	Amended and Restated Voting Agreement, dated October 30, 2002, by and among the Registrant and the stockholders listed on Exhibit A and Exhibit B thereto.
	10	.14	2001 Equity Incentive Plan and forms of related agreements.
	10	.15	2003 Israeli Share Option Plan.
	10	.16	2006 Equity Incentive Plan and forms of related agreements.
	10	.17	2006 Employee Stock Purchase Plan.
	10	.18	Offer of Employment with the Registrant, dated as of November 17, 2004, by and between the Registrant and Doug Sabella.
	10	.19	Amendment to Offer of Employment with the Registrant, dated November 17, 2004, made by and between the Registrant and Doug Sabella, as of April 21, 2006.
	10	.20	Employment Agreement, dated as of November 20, 2001, by and between the Registrant and Amit Chawla and Personnel Action Notice, dated June 30, 2005.

Exhibit No.			Description
	10	.21	Offer of Employment with the Registrant, dated April 13, 2005, by and between the Registrant and Al Wood.
	10	.22	Amendment to Offer of Employment with the Registrant, dated April 13, 2005, made by and between the Registrant and Al Wood, as of April 21, 2006.
	10	.23	Letter of Employment Agreement, dated January 1, 2003, by and between Veraz Networks, Ltd. and Israel Zohar.
	10	.24	Sublease Agreement, dated August 31, 2004. by and between the Registrant and ECI Telecom, Inc.
	10	.25	Amendment to Sublease Agreement, dated January 31, 2006. by and between the Registrant and ECI Telecom, Inc.
	10	.26	Standard Industrial/Commercial Multi-Tenant Lease — Net American Industrial Real Estate Association, dated December 2001, by and between the Registrant and Balch LLC.
	10	.27	Letter Amendment to Industrial Lease Agreement, dated April 15, 2002, issued by Balch LLC to the Registrant.
	10	.28	First Amendment to Industrial Lease Agreement, dated January 18, 2004, by and between the Registrant and Balch LLC.
	10	.29	Second Amendment to Industrial Lease Agreement, dated April 7, 2005, by and between the Registrant and Balch LLC.
	10	.30	Unprotected Lease Agreement, dated December 31, 2003, by and between Veraz Networks Ltd. and Amcol Engineering and Industrial Company Ltd.
	10	.31	Addendum to Unprotected Lease Agreement, dated November 3, 2005, by and between Veraz Networks Ltd. and Amcol Engineering and Industrial Company Ltd.
	10	.32	Letter, dated October 26, 2003, issued by ECI Telecom Ltd. and addressed to Veraz Networks Ltd.
	10	.33	Letter, dated February 23, 2005, issued by Amcol Engineering and Industrial Company Ltd. and addressed to Veraz Networks Ltd.
	10	.34	Unprotected Lease Agreement, dated November 3, 2005, by and between Veraz Networks Ltd. and Amcol Engineering and Industrial Company Ltd.
	10	.35	Master Manufacturing Agreement dated October 1, 2005, by and between Flextronics (Israel), Ltd. and Veraz Networks Ltd.*
	10	.36	Form of Indemnity Agreement.
	16	.1	Letter re change in certifying accountant from PricewaterhouseCoopers LLP.
	23	.1	Consent of Independent Registered Public Accounting Firm.
	23	.2	Consent of Cooley Godward Kronish LLP. Reference is made to Exhibit 5.1.*
	24	.1	Power of Attorney. Reference is made to the signature page.

* To be filed by amendment.

EX-2.1

Exhibit 2.1

SHARE EXCHANGE AGREEMENT

among

ECI TELECOM LTD.,

ECI TELECOM — NGTS INC.,

and

NEXVERSE NETWORKS, INC.,

Dated October 30, 2002

Table of Contents

	Page
ARTICLE I            DEFINITIONS		3
SECTION 1.01 Certain Defined Terms		3
ARTICLE II SHARE EXCHANGE		7
SECTION 2.01 Exchange of Chorale Networks Israel Shares		7
SECTION 2.02 Exchange of Chorale Networks U.S. Shares		7
SECTION 2.03 Closing		8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLERS		9
SECTION 3.01 Organization and Qualification; Subsidiaries		9
SECTION 3.02 Certificate of Incorporation and Bylaws; Minutes		9
SECTION 3.03 Capitalization		10
SECTION 3.04 Authority Relative to This Agreement; Title to Shares		10
SECTION 3.05 No Conflicts; Consents		11
SECTION 3.06 Permits; Compliance with Laws		11
SECTION 3.07 Financial Statements; Undisclosed Liabilities		12
SECTION 3.08 Absence of Certain Changes or Events		12
SECTION 3.09 Employee Benefit Plans; Labor Matters		13
SECTION 3.10 Contracts		15
SECTION 3.11 Litigation		16
SECTION 3.12 Environmental Matters		17
SECTION 3.13 Intellectual Property		17
SECTION 3.14 Taxes		19
SECTION 3.15 Insurance		20
SECTION 3.16 Assets		21
SECTION 3.17 Affiliates		21
SECTION 3.18 Brokers		22
SECTION 3.19 Business Practices		22
SECTION 3.20 Business Activity Restriction		22
SECTION 3.21 Customers and Suppliers		22
SECTION 3.22 Employee Matters		23
SECTION 3.23 Investment Representation		23
SECTION 3.24 Full Disclosure		23
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF NEXVERSE		23
SECTION 4.01 Organization and Qualification; Subsidiaries		24
SECTION 4.02 Certificate of Incorporation and Bylaws; Minute Books		24
SECTION 4.03 Capitalization		24
SECTION 4.04 Authority Relative to this Agreement		25
SECTION 4.05 No Conflicts; Consents		26
SECTION 4.06 Permits; Compliance with Laws		26
SECTION 4.07 Financial Statements; Undisclosed Liabilities		26
SECTION 4.08 Absence of Certain Changes or Events		27
SECTION 4.09 Employee Benefit Plans; Labor Matters		28
SECTION 4.10 Contracts		31
SECTION 4.11 Litigation		32
SECTION 4.12 Environmental Matters		32
SECTION 4.13 Intellectual Property		32
SECTION 4.14 Taxes		34

-i-

Table of Contents
(continued)

	Page
SECTION 4.15 Insurance		36
SECTION 4.16 Properties		36
SECTION 4.17 Affiliates		36
SECTION 4.18 Brokers		37
SECTION 4.19 Business Practices		37
SECTION 4.20 Business Activity Restriction		37
SECTION 4.21 Customers and Suppliers		37
SECTION 4.22 Employee Matters		37
SECTION 4.23 Registration Rights and Voting Rights		38
SECTION 4.24 Investment Representation		38
SECTION 4.25 Full Disclosure		38
ARTICLE V COVENANTS		38
SECTION 5.01 Conduct of the Business Pending the Closing		38
SECTION 5.02 Conduct of Business by NexVerse Pending the Closing		40
SECTION 5.03 Notices of Certain Events		41
SECTION 5.04 Access to Information; Confidentiality		42
SECTION 5.05 No Solicitation of Transactions		42
SECTION 5.06 Further Action; Consents; Filings		43
SECTION 5.07 Public Announcements		43
SECTION 5.08 Line of Credit		43
SECTION 5.09 Employee Benefit Matters		43
SECTION 5.10 Grant of NexVerse Options to Employees of NGTS Israel and NGTS U.S.		44
ARTICLE VI CONDITIONS TO THE TRANSACTIONS		44
SECTION 6.01 Conditions to the Obligations of Each Party to Consummate the Transactions		44
SECTION 6.02 Conditions to the Obligations of the Sellers		45
SECTION 6.03 Conditions to the Obligations of NexVerse		46
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER		46
SECTION 7.01 Termination		46
SECTION 7.02 Effect of Termination		47
ARTICLE VIII INDEMNIFICATION		47
SECTION 8.01 Indemnification		47
SECTION 8.02 Limitations on Indemnification		48
SECTION 8.03 Procedures		49
SECTION 8.04 Exclusive Remedy		50
ARTICLE IX GENERAL PROVISIONS		50
SECTION 9.01 Survival		50
SECTION 9.02 Amendment Waivers		50
SECTION 9.03 Waiver		51
SECTION 9.04 Expenses		51
SECTION 9.05 Notices		51
SECTION 9.06 Severability		52
SECTION 9.07 Assignment; Binding Effect; Benefit		52
SECTION 9.08 Incorporation of Exhibits		52

-ii-

Table of Contents
(continued)

	Page
SECTION 9.09 Governing Law		52
SECTION 9.10 Waiver of Jury Trial		53
SECTION 9.11 Headings; Interpretation		53
SECTION 9.12 Counterparts		53
SECTION 9.13 Entire Agreement		53

EXHIBITS

Exhibit 1	Israeli Separation Agreement
Exhibit 2	U.S. Separation Agreement
Exhibit 3	DCME License Agreement
Exhibit 4	VoIP Grant-Back License Agreement
Exhibit 5	DCME Master Agreement
Exhibit 6	VoIP Agreement
Exhibit 7A	Support Agreement – Israel
Exhibit 7B	Support Agreement – U.S.
Exhibit 8	Trademark License Agreement
Exhibit 9	Line of Credit Agreement
Exhibit 10	Transferring Employees
Exhibit 11	Series C Financing Documents
Exhibit 11A	Escrow Agreement
Exhibit 12	Opinion of Cooley Godward LLP
Exhibit 13	Recapitalization Table
Exhibit 14	Opinion of Goldfarb, Levy, Eran & Co.
Exhibit 15	Opinion of Brobeck, Phleger & Harrison LLP
Exhibit 16	Form of Resolutions Electing Directors
Exhibit 17	Closing Options

-iii-

SHARE EXCHANGE AGREEMENT

     This SHARE EXCHANGE AGREEMENT, dated October 30, 2002 (as amended, supplemented or otherwise modified from time to time, this “Agreement”), is made by and among ECI Telecom Ltd., an Israeli corporation (“ECI”), ECI Telecom – NGTS Inc. (“NGTS U.S.” and together with ECI, the “Sellers”), a Delaware corporation and an indirect wholly-owned subsidiary of Ea, and NexVerse Networks, Inc., a Delaware corporation (“NexVerse”).

RECITALS

     WHEREAS, the Sellers wish to sell, and NexVerse wishes to purchase, certain operations of the business of ECI, ECI Telecom – NGTS Ltd., an Israeli corporation and wholly owned subsidiary of ECI (“NGTS Israel”), and NGTS U.S. related to the development, manufacture, marketing, sale, distribution and service of products and solutions for gateways for point-to-point, point-to-multipoint and/or switching and non-switching applications for connecting end-to-end telephony or telephony over packet networks, which gateways include classification and/or compression of telephony signals, such as voice, modem, fax and/or other signals, such as video conference, and conversion of the classified and/or compressed signals into packets in formats suitable for media, such as Ethernet, IP, ATM or MPLS Voice over Internet Protocol (the “VoIP Business”), including customer contracts, intellectual property rights, VoIP gateway inventory, prepaid maintenance funds and specified equipment, and the business of developing, marketing, selling, distributing and supporting ECI’s DCME product line, excluding DCME inventory, manufacturing assets and assets associated with Celtro, Inc. (“Celtro”) and the prepaid calling card business of the Sellers (together with the VoIP Business, the “Business”).

     WHEREAS, in order to effectuate the foregoing, immediately prior to the Closing, as defined in Section 2.03:

(1)	ECI and NGTS Israel will transfer to a newly created, wholly-owned subsidiary of ECI, Tonance Ltd. (“Chorale Networks Israel”), the assets (the “Israeli Assets”) described in the Separation and Asset Purchase Agreement, dated as of the Closing Date, as defined in Section 2.03 below, by and among ECI, NGTS Israel and Chorale Networks Israel, substantially in the form attached hereto. as Exhibit 1 (the “Israeli Separation Agreement”);
(2)	NGTS U.S. will transfer to a newly created, wholly-owned subsidiary, Chorale Networks International, Inc. (“Chorale Networks U.S.” and together with Chorale Networks Israel, the “Companies”), the assets (the “U.S. Assets” and together with the Israeli Assets, the “Assets”) described in the Separation and Asset Purchase Agreement, dated as of the Closing Date, by and between NGTS U.S. and Chorale Networks U.S., substantially in the form attached hereto as Exhibit 2 (the “U.S. Separation Agreement” and together with the Israeli Separation Agreement, the “Separation Agreements”);
(3)	ECI and NGTS Israel will enter into a license agreement with Chorale Networks Israel substantially in the form attached hereto as Exhibit 3 (the “Intellectual Property License Agreement”), pursuant to which ECI will grant (i) a perpetual royalty-free license to Chorale Networks Israel to use the intellectual property described therein (the “DCME IP”) to the extent necessary to develop, market, sell and support the DCME product line and (ii) a perpetual, royalty-free, exclusive license to use the DCME IP in connection with the development, manufacture, marketing and support of the VoIP product line by Chorale

1.

	Networks Israel, in each case as more fully described, and pursuant to the terms set forth therein; and
(4)	Chorale Networks Israel will enter into a license agreement with ECI substantially in the form attached hereto as Exhibit 4 (the “VoIP Grant-Back License Agreement”), pursuant to which Chorale Networks Israel will grant ECI a perpetual, non-transferable license to use the intellectual property described therein (the “VoIP IP”) pursuant to the terms therein.

     WHEREAS, at the Closing, ECI will transfer all of the issued and outstanding ordinary shares of Chorale Networks Israel to NexVerse and NGTS U.S. will transfer all of the issued and outstanding shares of common stock of Chorale Networks U.S. to NexVerse, in each case in exchange for shares of NexVerse Common Stock and Series B-1 Preferred Stock, as such terms are defined in Section 2.01, all upon the terms and conditions of this Agreement (the “Exchange Transaction”).

     WHEREAS, simultaneously with the Closing, the parties will enter into various agreements with respect to the Business, including:

(1)	ECI, Chorale Networks Israel, Chorale Networks U.S. and NexVerse will enter into an exclusive master manufacturing and distribution agreement relating to ECI’s DCME product line, substantially in the form attached hereto as Exhibit 5 (the “DCME Master Agreement”), pursuant to which ECI will manufacture the DCME products ordered by Chorale Networks Israel and Chorale Networks U.S. and provide service and maintenance on such products, all for the period and subject to the terms and conditions contained in the DCME Master Agreement;
(2)	ECI, Chorale Networks Israel, Chorale Networks U.S. and NexVerse will enter into a non-exclusive manufacturing and supply agreement relating to ECI’s provision of VoIP gateway products, substantially in the form attached hereto as Exhibit 6 (the “VoIP Agreement”);
(3)	ECI and Chorale Networks Israel will enter into a transitional support and services agreement, substantially in the form attached hereto as Exhibit 7A, and ECI Telecom, Inc., a Delaware corporation and indirect wholly-owned subsidiary of ECI, (“ECI Inc.”), and Chorale Networks U.S. will enter into a transitional support and services agreement, substantially in the form attached hereto as Exhibit 7B (together, the “Support Agreements”), relating to, among other things, the sublease of office space and the provision of services to support those employees of Sellers whose employment relates to the Business and who will be transferred to Chorale Networks Israel, Chorale Networks U.S. or NexVerse (the “Transferring Employees”);
(4)	ECI and NexVerse will enter into a license agreement, substantially in the form attached hereto as Exhibit 8 (the “Trademark License Agreement”), pursuant to which NexVerse will be permitted to use the ECI trademarks, service marks and trade names listed in the Trademark License Agreement to market itself as “an ECI Telecom Company” for a period and within the parameters set forth in the Trademark License Agreement; and
(5)	ECI, certain stockholders of NexVerse and certain other Persons will purchase from NexVerse, and NexVerse will issue and sell, an aggregate of at least

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$20,000,000 of shares of its Series C Preferred Stock, par value $0.001 per share (the “Series C Preferred Stock” and such issuance and sale, the “Series C Financing”). The Exchange Transaction and the other transactions described in these recitals are referred to in this Agreement collectively as the “Transactions.”

     NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements set forth herein, and other valuable consideration, the receipt and adequacy of which are hereby acknowledged, and intending to be legally bound hereby, the parties agree as follows:

ARTICLE I

DEFINITIONS

     SECTION 1.01 Certain Defined Terms

     Unless the context otherwise requires, the following terms, when used in this Agreement, shall have the respective meanings specified below (such meanings to be equally applicable to the singular and plural forms of the terms defined):

     “affiliate” shall mean, with respect to any person, any other person that controls, is controlled by or is under common control with the first person.

     “Blue Sky Laws” shall mean state securities or “blue sky” laws.

     “Broker Fees” shall mean any brokerage, finder’s or other similar fee or commission in connection with the Exchange Transaction.

     “business day” shall mean any day on which the principal offices of the SEC in Washington, D.C. are open to accept filings, or, in the case of determining a date when any payment is due, any day on which banks are not required or authorized by law or executive order to close in New York.

     “Company Intellectual Property” shall mean rights in all of the following, in the United States and throughout the world, that are owned or licensed by either of the Sellers or NGTS Israel and that are material to the Business: any patents (including, without limitation, all related patent applications, invention and patent disclosures, and any and all divisions, continuations, continuations-in-part, reissues, re-examinations and extensions thereof), design rights, trademarks, trade names and service marks, trade dress, logos, and any other source-identifying designations or devices, including any combinations and variations thereof, whether registered or unregistered, and all associated goodwill, Internet domain names, mask work rights and copyrights, whether registered or unregistered, and any renewal rights therefor, sui generis database rights, and rights in any trade secrets, know how, information technologies, inventions, statistical models, supplier lists, works-in-progress, concepts, methods, processes, reports, data, computer software programs or applications in both source and object code form, and related technical documentation (“Technical Documentation”), registrations and applications with respect to any of the foregoing and all other intangible proprietary rights.

     “Code” shall mean the U.S. Internal Revenue Code of 1986, as amended.

     “Companies Material Adverse Effect” shall mean any change in or effect on the Business that, individually or in the aggregate (taking into account all other such changes or effects), is, or

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is reasonably likely to be, materially adverse to the Assets or the results of operations of the Business, except that any change in or effect on the Assets or results of operations of the Business resulting from any of the following shall not constitute a Companies Material Adverse Effect: (1) events, changes or developments in worldwide, national or local political, economic or regulatory conditions or (2) any changes in law or accounting principles (and any resulting changes) that adversely affect businesses generally or the Companies’ industry generally and that do not specifically relate to or have a materially disproportionate effect on the Assets or results of operations of the Business.

          “Competing Transaction” shall mean, (x) with respect to the Sellers, any sale, lease, exchange, mortgage, pledge, transfer or other disposition of the Assets in a single transaction or series of transactions (other than pursuant to the Separation Agreements or the Exchange Transaction and except for sales of inventory in the ordinary course of business consistent with past practice) or any public announcement of a proposal, plan or intention to do the foregoing or any agreement to engage in the foregoing, and (y) with respect to NexVerse, any of the following (other than the Exchange Transaction):

          (i) any merger, consolidation, share exchange, business combination or other similar transaction;

          (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition of 10% or more of its assets in a single transaction or series of transactions;

          (iii) any person having acquired beneficial ownership or the right to acquire beneficial ownership of, or any “group” (as such term is defined under Section 13(d) of the Exchange Act) having been formed that beneficially owns or has the right to acquire beneficial ownership of, 20% or more of its outstanding voting securities; or

          (iv) any public announcement of a proposal, plan or intention to do any of the foregoing or any agreement to engage in any of the foregoing.

          “$” shall mean United States Dollars.

          “Environmental Law” shall mean any Law and any enforceable judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, relating to pollution or protection of the environment or natural resources, including, without limitation, those relating to the use, handling, transportation, treatment, storage, disposal, release or discharge of Hazardous Material, as in effect as of the date hereof.

          “Environmental Permit” shall mean any permit, approval, identification number, license or other authorization required under or issued pursuant to any applicable Environmental Law.

          “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

          “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, together with the rules and regulations promulgated thereunder.

          “Expenses” shall mean, with respect to any party hereto, all out-of-pocket expenses (including, without limitation, all fees and expenses of counsel, accountants, investment bankers, experts and consultants to a party hereto and its affiliates) incurred by such party or on its behalf in connection with or related to the authorization, preparation, negotiation, execution and performance of its obligations

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pursuant to this Agreement and the consummation of the Transactions and all other matters related to the transactions contemplated hereby and the closing of the Exchange Transaction; provided, that any Broker Fees shall not constitute Expenses.

     “GAAP” shall mean United States generally accepted accounting principles.

     “Governmental Entity” shall mean any United States Federal, state or local or any foreign governmental, regulatory or administrative authority, agency or commission or any court, tribunal or arbitral body.

     “Governmental Order” shall mean any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Entity.

     “Hazardous Material” shall mean (i) any petroleum, petroleum products, by-products or breakdown products, radioactive materials, asbestos-containing materials or polychlorinated biphenyls or (ii) any chemical, material or substance defined or regulated as toxic or hazardous or as a pollutant or contaminant or waste under any applicable Environmental Law.

     “IRS” shall mean the United States Internal Revenue Service.

     “Law” shall mean any Federal, state, foreign or local statute, law, ordinance, regulation, rule, code, order, judgment, decree, other requirement or rule of law of the United States or any other jurisdiction, and any other similar act or law.

     “Lien” shall mean any lien, pledge, mortgage, deed of trust, security interest, claim, lease, license, charge, option, right of first refusal, easement, servitude, transfer restriction, encumbrance or any other restriction or limitation whatsoever.

     “Memorandum of Understanding” shall mean the Summary of Terms entered into by and between ECI and NexVerse as of August 22, 2002.

     “NexVerse Disclosure Schedule” shall mean the disclosure schedules delivered by NexVerse to the Sellers prior to the execution of this Agreement and forming a part hereof.

     “NexVerse Intellectual Property” shall mean rights in all of the following, in the United States and throughout the world, that are material to the currently planned or proposed business of NexVerse: any patents (including, without limitation, all related patent applications, invention and patent disclosures, and any and all divisions, continuations, continuations-in-part, reissues, re-examinations and extensions thereof), design rights, trademarks, trade names and service marks, trade dress, logos, and any other source-identifying designations or devices, including any combinations and variations thereof, whether registered or unregistered, all associated goodwill, Internet domain names, mask work rights and copyrights, whether registered or unregistered, and any renewal rights therefor, sui generis database rights, and rights in any trade secrets, know how, information technologies, inventions, statistical models, supplier lists, works-in-progress, concepts, methods, processes, reports, data, computer software programs or applications in both source and object code form, Technical Documentation, registrations and applications with respect to any of the foregoing and all other intangible proprietary rights.

     “NexVerse Material Adverse Effect” shall mean any change in or effect on the business of NexVerse that, individually or in the aggregate (taking into account all other such changes or effects), is, or is reasonably likely to be, materially adverse to the business, assets, liabilities, financial condition or results of operations of NexVerse, except that any change in or effect on the foregoing resulting from any

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of the following shall not constitute a NexVerse Material Adverse Effect: (1) events, changes or developments in worldwide, national or local political, economic or regulatory conditions or (2) any changes in law or accounting principles (and any resulting changes) that adversely affect businesses generally or NexVerse’s industry generally and that do not specifically relate to or have a materially disproportionate effect on the business, assets, liabilities, financial condition or results of operations of NexVerse.

     “NexVerse Stock Plan” means the 2001 Equity Incentive Plan of NexVerse.

     “Person” shall mean an individual, corporation, partnership, limited partnership, limited liability company, limited liability partnership, syndicate, person (including, without limitation, a “person” as defined in Section 13(d)(3) of the Exchange Act), trust, association, entity or government or political subdivision, agency or instrumentality of a government.

     “Securities Act” shall mean the Securities Act of 1933, as amended, together with the rules and regulations promulgated thereunder.

     “SEC” shall mean the Securities and Exchange Commission.

     “Sellers’ Disclosure Schedule” shall mean the disclosure schedules delivered by the Sellers to NexVerse prior to the execution of this Agreement and forming a part hereof.

     “subsidiary” shall mean, with respect to any person, any corporation, partnership, limited partnership, limited liability company, limited liability partnership, joint venture or other legal entity of which such person (either alone or through or together with any other subsidiary of such person) owns, directly or indirectly, a majority of the stock or other equity interests.

     “Tax” shall mean (i) any and all taxes, fees, levies, duties, tariffs, imposts and other charges and assessments of any kind (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any Governmental Entity or taxing authority, including, without limitation, taxes or other charges on or with respect to income, franchises, windfall or other profits, gross receipts, net proceeds, real and personal property, sales, use, capital stock, payroll, employment, social security, workers’ compensation, unemployment compensation or net worth; taxes or other charges in the nature of excise, withholding, ad valorem, stamp, transfer, value-added or gains taxes; license, registration and documentation fees; and customers’ duties, tariffs and similar charges; (ii) any liability for the payment of any amounts of the type described in (i) as a result of being a member of an affiliated, combined, consolidated or unitary group for any taxable period; and (iii) any liability for the payment of amounts of the type described in (i) or (ii) as a result of being a transferee of, or a successor in interest to, any Person or as a result of an express or implied obligation to indemnify any person.

     “Tax Return” shall mean any return, report, statement or form (including, without limitation, any estimated tax reports or returns, withholding tax reports or returns and information reports or returns and any related or supporting information) filed or required to be filed with any Governmental Entity in connection with the determination, assessment or collection of any Taxes or the administration of any Law relating to Taxes.

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ARTICLE II

SHARE EXCHANGE

     SECTION 2.01 Exchange of Chorale Networks Israel Shares

     (a) Exchange of Shares. At the Closing, upon the terms and subject to the conditions of this Agreement and in reliance upon the representations, warranties and agreements contained herein, ECI shall transfer and convey to NexVerse, and NexVerse shall acquire from ECI, all of the issued and outstanding ordinary shares of Chorale Networks Israel, nominal value NIS 0.01 per share (the “Chorale Networks Israel Shares”), in exchange for an aggregate number of shares of Series B-1 Preferred Stock, par value $0.001 per share, of NexVerse (the “Series B-1 Preferred Stock”) and shares of common stock, par value $0.001 per share, of NexVerse (the “NexVerse Common Stock”) as provided by ECI to NexVerse in writing prior to the Closing; provided that such number of shares Series B-1 Preferred Stock shall not exceed 9,000,000 and such number of shares of NexVerse Common Stock shall not exceed 68,347,221 (collectively, the “NexVerse Shares - Israel”).

     (b) Issuance of NexVerse Israel Shares. At the Closing, upon the terms and subject to the conditions of this Agreement and in reliance upon the representations, warranties and agreements contained herein, NexVerse shall issue to ECI the NexVerse Shares – Israel.

     (c) Delivery of Chorale Networks Israel Shares. At the Closing, upon the terms and subject to the conditions of this Agreement and in reliance upon the representations, warranties and agreements contained herein, ECI shall deliver to NexVerse a certificate representing the Chorale Networks Israel Shares, constituting all of the issued and outstanding share capital of Chorale Networks Israel, duly endorsed in blank or accompanied by a share transfer deed duly executed in blank, in proper form for transfer.

     SECTION 2.02 Exchange of Chorale Networks U.S. Shares

     (a) Exchange of Shares. At the Closing, upon the terms and subject to the conditions of this Agreement and in reliance upon the representations, warranties and agreements contained herein, NGTS U.S. shall transfer and convey to NexVerse, and NexVerse shall acquire from NGTS U.S., all of the issued and outstanding common stock of Chorale Networks U.S., par value $0.01 per share (the “Chorale Networks U.S. Shares”), in exchange for an aggregate number of shares of Series B-I Preferred Stock and shares of NexVerse Common Stock equal to 9,000,000 less the number of shares issued to ECI pursuant to 2.01(a) above, in the case of Series B-1 Preferred Stock, and 68,347,221 less the number of shares issued to ECI pursuant to 2.01(a) above, in the case of NexVerse Common Stock (collectively, the “NexVerse Shares — U.S.”).

     (b) Issuance of NexVerse U.S. Shares. At the Closing, upon the terms and subject to the conditions of this Agreement and in reliance upon the representations, warranties and agreements contained herein, NexVerse shall issue to NGTS U.S. the NexVerse Shares -U.S.

     (c) Delivery of Chorale Networks U.S. Shares. At the Closing, upon the terms and subject to the conditions of this Agreement and in reliance upon the representations, warranties and agreements contained herein, NGTS U.S. shall deliver to NexVerse a certificate

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representing the Chorale Networks U.S. Shares, constituting all of the issued and outstanding capital stock of Chorale Networks U.S., duly endorsed in blank or accompanied by a stock power duly executed in blank, in proper form for transfer.

     SECTION 2.03 Closing

     (a) Closing. The closing of the exchange of the Chorale Networks Israel Shares for the NexVerse Shares — Israel and the exchange of the Chorale Networks U.S. Shares for the NexVerse Shares — U.S. contemplated hereby (the “Closing”) shall take place at the offices of Brobeck, Phleger & Harrison LLP, 1633 Broadway, New York, New York, at 10:00 a.m. New York time, on the third business day after the conditions to Closing set forth in Article VI have been satisfied, or such other time and date as the parties hereto may mutually agree; provided, that all of the conditions to Closing set forth in Article VI have been satisfied or waived by the party or parties entitled to waive them. The date on which the Closing occurs is referred to in this Agreement as the “Closing Date.”

     (b) Deliveries at Closing. At the Closing, the following agreements will be delivered, and the following transactions will be consummated, by the parties:

          (A) Separation Agreements. The Israeli Separation Agreement attached hereto as Exhibit 1, including all agreements attached as exhibits thereto, will be delivered by ECI, NGTS Israel, Chorale Networks Israel and NexVerse and the U.S. Separation Agreement attached hereto as Exhibit 2 will be delivered by NGTS U.S., Chorale Networks U.S., ECI and NexVerse, and the transactions contemplated by such agreements shall be completed;

          (B) DCME Master Agreement. The DCME Master Agreement attached hereto as Exhibit 5 will be delivered by ECI, Chorale Networks Israel, Chorale Networks U.S. and NexVerse;

          (C) Directions Regarding Release of Escrow. Simultaneously with the Closing, ECI, NexVerse and the Investor Representative will instruct the Escrow Agent to release the Escrow Property, including the Escrowed Funds and the signature pages to the Amended and Restated Investor Rights Agreement and the Amended and Restated Voting Agreement. Such agreements, the Amended and Restated Certificate of Incorporation of NexVerse and the Series C Stock Purchase Agreement are collectively referred to herein as the “Series C Financing Documents,” all of which shall be in substantially the forms attached hereto as Exhibit 11. All capitalized terms used in this subsection 2.03(b)(C) but not defined in this Agreement shall have the meanings given them in the Escrow Agreement attached hereto as Exhibit 11 A (the “Escrow Agreement”);

          (D) VoIP Agreement. The VOID Agreement attached hereto as Exhibit 6 will be delivered by ECI, Chorale Networks Israel, Chorale Networks U.S. and NexVerse;

          (E) Support Agreements. The Support Agreement attached hereto as Exhibit 7A will be delivered by ECI, Chorale Networks Israel and NexVerse, and the Support Agreement attached hereto as Exhibit 7B will be delivered by ECI Inc., Chorale Networks U.S., ECI and NexVerse;

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          (F) Trademark License Agreement. The Trademark License Agreement attached hereto as Exhibit 8 will be delivered by ECI and NexVerse;

          (G) Board of Directors. Resolutions attached hereto as Exhibit 16 electing Promod Hague, Pascal Levensohn, Morgan Jones, Amit Chawla, Tal Simchony, Giora Bitan, Barak Hachamov, one director designated by ECI prior to Closing (provided that such director is neither an officer nor director of ECI) and, if practicable, one independent director selected by the directors named herein to the board of directors of NexVerse will be delivered by the board of directors of NexVerse;

ARTICLE III

REPRESENTATIONS AND WARRANTIES
OF THE SELLERS

     The Sellers, jointly and severally, hereby represent and warrant to NexVerse, subject to the exceptions specifically disclosed in writing in the Sellers’ Disclosure Schedule, all such exceptions to be referenced to a specific representation set forth in this Article III (it being understood that all matters set forth in the Sellers’ Disclosure Schedule shall be deemed to be disclosed not only in connection with the representation and warranty specifically referenced on a given Schedule, but for all purposes relating to the representations and warranties of the Sellers set forth in this Article III so long as the relevance of such disclosure to any other representation or warranty is reasonably apparent to NexVerse from the terms of such disclosure), that:

     SECTION 3.01 Organization and Qualification; Subsidiaries

     (a) Each of Chorale Networks Israel and Chorale Networks U.S. has been duly organized and is validly existing and, to the extent applicable, in good standing under the laws of the jurisdiction of its incorporation or organization, as the case may be, and has the requisite corporate power and authority to own, lease and operate the properties it will hold as of the Closing and to carry on the portion of the Business that will be carried on by it as it is presently conducted and as it is proposed to be conducted. As of the Closing, each of Chorale Networks Israel and Chorale Networks U.S. will be duly qualified or licensed to do business, and, to the extent applicable, will be in good standing, in each jurisdiction where the character of the properties to be owned, leased or operated by it as of the Closing or the nature of its business as of the Closing makes such qualification or licensing necessary, except for such failures to be so qualified or licensed and in good standing that could not reasonably be expected to have, individually or in the aggregate, a Companies Material Adverse Effect.

     (b) As of the Closing, neither Chorale Networks Israel nor Chorale Networks U.S. will own an equity interest in any corporation, partnership or joint venture arrangement or other business entity.

     SECTION 3.02 Certificate of Incorporation and Bylaws; Minutes

     (a) Section 3.02(a) of the Sellers’ Disclosure Schedule contains true, complete and correct copies of the forms of Chorale Networks Israel’s articles and memorandum of association and Chorale Networks U.S.’s certificate of incorporation and bylaws that will be

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filed prior to the Closing. As of the Closing, such memorandum and articles of association and certificate of incorporation and bylaws will be in full force and effect. Neither Chorale Networks Israel nor Chorale Networks U.S. is, nor as of the Closing will be, in violation of any of the provisions of its articles or memorandum of association or certificate of incorporation or bylaws, as applicable.

     (b) True, complete and correct copies of all minutes of meetings of directors and shareholders and/or actions by written consent executed prior to the date hereof by the board of directors and shareholders of Chorale Networks Israel and Chorale Networks U.S. prior to Closing have been previously provided to NexVerse.

     SECTION 3.03 Capitalization

     (a) As of the Closing, the authorized share capital of Chorale Networks Israel will consist of 39,100 Chorale Networks Israel Shares. As of the Closing, 100 Chorale Networks Israel Shares will be issued and outstanding, all of which will have been duly authorized, validly issued to ECI, fully paid and nonassessable. As of the Closing, there will be no options, warrants or other rights, agreements, arrangements or commitments of any character to which Chorale Networks Israel is a party or by which Chorale Networks Israel is bound relating to issued or unissued Chorale Networks Israel Shares, or any other share capital or other equity interests of Chorale Networks Israel, or obligating Chorale Networks Israel to issue or sell any Chorale Networks Israel Shares, or any other share capital of Chorale Networks Israel. As of the Closing, there will be no outstanding contractual obligations of Chorale Networks Israel to repurchase, redeem or otherwise acquire any Chorale Networks Israel Shares, or any other share capital of Chorale Networks Israel, or outstanding contractual obligations of Chorale Networks Israel to provide funds to, or make any material investment (in the form of a loan, capital contribution or otherwise) in, any other Person.

     (b) As of the Closing, the authorized capital stock of Chorale Networks U.S. will consist of 1000 Chorale Networks U.S. Shares. As of the Closing, 1000 Chorale Networks U.S. Shares will be issued and outstanding, all of which will have been duly authorized, validly issued to NGTS U.S., fully paid and nonassessable. As of the Closing, there will be no options, warrants or other rights, agreements, arrangements or commitments of any character to which Chorale Networks U.S. is a party or by which Chorale Networks U.S. is bound relating to the issued or unissued capital stock of Chorale Networks U.S. or obligating Chorale Networks U.S. to issue or sell any shares of capital stock of, or other equity interests in Chorale Networks U.S. As of the Closing, there will be no outstanding contractual obligations of Chorale Networks U.S. to repurchase, redeem or otherwise acquire any Chorale Networks U.S. Shares, or any other capital stock of Chorale Networks U.S., and no outstanding contractual obligations of Chorale Networks U.S. to provide funds to, or make any material investment (in the form of a loan, capital contribution or otherwise) in, any other Person.

     SECTION 3.04 Authority Relative to This Agreement; Title to Shares

     (a) Each of the Sellers has all necessary corporate power and authority to execute and deliver this Agreement. to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by each of the

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Sellers and the consummation by the Sellers of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action, and no other corporate proceedings on the part of the Sellers are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by the Sellers and, assuming the due authorization, execution and delivery by NexVerse, constitutes a legal, valid and binding obligation of each of the Sellers, enforceable against each of them in accordance with its terms, except to the extent that its enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other laws affecting the enforcement of creditors’ rights generally or by general equitable principles.

     (b) As of the Closing, ECI will own beneficially and of record, free and clear of any Lien, and has full power and authority to convey free and clear of any Lien, the Chorale Networks Israel Shares and, upon receipt of the NexVerse Shares — Israel at the Closing as herein provided, ECI will convey to NexVerse good and valid title thereto, free and clear of any Lien.

     (c) As of the Closing, NGTS U.S. will own beneficially and of record, free and clear of any Lien, and has full power and authority to convey free and clear of any Lien, the Chorale Networks U.S. Shares and, upon receipt of the NexVerse Shares — U.S. at the Closing as herein provided, NGTS U.S. will convey to NexVerse good and valid title thereto, free and clear of any Lien.

     SECTION 3.05 No Conflicts; Consents

     Except as could not reasonably be expected to have an adverse effect on the Transactions, the Business or the Assets, the execution and delivery of this Agreement by each of the Sellers do not, and the performance by each of the Sellers of their respective obligations hereunder and the consummation of the Exchange Transaction will not, (i) conflict with or violate any provision of the memorandum or articles of association of ECI or the certificate of incorporation or bylaws of NGTS U.S., as applicable, (ii) conflict with or violate any Law applicable to either Seller or either Company or by which any material property or asset of ECI or NGTS U.S. is bound or affected, (iii) require either Seller to obtain any consents, approvals, authorizations or actions of, or make any filings with or give any notices to, any Governmental Entity or any other Person, except as set forth in Section 3.05 of the Sellers’ Disclosure Schedule (the “Seller Consents”) or (iv) if the Seller Consents are obtained, result in any breach of or constitute a default (or an event which with the giving of notice or lapse of time or both could reasonably be expected to become a default) under, or give to others any right of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or other encumbrance on any of the Assets pursuant to, any note, bond, mortgage, indenture, contract, . agreement, lease, license, permit, franchise or other instrument or obligation to which either Seller or either Company is a party or by which any of them are bound.

     SECTION 3.06 Permits; Compliance with Laws

     Each of the Sellers and NGTS Israel is, and as of the Closing each of the Companies will be, in possession of all material franchises, grants, authorizations, licenses, establishment registrations, product listings, permits, easements, variances, exceptions, consents, certificates, identification and registration numbers, approvals and orders of any Governmental Entity necessary for the operation of the Business in substantially the same manner as it is now being conducted (collectively, the “Business Permits”), and, as of the date of this Agreement, none of the Business Permits has been suspended or cancelled nor is any such suspension or cancellation pending or, to the knowledge of either Seller,

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threatened. Neither Seller nor NGTS Israel is, nor at the Closing will either Company be, in conflict with, or in default or violation of, (i) any material Law applicable to the Business or by which any of the Assets is bound or affected or (ii) any Business Permits. There are no actions, proceedings, investigations or surveys pending or, to the knowledge of either Seller, threatened against either Seller, NGTS Israel or either Company that could reasonably be expected to result in the suspension or cancellation of any Business Permit. Neither Seller, NGTS Israel nor either Company, has received from any Governmental Entity any written notification with respect to possible conflicts, defaults or violations of Laws applicable to the Business or the Assets. The consummation of the Transactions will not result in the suspension or cancellation of any Business Permit.

     SECTION 3.07 Financial Statements; Undisclosed Liabilities

     (a) Note 17 (Supplementary Financial Statement Information) to ECI’s Consolidated Financial Statements as at December 31, 2001, contained in ECI’s Annual Report on Form 20-F, filed with the SEC on June 28, 2002, includes segment information relating to the operations of NGTS Israel and NGTS U.S. (collectively, “NGTS”) for the year ended December 31, 2001, including information related to the profit and loss of NGTS for such period and the assets identified to NGTS (the “NGTS Segment Information”) in accordance with SFAS 131, “Disclosure about Segments of an Enterprise and Related Information.” The NGTS Segment Information: (i) presents fairly the profit and loss of NGTS for such period; and (ii) is correct and complete in all material respects, and can be reconciled with the books of account and records of NGTS and ECI. ECI maintains with respect to NGTS an adequate system of internal controls established and administered in accordance with GAAP.

     (b) Except as set forth on Section 3.07 of the Sellers’ Disclosure Schedule, as of the Closing, the Companies will not have any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) related to the Business except for liabilities associated with the performance of contracts to which either Company is then a party.

     SECTION 3.08 Absence of Certain Changes or Events

     Since December 31, 2001, the Sellers and NGTS Israel have conducted the Business only in the ordinary course consistent with past practice and, since such date, there has not been with respect to the Business, other than as set forth in ECI’s annual report on Form 20—F, filed with the SEC on June 28, 2002, or in press releases filed with the SEC from time to time on Form 6-K:

     (i) any Companies Material Adverse Effect;

     (ii) any event that could reasonably be expected to prevent or materially delay the performance of either Seller’s obligations pursuant to this Agreement;

     (iii) any material increase in the compensation or benefits or establishment of any bonus, insurance, severance, deferred compensation, pension, retirement, profit sharing, or other employee benefit plan, or any other material increase in the compensation payable or to become payable to any of the Transferring Employees;

     (iv) any (a) purchase, sale, assignment, license, lease or transfer of any material assets used in the Business, other than in the ordinary course of business consistent with past practice, (b) mortgage, pledge or existence of any Lien, on any material assets or properties,

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tangible or intangible, used in the Business or (c) waiver of any rights of material value that relate to the business or cancellation of any material debts or claims that relate to the Business;

     (v) any incurrence of any damage, destruction or similar loss, whether or not covered by insurance, materially affecting the Business or Assets;

     (vi) any entering into any transaction of a material nature in connection with the Business other than in the ordinary course of business, consistent with past practice; or

     (vii) any negotiation or agreement by the Sellers to do any of the things described in the preceding clauses (i) through (vi).

     SECTION 3.09 Employee Benefit Plans; Labor Matters

     (a) Section 3.09(a) of the Sellers’ Disclosure Schedule lists each employee benefit fund, plan, program, arrangement and contract (including, without limitation, any “pension” plan, fund or program, as defined in Section 3(2) of ERISA, and any “employee benefit plan”, as defined in Section 3(3) of ERISA, and any plan, program, arrangement or contract providing for severance; medical, dental or vision benefits; life insurance or death benefits; disability benefits, sick pay or other wage replacement; vacation, holiday or sabbatical; pension or profit-sharing benefits; stock options or other equity compensation; bonus or incentive pay or other material fringe benefits), whether written or not, maintained, sponsored or contributed to, or required to be contributed to, by either Seller or an affiliate of either Seller, in all cases only to the extent that any Transferring Employee is or may be entitled to any benefit under any such plan (each, a “Company Benefit Plan”). With respect to each Company Benefit Plan, Seller has delivered or made available to NexVerse a true, complete and correct copy of (i) such Company Benefit Plan (or, if not written, a written summary of its material terms) and the most recent summary plan description, if any, related to such Company Benefit Plan, (ii) each trust agreement or other funding arrangement relating to such Company Benefit Plan, (iii) the most recent annual report (Form 5500) filed with the IRS with respect to such Company Benefit Plan (and, if the most recent annual report is a Form 5500R, the most recent Form 5500C filed with respect to such Company Benefit Plan), (iv) the most recent actuarial report or financial statement relating to such Company Benefit Plan and (v) the most recent determination letter, if any, issued by the IRS with respect to such Company Benefit Plan and any pending request for such a determination letter. Neither Seller, nor to the knowledge of either Seller, any other person or entity, has any express or implied commitment, whether legally enforceable or not, to modify, change or terminate any Company Benefit Plan in such a way as would have any adverse effect on any Transferring Employee, other than with respect to a modification, change or termination required by ERISA or the Code.

     (b) As of the Closing, no Transferring Employee shall be able to receive benefits under any Company Benefit Plan and neither Company shall have any liability under any Company Benefit Plan.

     (c) Each Company Benefit Plan which is intended to qualify under Section 401(a), Section 401(k), Section 401(m) or Section 4975(e)(6) of the Code has received a favorable determination letter from the IRS as to its qualified status, and to the knowledge of the

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Sellers, no fact or event has occurred that could adversely affect the qualified status of any such Company Benefit Plan or the exempt status of any such trust. Any Company Benefit Plan that is a Section 401(k) plan has been run in material compliance with all applicable laws and any accounts of a Transferring Employee under such 401(k) plan will be eligible rollover distributions.

     (d) No Company Benefit Plan is a multiemployer pension plan (as defined in Section 3(37) of ERISA) or other pension plan subject to Title IV of ERISA and neither Seller nor any other trade or business (whether or not incorporated) that is under “common control” with either Seller (within the meaning of ERISA Section 4001) or with respect to which either Seller could otherwise incur liability under Title IV of ERISA (a “Seller ERISA Affiliate”) has sponsored or contributed to or been required to contribute to a multiemployer pension plan or other pension plan subject to Title IV of ERISA, except as could not reasonably be expected to have an adverse effect on the Business or Assets. No material liability under Title IV of ERISA has been incurred by either Seller or any Seller ERISA Affiliate that has not been satisfied in full, and no condition exists that presents a material risk to either Seller or any Seller ERISA Affiliate of incurring or being subject (whether primarily, jointly or secondarily) to a material liability thereunder, except as could not reasonably be expected to have an adverse effect on the Business or Assets. None of the assets of either Seller or any Seller ERISA Affiliate is or may reasonably be expected to become, the subject of any lien arising under ERISA or Section 412(n) of the Code, except as could not reasonably be expected to have an adverse effect on the Business or Assets or any Transferring Employee.

     (e) Set forth in Section 3.09(e) of the Sellers’ Disclosure Schedule are (i) all employment and consulting agreements to which any Transferring Employee and either Company will be a party as of the Closing, (ii) all severance plans, agreements, programs and policies of the Sellers with or relating to any Transferring Employees and (iii) all plans, programs, agreements and other arrangements of either Seller with or relating to any Transferring Employees which contain “change of control” provisions. No payment or benefit which may be required to be made by either Seller or which otherwise may be required to be made under the terms of any Company Benefit Plan or other arrangement will constitute a parachute payment under Section 280(G)(1) of the Code, and the consummation of the transactions contemplated by this Agreement will not, alone or in conjunction with any other possible event (including termination of employment), (i) entitle any Transferring Employee or other service provider of either Company as of the Closing to severance benefits or any other payment, compensation or benefit (including forgiveness of indebtedness), or (ii) accelerate the time of payment or vesting, or increase the amount of compensation or benefit due any such Transferring Employee or service provider.

     (f) Except as set forth in Section 3.09(f) of the Sellers’ Disclosure Schedule, as of the Closing neither Company will be a party to or have any obligations under or with respect to, any collective bargaining or other labor union contract applicable to persons employed by it and no collective bargaining agreement is being negotiated by either Seller or any Person that may obligate either Company thereunder. As of the date of this Agreement, there is no labor dispute, strike, union organizing activity or work stoppage against either Seller, NGTS Israel or Company which has an adverse impact on the operation of the Business pending or, to the knowledge of either Seller, threatened which may interfere with the Business. As of the date

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of this Agreement, to the knowledge of either Seller, neither Seller, NGTS Israel and neither Company, nor any of their respective representatives or employees, has committed any unfair labor practice in connection with the operation of the Business, and there is no charge or complaint filed against either Seller or NGTS Israel by or with the National Labor Relations Board or any comparable Governmental Entity pending or threatened in writing that relates to the Business or the Assets.

          (g) Except as set forth in Section 3.09(g) of the Sellers’ Disclosure Schedule, no Company Benefit Plan provides any retiree or post-employment benefits to any Transferring Employee. To the knowledge of the Sellers, insofar as it relates to the Business, the Sellers, NGTS Israel and the Companies are in compliance with (i) the requirements of the applicable health care continuation and notice provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) and (ii) the applicable requirements of the Health Insurance Portability and Accountability Act of 1996, as amended, except as could not reasonably be expected to have an adverse effect on the Business or the Assets.

          SECTION 3.10 Contracts

          Except for the contracts and agreements described in Section 3.10 of the Sellers’ Disclosure Schedule (collectively, the “Company Material Contracts”), with respect to the Business neither of the Sellers nor NGTS Israel is, and as of the Closing, neither Company will be, a party to or bound by any contract or agreement described below:

          (a) any sales, advertising or agency contract in excess of $25,000 over the life of the contract;

          (b) any continuing contract for the purchase of materials, supplies, equipment or services involving in the case of any such contact more than $25,000 over the life of the contract;

          (c) any contract that expires or may be renewed at the option of any person other than either Company so as to expire more than one year after the date of this Agreement;

          (d) any trust indenture, mortgage, promissory note, loan agreement or other contract for the borrowing of money, any currency exchange, commodities or other hedging arrangement or any leasing transaction of the type required to be capitalized in accordance with GAAP;

          (e) any contract for capital expenditures in excess of $10,000 in the aggregate;

          (f) any contract limiting the freedom of either Company to engage in any line of business or to compete with any other corporation, partnership, limited liability company, trust, individual or other entity, or any confidentiality, secrecy or nondisclosure contract, except for the non-competition provisions contained in the VoIP License Agreement;

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          (g) any contract pursuant to which either Company is a lessee of any machinery, equipment, motor vehicles, office furniture, fixtures or other personal property, pursuant to which payments in excess of $25,000 remain outstanding;

          (h) any contract with an affiliate, except for the contracts contemplated by this Agreement;

          (i) any agreement of guarantee, support, indemnification, assumption or endorsement of, or any similar commitment with respect to, the obligations, liabilities (whether accrued, absolute, contingent or otherwise) or indebtedness of any other person;

          (j) any Company License Agreement, as such term is defined in Section 3.I3(b), or any license or other agreement pursuant to which a third party uses any Company Intellectual Property;

          (k) any distribution contract; or

          (l) any employment contract, arrangement or policy (including without limitation any collective bargaining contract or union agreement) with a Transferring Employee which may not be immediately terminated without penalty (or any augmentation or acceleration of benefits).

          Each of the Sellers, NGTS Israel and the Companies, as applicable, has performed all of the obligations required to be performed by it and is entitled to all benefits under, and is not alleged to be in default in respect of any Company Material Contract. Each of the Company Material Contracts is valid and binding and in full force and effect, and there exists no default or event of default or event, occurrence, condition or act, with respect to either Seller, NGTS Israel or to the knowledge of either Seller, with respect to any other contracting party, which, with the giving of notice, the lapse of the time or the happening of any other event or conditions, would become a default or event of default under any Company Material Contract. True, correct and complete copies of all Company Material Contracts have been delivered to NexVerse.

          SECTION 3.11 Litigation

          Except as set forth in Section 3.11 of the Sellers’ Disclosure Schedule, there is no private or governmental action, suit, proceeding, claim, arbitration or investigation pending before any agency, court or tribunal, foreign or domestic, or, to the knowledge of either Seller, threatened against either Seller, NGTS Israel or Company with respect to the Business or the Assets or any of the Transferring Employees (in their capacities as employees of Sellers, NGTS Israel and/or the Companies). Neither Seller is aware of any facts or circumstances which could reasonably be expected to result in the denial of otherwise applicable insurance coverage under policies issued to either Seller in respect of any such suits, claims, actions, proceedings and investigations. There is no judgment, decree or order against either Seller, NGTS Israel or, to the knowledge of either Seller, any of the Transferring Employees (in their capacities as employees of Sellers, NGTS Israel and/or the Companies), that could prevent, enjoin, or materially alter or delay any of the transactions contemplated by this Agreement, or that could reasonably be expected to have a Companies Material Adverse Effect. Section 3.11 of the Sellers’ Disclosure Schedule also lists all litigation that the Sellers have pending against other parties with respect to the Business or the Assets.

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     SECTION 3.12 Environmental Matters

     Each Seller, NGTS Israel and Company is in compliance in all material respects with all Environmental Laws applicable to the Business or the Assets and all Business Permits required by such Environmental Laws (“Environmental Permits”). All past noncompliance, if any, of the Sellers with such Environmental Laws or Environmental Permits has been resolved without any pending, ongoing or future obligation, cost or liability. Neither Seller or NGTS Israel has released a Hazardous Material at, or transported a Hazardous Material to or from, any real property currently or formerly owned, leased or occupied by either Seller, NGTS Israel or Company, in violation of any Environmental Law, except as could not reasonably be expected to have an adverse effect on the Business or Assets.

     SECTION 3.13 Intellectual Property

     (a) Section 3.13(a) of the Sellers’ Disclosure Schedule contains a true and complete list of the Sellers’ and NGTS Israel’s and, as of the Closing, the Companies’ patents, patent applications, registered and unregistered trademarks, trademark applications, trade names, registered and unregistered service marks, service mark applications, service marks, Internet domain names, Internet domain name applications, and copyright registrations and applications included in the Company Intellectual Property and all other filings and formal actions made or taken pursuant to Federal, state, local and foreign laws by the Sellers and NGTS Israel to protect their interests in the Company Intellectual Property, and includes details of all due dates for further filings, maintenance, payments or other actions falling due in respect of the Company Intellectual Property within twelve (12) months of the Closing Date. All of the Sellers’ and NGTS Israel’s and, as of the Closing, the Companies’ patents, patent applications, registered trademarks, trademark applications and registered copyrights set forth in Section 3.13(a) of the Sellers’ Disclosure Schedule remain in good standing with respect to all fees and filings due as of the date hereof.

     (b) The Company Intellectual Property contains only those items and rights which are: (i) owned by the Sellers and NGTS Israel and, as of the Closing, the Companies; (ii) in the public domain; or (iii) rightfully used by the Sellers and NGTS Israel and, as of the Closing, the Companies, pursuant to a valid and enforceable license or other agreement (the “Company Licensed Intellectual Property”), the title, parties, date, term and subject matter of each such license or other agreement (each, a “Company License Agreement”) being set forth on Section 3.13(b) of the Sellers’ Disclosure Schedule. The Sellers or NGTS Israel have and, as of the Closing, the Companies will have, all rights in the Company Intellectual Property, which includes all rights necessary to carry out the Business and the Sellers’ and NGTS Israel’s and, as of the Closing, the Companies’, future activities relating to the Business, to the extent such future activities are proposed to be conducted, including without limitation, to the extent required to carry out such activities, rights to make, use, reproduce, modify, adapt, create derivative works based on, translate, distribute (directly and indirectly), transmit, display and perform publicly, license, rent lease, import and export and, other than with respect to the Company Licensed Intellectual Property, assign, sell and offer for sale, the Company Intellectual Property.

     (c) The reproduction, manufacturing, distribution, licensing, sublicensing, sale or any other exercise of rights in any Company Intellectual Property as now used or offered or proposed for use, licensing or sale by Sellers or NGTS Israel and, as of the Closing, the Companies, does not, to the knowledge of the Sellers, infringe on any proprietary or personal

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right of any person, including any rights in any patent, industrial design, trademark, trade name, service mark, trade dress, Internet domain name, copyright, database, or trade secret of any person, anywhere in the world. The Sellers have not received notice of any pending or threatened claims (including offers to grant licenses) (i) challenging the validity, effectiveness or, other than with respect to the Company Licensed Intellectual Property, ownership by the Sellers or NGTS Israel of any Company Intellectual Property, or (ii) to the effect that the use, distribution, licensing, sublicensing, sale or any other exercise of rights in any product, work, technology or process as now used or offered or proposed for use, licensing, sublicensing or sale in connection with the operation of the Business infringes or will infringe on or misappropriate any intellectual property or other proprietary or personal right of any person. To the knowledge of the Sellers, (a) no such claims have been threatened by any person, and (b) there are no valid grounds for any bona fide claim of any such kind. To the Seller’s knowledge, all of the rights within the Company Intellectual Property are enforceable and subsisting. To the knowledge of the Sellers, there is no unauthorized use, infringement or misappropriation of any Company Intellectual Property by any third party, employee or former employee.

     (d) Except as disclosed in Section 3.13(d) of the Company Disclosure Schedule, all personnel, including employees, agents, consultants and contractors, who have contributed to or participated in the conception and development of the Company Intellectual Property on behalf of the Sellers, NGTS Israel or an affiliate of Sellers, have executed nondisclosure agreements and either (i) have been a party to an enforceable agreement with the Sellers, NGTS Israel or an affiliate of Sellers in accordance with applicable national and state law that accords the Sellers, NGTS Israel and, as of the Closing, the Companies, full, effective, exclusive and original ownership of all tangible and intangible property as “works-for-hire,” arising from the efforts of such personnel, or (ii) have executed appropriate instruments of assignment in favor of the Sellers, NGTS Israel or an affiliate of Sellers that have conveyed to the Sellers, NGTS Israel or an affiliate of Sellers and, as of the Closing, will have conveyed to the Companies, full, effective and exclusive ownership of all tangible and intangible property arising from the efforts of such personnel, or (iii) otherwise have by operation of law vested in the Sellers, NGTS Israel or an affiliate of Sellers or, as of the Closing, the Companies, all right, title and interest in all such Company Intellectual Property by virtue of their employment relationship with the Sellers, NGTS Israel or an affiliate of Sellers.

     (e) Neither of the Sellers or NGTS Israel is, nor as a result of the execution or delivery of this Agreement, or the performance by the Sellers of their obligations hereunder, will the Sellers, NGTS Israel or the Companies be, in violation of any license, sublicense, agreement or instrument to which the Sellers or NGTS Israel are, or as of the Closing, the Companies will be, a party or otherwise bound, nor will execution or delivery of this Agreement, or performance by the Sellers of their obligations hereunder, cause the diminution, termination or forfeiture of any the Company Intellectual Property.

     (f) Section 3.13(f) of the Sellers’ Disclosure Schedule contains a true and complete list of all the Sellers’ and NGTS Israel’s computer software programs included within the Company Intellectual Property, whether in source code, object code or human readable form, other than any fully-paid off-the-shelf software programs (the “Company Software Programs”). The Sellers and NGTS Israel have, and as of the Closing, the Companies will have, full and

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unrestricted rights to use the Company Software Programs that they license, pursuant to license agreements listed in Section 3.13(b) of the Sellers’ Disclosure Schedule.

     (g) To the knowledge of the Sellers, the source code and system documentation relating to the Company Software Programs have been maintained in strict confidence and (i) have been disclosed by each of the Sellers, NGTS Israel or affiliates of Sellers only to those of its employees who have a “need to know” the contents thereof in connection with the performance of their duties and who have executed nondisclosure agreements with the Sellers, NGTS Israel or an affiliate of Sellers, as appropriate, and (ii) have been disclosed to only those third parties who have executed nondisclosure agreements with the Sellers, NGTS Israel or an affiliate of Sellers.

     (h) Except as set forth in Section 3.13(h) of the Sellers’ Disclosure Schedule, the Company Software Programs and the Company Intellectual Property are free and clear of any and all Liens.

     (i) Except as set forth in Section 3.13(i) of the Sellers’ Disclosure Schedule, the Sellers and NGTS Israel do not, and as of the Closing, the Companies will not, owe nor will they owe any royalties or other payments to third parties in respect of the Company Intellectual Property. All such royalties or other payments that have accrued prior to the Closing have been paid.

     (j) It is the Sellers’ and NGTS Israel’s practice to scan, with commercially available virus scan software, the Company Intellectual Property listed in Section 3.13(f) of the Sellers’ Disclosure Schedule that are capable of being scanned for “viruses”, and, to the knowledge of the Sellers, the Company Software Programs and other Company Intellectual Property contain no “viruses.” For the purposes of this Agreement, “virus” means any computer code designed to disrupt, disable or harm in any manner the operation of any software or hardware including, without limitation, worms, bombs, backdoors, clocks, timers, or other disabling device code, designs or routines which causes the software to be erased, inoperable, or otherwise incapable of being used, either automatically or upon command by any party.

     SECTION 3.14 Taxes

     (a) The Companies, as of the Closing, will have properly completed and timely filed all Tax Returns required to be filed by them and will have paid all Taxes shown thereon to be due to the extent such Taxes are due and payable as of the Closing Date. As of the Closing, neither Company will be delinquent in the payment of any Taxes. As of the Closing, neither Company will have any material liability for unpaid Taxes.

     (b) As of the Closing, there will be (i) no material claim for Taxes that is, or could give rise to, a Lien against any Asset or is being asserted against either Company other than Liens for Taxes not yet due and payable, (ii) no audit of any Tax Return of either Company being conducted by a tax authority; (iii) no extension of the statute of limitations for the assessment of any Taxes that has been granted to either Company, and (iv) no agreement, contract or arrangement to which either Company is a party that is reasonably expected to result

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in the payment of any amount that would not be deductible by reason of Section 280G or Section 404 of the Code.

     (c) As of the Closing, neither Company will have any net operating losses.

     (d) As of the Closing, neither Company will be required to include any material amounts in Taxable income for any Tax period (or portion thereof) ending after the Closing Date pursuant to Section 481 or 263A of the Code or any comparable provision under state or foreign Tax laws as a result of transactions or events occurring or accounting methods employed prior to the Exchange Transaction.

     (e) As of the Closing, Chorale Networks U.S. will not have filed any consent to have the provisions of Section 341(0(2) of the Code (or comparable provisions of any state Tax laws) apply to it.

     (f) As of the Closing, neither Company will be a party to any Tax sharing or Tax allocation agreement nor will either Company have any liability or potential liability to another party under any such agreement.

     (g) As of the Closing, neither Company will have filed any disclosures under Section 6662 of the Code or comparable provisions of state, local or foreign law to prevent the imposition of penalties with respect to any Tax reporting position taken on any Tax Return.

     (h) As of the Closing, Chorale Networks U.S. will not be a “United States real property holding corporation” within the meaning of Section 897 of the Code.

     (i) As of the Closing, no claim will ever have been made by any authority in a jurisdiction where either Company does not file Tax Returns that it is or may be subject to taxation by that jurisdiction.

     (j) As of the Closing, each Company will have withheld and paid over all Taxes required to have been withheld and paid over and complied with all material information reporting and backup withholding requirements, including maintenance of required records with respect thereto, in connection with material amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party.

     (k) As of the Closing, Chorale Networks U.S. will not have constituted either a “distributing corporation” or a “controlled corporation” in a distribution of stock qualifying for tax-free treatment under Section 355 of the Code (x) in the two years prior to the date of this Agreement or (y) in a distribution which could otherwise constitute part of a “plan” or “series of related transactions” (within the meaning of Section 355(e) of the Code) in conjunction with the Exchange Transaction.

     SECTION 3.15 Insurance

     Each of the Sellers and NGTS Israel is presently insured, and since inception has been insured, against such risks to the Business and the Assets as companies engaged in a similar business would, in accordance with good business practice, customarily be insured. The policies of fire, theft,

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liability and other insurance maintained with respect to the Business and the Assets provide adequate coverage against loss. There is no material claim pending under any of such policies with respect to the Business or the Assets as to which coverage has been questioned, denied or disputed by the underwriters of such policies. The Sellers have previously furnished to NexVerse a complete and correct list as of the date hereof of all insurance policies maintained by the Sellers and NGTS Israel with respect to the Business or the Assets, and have made available to NexVerse complete and correct copies of all such policies, together with all riders and amendments thereto. All such policies are in full force and effect and all premiums due thereon have been paid to the date hereof. Each Seller and NGTS Israel has complied in all material respects with the terms of such policies with respect to the Business or the Assets. Neither Seller knows of any threatened termination of, or material premium increase with respect to, any of such policies that would relate to the Business or the Assets.

     SECTION 3.16 Assets

     The Sellers or NGTS Israel have, and as of the Closing, each Company will have, good and indefeasible title, free and clear of all Liens to all of the Assets to be acquired by it under the applicable Separation Agreement, other than as set forth in Section 3.16 of the Sellers’ Disclosure Schedule. All Assets held under leases or sub-leases by either Seller or NGTS Israel, and as of the Closing, by either Company are, and will be, held under valid instruments enforceable in accordance with their respective terms, subject to applicable laws of bankruptcy, insolvency or similar laws relating to creditors’ rights generally and to general principles of equity (whether applied in a proceeding in law or equity). Substantially all of the equipment in regular use in the Business and constituting part of the Assets has been reasonably maintained and is in serviceable condition, reasonable wear and tear excepted. Each Seller or NGTS Israel owns or has the valid and subsisting right to use, and as of the Closing, each Company will own or have the valid and subsisting right to use, all the Assets. The Assets (other than the Company Intellectual Property and the Company Licensed Intellectual Property, regarding which representations and warranties are made in Section 3.13 above) comprise all of the assets related to the Business and owned by the Sellers as of the date hereof and, to the Sellers’ knowledge, comprise all of the assets (other than the Company Intellectual Property and the Company Licensed Intellectual Property, regarding which representations and warranties are made in Section 3.13 above) reasonably required for operation of the Business as conducted and as proposed to be conducted, it being understood that the Assets do not include: (i) cash and cash equivalents, other than funds associated with prepaid maintenance and warranty services; (ii) accounts receivable arising out of the DCME business; (iii) inventory relating to the DCME business; (iv) any inventory other than finished goods; (v) manufacturing assets related to the DCME business; (vi) assets associated with Celtro and the prepaid calling card business; and (vii) other items specifically excluded under the Separation Agreements.

     SECTION 3.17 Affiliates

     Except as set forth on Section 3.17 of the Sellers’ Disclosure Schedule, there are no obligations of the Sellers or NGTS Israel, and as of the Closing there will be no obligations of the Companies, to officers, directors, or Transferring Employees other than (a) for payment of salary for services rendered, (b) reimbursement for reasonable expenses incurred on behalf of the Sellers or NGTS Israel and (c) for other standard employee benefits made generally available to all employees (including stock option agreements outstanding under any stock option plan or otherwise approved by the Board of Directors of either Seller or NGTS Israel). None of the officers or directors of either Seller, NGTS Israel or either Company, or Transferring Employees, or any members of their immediate families, is indebted to either Seller, NGTS Israel or either Company or has any direct or indirect ownership interest in any firm or corporation with which the Business is affiliated or with which it has a business relationship, or any firm or corporation which competes with the Business, other than passive investments in publicly traded companies (representing less than 1% of such company) which may compete with the Business.

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No officer or director of either Seller, NGTS Israel or either Company, or any member of their immediate families, is, directly or indirectly, interested in any Company Material Contract.

     SECTION 3.18 Brokers

     Any Broker Fees based upon arrangements made by or on behalf of the Sellers or NGTS Israel will be paid by the Sellers.

     SECTION 3.19 Business Practices

     Neither Seller or NGTS Israel, and neither Company, nor any of their respective directors, officers, agents or employees (in their capacities as such) has, with respect to the Business, (i) Used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating 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, as amended, or (iii) made any other unlawful payment.

     SECTION 3.20 Business Activity Restriction

     Except as set forth in Section 3.20 to the Sellers’ Disclosure Schedule and except for the non-competition provisions contained in the VoIP License Agreement or any other agreement executed in connection with this Agreement, there is no non-competition or other similar agreement, commitment, judgment, injunction, order or decree to which either Seller or NGTS Israel is, or as of the Closing either Company will be, a party or subject to that has or could reasonably be expected to have the effect of prohibiting or materially impairing the conduct of the Business. Except as set forth in Section 3.20 to the Sellers’ Disclosure Schedule and except for the non-competition provisions contained in the VoIP License Agreement or any other agreement executed in connection with this Agreement, neither Seller or NGTS Israel has, nor as of the Closing Date will either Company have, entered into any agreement under which it is restricted from selling, licensing or otherwise distributing any of its technology or products to, or providing services to, customers or potential customers or any class of customers, in any geographic area, during any period of time or in any segment of the market or line of the Business.

     SECTION 3.21 Customers and Suppliers

     (a) No customer which individually accounted for more than 5% of the gross revenues of the Business during the 12 months ended August 31, 2002 has canceled, otherwise terminated or materially decreased its relationship with either Seller or its usage of the products or services of the Business, or made any written threat to either Seller or NGTS Israel to cancel, otherwise terminate or materially decrease its relationship with the Business or its usage of the products or services of the Business.

     (b) (i) Except as set forth on Section 3.21 of the Sellers’ Disclosure Schedule, in connection with the Business the Sellers and NGTS Israel have not purchased from any single supplier goods or services for which the aggregate purchase price exceeded 5% of the goods and services purchased by the Sellers and NGTS Israel in connection with the Business during the 12 months ended August 31, 2002 and (ii) there has been no material adverse change in the business relationship between the Sellers or NGTS Israel, with respect to the Business, and any of the suppliers set forth on Section 3.21 of the Sellers’ Disclosure Schedule.

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     SECTION 3.22 Employee Matters

     As of the Closing, each Company will be in compliance in all material respects with all currently applicable Laws and regulations respecting employment, discrimination in employment, terms and conditions of employment, wages, hours and occupational safety and health and employment practices. As of the Closing, each of the Companies will have withheld all amounts required by Law or by agreement to be withheld from the wages, salaries, and other payments to employees and will not be liable for any arrears of wages or any taxes or any penalty for failure to comply with any of the foregoing. As of the Closing, neither Company will be liable for any payment to any trust or other fund or to any Governmental Entity with respect to unemployment compensation benefits, social security or other benefits or obligations for employees (other than routine payments to be made in the normal course of business and consistent with past practice). As of the Closing, there will be no pending claims against either Company under any workers compensation plan or policy or for long term disability. There are no controversies pending or, to the knowledge of the Sellers, threatened, between the Sellers and any of the Transferring Employees, which controversies have or could reasonably be expected to result in an action, suit, proceeding, claim, arbitration or investigation before any Governmental Entity. To the knowledge of the Sellers, no Transferring Employees are in violation of any term of any employment contract, non-disclosure agreement, noncompetition agreement, or any restrictive covenant to a former employer relating to the right of any such employee to be employed by either Seller, NGTS Israel or either Company, because of the nature of the Business conducted or presently proposed to be conducted, or to the use of trade secrets or proprietary information of others. No Transferring Employees have given notice to the Sellers or NGTS Israel, nor are the Sellers otherwise aware, that any such Transferring Employee intends to terminate his or her employment.

     SECTION 3.23 Investment Representation

     ECI is acquiring the NexVerse Shares — Israel for its own account for investment and not for resale or distribution in any transaction that would be in violation of the securities laws of the United States of America or any state thereof. NGTS U.S. is acquiring the NexVerse Shares - U.S. for its own account for investment and not for resale or distribution in any transaction that would be in violation of the securities laws of the United States of America or any state thereof. Each Seller is an “accredited investor” as defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933, as amended.

     SECTION 3.24 Full Disclosure

     The Sellers have provided NexVerse with all information requested by NexVerse in connection with its decision to enter into the Transactions. This Agreement, including the schedules and exhibits hereto, does not contain any untrue statement of a material fact nor omit to state a material fact necessary in order to make the statements contained herein not misleading.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF NEXVERSE

     NexVerse hereby represents and warrants to the Sellers, subject to the exceptions specifically disclosed in NexVerse Disclosure Schedule, all such exceptions to be referenced to a specific representation set forth in this Article IV (it being understood that all matters set forth in NexVerse Disclosure Schedule shall be deemed to be disclosed not only in connection with the representation and warranty specifically referenced on a given Schedule, but for all purposes relating to the representations and warranties of NexVerse set forth in this Article IV so long as the relevance of such disclosure to any

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other representation or warranty is reasonably apparent to the Sellers from the terms of such disclosure), that:

     SECTION 4.01 Organization and Qualification; Subsidiaries

     (a) NexVerse has been duly organized and is validly existing and in good standing under the laws of the jurisdiction of its incorporation and has the requisite corporate power and authority to own, lease and operate its properties and to carry on its business as it is presently conducted and as it is proposed to be conducted. NexVerse is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary, except for such failures to be so qualified or licensed and in good standing that could not reasonably be expected to have, individually or in the aggregate, a NexVerse Material Adverse Effect.

     (b) NexVerse does not own an equity interest in any corporation, partnership or joint venture arrangement or other business entity.

     SECTION 4.02 Certificate of Incorporation and Bylaws; Minute Books

     (a) Section 4.02 of the NexVerse Disclosure Schedule contains true, complete and correct copies of NexVerse’s certificate of incorporation and bylaws. Such certificate of incorporation and bylaws are in full force and effect. NexVerse is not in violation of any of the provisions of its certificate of incorporation or bylaws.

     (b) True, complete and correct copies of minutes of all meetings of directors and stockholders and/or actions by written consent since the time of NexVerse’s incorporation have been previously provided to the Sellers.

     SECTION 4.03 Capitalization

     (a) As of the date hereof, the authorized capital stock of NexVerse consists of 65,000,000 shares of NexVerse Common Stock, 12,974,738 shares of Series A Preferred Stock, par value $0.001 per share (“Series A Preferred Stock”) and 33,500,000 shares of Series B Preferred Stock, par value $0.001 per share (“Series B Preferred Stock”). As of the date hereof (i) 3,516,375 shares of NexVerse Common Stock are issued and outstanding, all of which are duly authorized, validly issued, fully paid and nonassessable, (ii) no shares of NexVerse Common Stock are held in the treasury of NexVerse, (iii) 6,873,572 shares of NexVerse Common Stock are reserved for issuance pursuant to the NexVerse Stock Plan, under which options to purchase 4,660,033 shares of NexVerse Common Stock have been granted, (iv) 12,974,738 shares of Series A Preferred Stock are issued and outstanding, all of which are duly authorized, validly issued, fully paid and nonassessable and (v) 30,000,000 shares of Series B Preferred Stock are issued and outstanding, all of which are duly authorized, validly issued, fully paid and nonassessable. Except for the shares of NexVerse Common Stock issuable pursuant to the NexVerse Stock Plan and the Closing Options, as defined in Section 5.10, and an outstanding warrant to purchase 147,500 shares of Series B Preferred Stock, there are no options, warrants or other rights, agreements, arrangements or commitments of any character to which NexVerse is a party or by which NexVerse is bound relating to the issued or unissued capital stock of NexVerse

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or obligating NexVerse to issue or sell any shares of capital stock of, or other equity interests in, NexVerse. All shares of NexVerse Common Stock subject to issuance upon the exercise of options granted under the NexVerse Stock Plan and subject to issuance upon the exercise of the Closing Options, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid and nonassessable. Other than as contemplated by the Recapitalization, as defined in Section 6.02(b), and as may be permitted under Founder Stock Purchase Agreements between NexVerse and certain of its employees, there are no outstanding contractual obligations of NexVerse to repurchase, redeem or otherwise acquire any shares of NexVerse Common Stock, Series A Preferred Stock or Series B Preferred Stock. There are no material outstanding contractual obligations of NexVerse to provide funds to, or make any material investment (in the form of a loan, capital contribution or otherwise) in, any person.

     (b) Following the Recapitalization and immediately prior to the Closing, the authorized capital stock of NexVerse will consist of 450,000,000 shares of NexVerse Common Stock, 5,446,500 shares of Series A-1 Preferred Stock, par value $0.001 per share (“Series A-1 Preferred Stock”), one (1) share of Series A-2 Preferred Stock, par value $0.001 per share (the “Series A-2 Preferred Stock”), 9,000,000 shares of Series B-1 Preferred Stock, 180,000,000 shares of Series C Preferred Stock, par value $0.001 per share (“Series C Preferred Stock”), and no shares of Series A Preferred Stock or Series B Preferred Stock. Immediately prior to the Closing and the Series C Financing (i) 48,918,926 shares of NexVerse Common Stock will be issued and outstanding, all of which will have been duly authorized, validly issued, fully paid and non-assessable, (ii) 5,425,207 shares of Series A-1 Preferred Stock will be issued and outstanding, all of which will have been duly authorized, validly issued, fully paid and non-assessable, (iii) no shares of Series A-2 Preferred Stock, Series B-1 Preferred Stock or Series C Preferred Stock will be issued and outstanding and (iv) 57,377,374 shares of NexVerse Common Stock will be reserved for issuance pursuant to NexVerse Stock Plan, under which options to purchase 6,485,669 shares of NexVerse Common Stock will be outstanding. As of the Closing, except for an outstanding warrant to purchase 162,250 shares of NexVerse Common Stock and 21,137 shares of Series A-1 Preferred Stock, and the shares of NexVerse Common Stock issuable pursuant to the NexVerse Stock Plan and the Closing Options, there will be no options, warrants or other rights, agreements, arrangements or commitments of any character to which NexVerse is a party or by which NexVerse is bound relating to the issued or unissued capital stock of NexVerse or obligating NexVerse to issue or sell any shares of capital stock of, or other equity interests in, NexVerse. All shares of NexVerse Common Stock subject to issuance upon the exercise of options granted under NexVerse Stock Plan, that will be subject to issuance upon the exercise of the Closing Options and upon conversion of the Series C Preferred Stock, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid and nonassessable. The NexVerse Shares – Israel and the NexVerse Shares – U.S., upon issuance on the terms and conditions specified in this Agreement, will be duly authorized, validly issued, fully paid and nonassessable.

     SECTION 4.04 Authority Relative to this Agreement

     NexVerse has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by NexVerse and the consummation by NexVerse

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of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action, and no other corporate proceedings on the part of NexVerse is necessary to authorize this Agreement or to consummate such transactions. This Agreement has been duly executed and delivered by NexVerse and, assuming the due authorization, execution and delivery by the Sellers, constitutes a legal, valid and binding obligation of NexVerse enforceable against NexVerse in accordance with its terms, except to the extent that its enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other laws affecting the enforcement of creditors’ rights generally or by general equitable principles.

     SECTION 4.05 No Conflicts; Consents

     The execution and delivery of this Agreement by NexVerse does not, and the performance by NexVerse of its obligations hereunder and the consummation of the Exchange Transaction will not, (i) conflict with or violate any provision of the certificate of incorporation or bylaws of NexVerse or, upon its adoption, of the New Charter, as defined in Section 6.01(m), (ii) conflict with or violate any Law applicable to NexVerse or by which any property or asset of NexVerse is bound or affected, (iii) require NexVerse to obtain any consents, approvals, authorizations or actions of, or make any filings with or give any notices to, any Governmental Entity or any other Person, except as set forth in Section 4.05 of NexVerse Disclosure Schedule (the “NexVerse Consents”) or (iv) if the NexVerse Consents are obtained, result in any breach of or constitute a default (or an event which with the giving of notice or lapse of time or both could reasonably be expected to become a default) under, or give to others any right of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on any property or asset of NexVerse pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which NexVerse is a party or by which it is otherwise bound.

     SECTION 4.06 Permits; Compliance with Laws

     NexVerse is in possession of all material franchises, grants, authorizations, licenses, establishment registrations, product listings, permits, easements, variances, exceptions, consents, certificates, identification and registration numbers, approvals and orders of any Governmental Entity necessary for NexVerse to own, lease and operate its properties or to offer or perform its services or to develop, produce, store, distribute and market its products or otherwise to carry on its business in substantially the same manner as it is now being conducted (collectively, the “NexVerse Permits”), and, as of the date of this Agreement, none of NexVerse Permits has been suspended or cancelled nor is any such suspension or cancellation pending or, to the knowledge of NexVerse, threatened. NexVerse is not in conflict with, or in default or violation of, (i) any material Law applicable to NexVerse or by which any property or asset of NexVerse is bound or affected or (ii) any NexVerse Permits. There are no actions, proceedings, investigations or surveys pending or, to the knowledge of NexVerse, threatened against NexVerse that could reasonably be expected to result in the suspension or cancellation of any NexVerse Permit. NexVerse has not received from any Governmental Entity any written notification with respect to possible conflicts, defaults or violations of Laws. The consummation of the Transactions will not result in the suspension or cancellation of any NexVerse Permit.

     SECTION 4.07 Financial Statements; Undisclosed Liabilities

     (a) Section 4.07 of the NexVerse Disclosure Schedule includes copies of (x) the audited balance sheet of NexVerse at June 30, 2002, together with the related statements of income, shareholders’ equity and cash flows for the period since inception and then ended and the notes thereto (the “NexVerse Audited Financial Statements”) and (y) the unaudited interim

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balance sheet of NexVerse at September 30, 2002, together with the related statement of income for the three-month period then ended (the “NexVerse Unaudited Financial Statements” and, together with the NexVerse Audited Financial Statements, the “NexVerse Financial Statements”). The NexVerse Financial Statements, including the notes thereto: (i) were prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby; (ii) present fairly the financial position, results of operations and cash flows of NexVerse as of such dates and for the periods then ended (subject, in the case of the NexVerse Unaudited Financial Statements, to normal year-end audit adjustments consistent with prior periods); and (iii) are correct and complete in all material respects, and can be reconciled with the books of account and records of NexVerse. NexVerse maintains and will continue to maintain an adequate system of internal controls established and administered in accordance with GAAP.

          (b) Except as and to the extent set forth or reserved against on the balance sheets of NexVerse as reported in the NexVerse Unaudited Financial Statements, including the notes thereto, NexVerse does not have any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise), including, without limitation, any undisclosed liabilities or obligations of ipVerse, Inc., (“ipVerse”) that would be required to be reflected on a balance sheet prepared in accordance with GAAP and NexVerse’s past practices, except for immaterial liabilities or obligations incurred in the ordinary course of business consistent with past practice since September 30, 2002.

          SECTION 4.08 Absence of Certain Changes or Events

          Since September 30, 2002, NexVerse has conducted its businesses only in the ordinary course consistent with past practice and, since such date, there has not been:

   (i) any NexVerse Material Adverse Effect;

   (ii) any event that could reasonably be expected to prevent or materially delay the performance of NexVerse’s obligations pursuant to this Agreement and the consummation of the Transactions by NexVerse;

   (iii) any change by NexVerse in its accounting methods, principles or practices;

   (iv) any declaration, setting aside or payment of any dividend or distribution in respect of the shares of the capital stock of NexVerse or any redemption, purchase or other acquisition of any of the capital stock of NexVerse (except as contemplated by the Recapitalization);

   (v) any material increase in the compensation or benefits or establishment of any bonus, insurance, severance, deferred compensation, pension, retirement, profit sharing, stock option (including, without limitation, the granting of stock options, stock appreciation rights, performance awards or restricted stock awards), stock purchase or other employee benefit plan, or any other material increase in the compensation payable or to become payable to any employees, officers, consultants or directors of NexVerse;

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     (vi) any issuance or sale of any stock, notes, bonds or other securities, or entering into any agreement with respect thereto (except as contemplated by the Recapitalization);

     (vii) any amendment to NexVerse’s certificate of incorporation or bylaws;

     (viii) any (x) purchase, sale, assignment, lease, license or transfer of any material assets, other than in the ordinary course of business consistent with past practice, (y) mortgage, pledge or existence of any Lien on any material assets or properties, tangible or intangible, except for Liens for Taxes not yet delinquent and such other Liens which do not, individually or in the aggregate, have a NexVerse Material Adverse Effect, or (z) waiver of any rights of material value or cancellation or any material debts or claims;

     (ix) any incurrence of any material liability (absolute or contingent), except for current liabilities and obligations incurred in the ordinary course of business consistent with past practice;

     (x) any incurrence of any damage, destruction or similar loss, whether or not covered by insurance, materially affecting the business or properties of NexVerse;

     (xi) any entering into of any transaction of a material nature other than in the ordinary course of business, consistent with past practice (except for the Transactions); or

     (xii) any negotiation or agreement by NexVerse to do any of the things described in the preceding clauses (i) through (xi).

            SECTION 4.09 Employee Benefit Plans; Labor Matters

            (a) Section 4.09(a) of the NexVerse Disclosure Schedule lists each employee benefit fund, plan, program, arrangement and contract (including, without limitation, any “pension” plan, fund or program, as defined in Section 3(2) of ERISA, and any “employee benefit plan”, as defined in Section 3(3) of ERISA, and any plan, program, arrangement or contract providing for severance; medical, dental or vision benefits; life insurance or death benefits; disability benefits, sick pay or other wage replacement; vacation, holiday or sabbatical; pension or profit-sharing benefits; stock options or other equity compensation; bonus or incentive pay or other material fringe benefits), whether written or not, maintained, sponsored or contributed to, or required to be contributed to, by NexVerse (the “NexVerse Benefit Plans”). With respect to each NexVerse Benefit Plan, NexVerse has delivered or made available to the Sellers a true, complete and correct copy of (i) such NexVerse Benefit Plan (or, if not written, a written summary of its material terms) and the most recent summary plan description, if any, related to such NexVerse Benefit Plan, (ii) each trust agreement or other funding arrangement relating to such NexVerse Benefit Plan, (iii) the most recent annual report (Form 5500) filed with the IRS with respect to such NexVerse Benefit Plan (and, if the most recent annual report is a Form 5500R, the most recent Form 5500C filed with respect to such NexVerse Benefit Plan), (iv) the most recent actuarial report or financial statement relating to such NexVerse Benefit Plan and (v) the most recent determination letter, if any, issued by the IRS with respect to such NexVerse Benefit Plan and any pending request for such a determination letter. Neither

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NexVerse, nor to the knowledge of NexVerse, any other person or entity, has any express or implied commitment, whether legally enforceable or riot, to modify, change or terminate any NexVerse Benefit Plan, other than with respect to a modification, change or termination required by ERISA or the Code.

     (b) Each NexVerse Benefit Plan has been administered in all material respects in accordance with its terms and all applicable laws, including ERISA and the Code, and contributions required to be made under the terms of any of NexVerse Benefit Plans as of the date of this Agreement have been timely made or, if not yet due, have been properly reflected on the balance sheet included in the NexVerse Unaudited Financial Statements. With respect to NexVerse Benefit Plans, no event has occurred and, to the knowledge of NexVerse, there exists no condition or set of circumstances in connection with which NexVerse could be subject to any material liability (other than for routine benefit liabilities) under the terms of, or with respect to, such NexVerse Benefit Plans, ERISA, the Code or any other applicable Law.

     (c) (i) Each NexVerse Benefit Plan which is intended to qualify under Section 401(a), Section 401(k), Section 401(m) or Section 4975(e)(6) of the Code has received a favorable determination letter from the IRS as to its qualified status, and to the knowledge of NexVerse, no fact or event has occurred that could adversely affect the qualified status of any such NexVerse Benefit Plan or the exempt status of any such trust; (ii) there has been no prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code and other than a transaction that is exempt under a statutory or administrative exemption) with respect to any NexVerse Benefit Plan that could result in a material liability to NexVerse and (iii) each NexVerse Benefit Plan can be amended, terminated or otherwise discontinued after the Closing Date in accordance with its terms, without liability (other than (A) liability for ordinary administrative expenses typically incurred in a termination event or (B) if the NexVerse Benefit Plan is a pension benefit plan subject to Part 2 of Title I of ERISA, liability for the accrued benefits as of the date of such termination (if and to the extent required by ERISA) to the extent that either there are sufficient assets set aside in a trust or insurance contract to satisfy such liability or such liability is reflected on the most recent balance sheet included in the NexVerse Unaudited Financial Statements). No suit, administrative proceeding, action or other litigation has been brought, or to the knowledge of NexVerse, is threatened, against or with respect to any such NexVerse Benefit Plan, including any audit or inquiry by the IRS or United States Department of Labor (other than routine benefits claims).

     (d) No NexVerse Benefit Plan is a multiemployer pension plan (as defined in Section 3(37) of ERISA) or other pension plan subject to Title IV of ERISA and neither NexVerse nor any other trade or business (whether or not incorporated) that is under “common control” with NexVerse (within the meaning of ERISA Section 4001) or with respect to which NexVerse could otherwise incur liability under Title IV of ERISA (an “NexVerse ERISA Affiliate”) has sponsored or contributed to or been required to contribute to a multiemployer pension plan or other pension plan subject to Title IV of ERISA. No material liability under Title IV of ERISA has been incurred by NexVerse or any NexVerse ERISA Affiliate that has not been satisfied in full, and no condition exists that presents a material risk to NexVerse or any NexVerse ERISA Affiliate of incurring or being subject (whether primarily, jointly or secondarily) to a material liability thereunder. None of the assets of NexVerse or any NexVerse

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ERISA Affiliate is or may reasonably be expected to become, the subject of any Lien arising under ERISA or Section 412(n) of the Code.

     (e) With respect to each NexVerse Benefit Plan required to be set forth in the NexVerse Disclosure Schedule that is subject to Title IV or Part 3 of Title I of ERISA or Section 412 of the Code, (i) no reportable event (within the meaning of Section 4043 of ERISA, other than an event that is not required to be reported before or within 30 days of such event) has occurred or is expected to occur, (ii) there was not an accumulated funding deficiency (within the meaning of Section 302 of ERISA or Section 412 of the Code), whether or not waived, as of the most recently ended plan year of such NexVerse Benefit Plan; and (iii) there is no “unfunded benefit liability” (within the meaning of Section 4001(a)(18) of ERISA).

     (f) Set forth in Section 4.09(f) of the NexVerse Disclosure Schedule are (i) all employment agreements with officers and all consulting agreements of NexVerse, (ii) all severance plans, agreements, programs and policies of NexVerse with or relating to its employees, directors or consultants, and (iii) all plans, programs, agreements and other arrangements of NexVerse with or relating to their respective employees, directors or consultants which contain “change of control” provisions. No payment or benefit which may be required to be made by NexVerse or which otherwise may be required to be made under the terms of any NexVerse Benefit Plan or other arrangement will constitute a parachute payment under Section 280(G)(1) of the Code, and the consummation of the transactions contemplated by this Agreement will not, alone or in conjunction with any other possible event (including termination of employment), (i) entitle any current or former employee or other service provider of NexVerse to severance benefits or any other payment, compensation or benefit (including forgiveness of indebtedness), or (ii) accelerate the time of payment or vesting, or increase the amount of compensation or benefit due any such employee or service provider.

     (g) Except as set forth in Section 4.09(g) of the NexVerse Disclosure Schedule, NexVerse is not a party to, and does not have any obligations under or with respect to, any collective bargaining or other labor union contract applicable to persons employed by NexVerse and no collective bargaining agreement is being negotiated by NexVerse or any person or entity that may obligate NexVerse thereunder. As of the date of this Agreement, there is no labor dispute, strike, union organizing activity or work stoppage against NexVerse pending or, to the knowledge of NexVerse, threatened which may interfere with the business activities of NexVerse. As of the date of this Agreement, to the knowledge of NexVerse, neither NexVerse nor any of its representatives or employees has committed any unfair labor practice in connection with the operation of the business of NexVerse, and there is no charge or complaint filed against NexVerse by or with the National Labor Relations Board or any comparable Governmental Entity pending or threatened in writing.

     (h) Except as required by Law, no NexVerse Benefit Plan provides any retiree or post-employment benefits to any person. NexVerse is in compliance with (i) the requirements of the applicable health care continuation and notice provisions of COBRA and (ii) the applicable requirements of the Health Insurance Portability and Accountability Act of 1996, as amended.

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     SECTION 4.10 Contracts

     Except for the contracts and agreements described in Section 4.10 of NexVerse Disclosure Schedule (collectively, the “NexVerse Material Contracts”), NexVerse is not a party to or bound by any contract or agreement described below:

     (a) any sales, advertising or agency contract in excess of $25,000 over the life of the contract;

     (b) any continuing contract for the purchase of materials, supplies, equipment or services involving in the case of any such contact more than $25,000 over the life of the contract;

     (c) any contract that expires or may be renewed at the option of any person other than NexVerse so as to expire more than one year after the date of this Agreement;

     (d) any trust indenture, mortgage, promissory note, loan agreement or other contract for the borrowing of money, any currency exchange, commodities or other hedging arrangement or any leasing transaction of the type required to be capitalized in accordance with GAAP;

     (e) any contract for capital expenditures in excess of $10,000 in the aggregate;

     (f) any contract limiting the freedom of NexVerse to engage in any line of business or to compete with any other corporation, partnership, limited liability company, trust, individual or other entity, or any confidentiality, secrecy or non-disclosure contract, except for the non-competition provisions contained in the VoIP License Agreement;

     (g) any contract pursuant to which NexVerse is a lessee of any machinery, equipment, motor vehicles, office furniture, fixtures or other personal property, pursuant to which payments in excess of $25,000 remain outstanding;

     (h) any contract with an affiliate;

     (i) any agreement of guarantee, support, indemnification, assumption or endorsement of, or any similar commitment with respect to, the obligations, liabilities (whether accrued, absolute, contingent or otherwise) or indebtedness of any other person;

     (j) any NexVerse License Agreement, as such term is defined in Section 4.13(b), or any license or other agreement pursuant to which a third party uses any NexVerse Intellectual Property.

     (k) any distribution contract; or

     (l) any employment contract, arrangement or policy (including without limitation any collective bargaining contract or union agreement) which may not be immediately terminated without penalty (or any augmentation or acceleration of benefits).

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     NexVerse has performed all of the obligations required to be performed by it and is entitled to all benefits under, and is not alleged to be in default in respect of, any NexVerse Material Contract. Each of the NexVerse Material Contracts is valid and binding and in full force and effect, and there exists no default or event of default or event, occurrence, condition or act, with respect to NexVerse, or to the knowledge of NexVerse, with respect to any other contracting party, which, with the giving of notice, the lapse of the time or the happening of any other event or conditions, would become a default or event of default under any NexVerse Material Contract. True, correct and complete copies of all of the NexVerse Material Contracts have been delivered to the Sellers.

     SECTION 4.11 Litigation

     Except as set forth in Section 4.11 of the NexVerse Disclosure Schedule, there is no private or governmental action, suit, proceeding, claim, arbitration or investigation pending before any agency, court or tribunal, foreign or domestic, or, to the knowledge of NexVerse, threatened against NexVerse or any of its properties or any of its officers or directors (in their capacities as such). NexVerse is not aware of any facts or circumstances which could reasonably be expected to result in the denial of otherwise applicable insurance coverage under policies issued to NexVerse in respect of any such suits, claims, actions, proceedings and investigations. There is no judgment, decree or order against NexVerse or, to the knowledge of NexVerse, any of its directors or officers (in their capacities as such), that could prevent, enjoin, or materially alter or delay any of the Transactions, or that could reasonably be expected to have a NexVerse Material Adverse Effect. Section 4.11 of the NexVerse Disclosure Schedule also lists all litigation that NexVerse has pending against other parties.

     SECTION 4.12 Environmental Matters

     NexVerse is in compliance in all material respects with all applicable Environmental Laws and all NexVerse Permits required by Environmental Laws (“NexVerse Environmental Permits”). All past noncompliance, if any, of NexVerse with Environmental Laws or NexVerse Environmental Permits has been resolved without any pending, ongoing or future obligation, cost or liability. NexVerse has not released a Hazardous Material at, or transported a Hazardous Material to or from, any real property currently or formerly owned, leased or occupied by NexVerse, in violation of any Environmental Law.

     SECTION 4.13 Intellectual Property

     (a) Section 4.13(a) of the NexVerse Disclosure Schedule contains a true and complete list of NexVerse’s patents, patent applications, registered and unregistered trademarks, trademark applications, trade names, registered and unregistered service marks, service mark applications, service marks, Internet domain names, Internet domain name applications, and copyright registrations and applications included in the NexVerse Intellectual Property and all other filings and formal actions made or taken pursuant to Federal, state, local and foreign laws by NexVerse to protect its interests in the NexVerse Intellectual Property, and includes details of all due dates for further filings, maintenance, payments or other actions falling due in respect of the NexVerse Intellectual Property within twelve (12) months of the Closing. All of NexVerse’s patents, patent applications, registered trademarks, trademark applications and registered copyrights remain in good standing with respect to all fees and filings due as of the date hereof.

     (b) The NexVerse Intellectual Property contains only those items and rights which are: (i) owned by NexVerse; (ii) in the public domain; or (iii) rightfully used by NexVerse pursuant to a valid and enforceable license or other agreement (the “NexVerse Licensed

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Intellectual Property”), the title, parties, date, term and subject matter of each such license or other agreement (each, “NexVerse License Agreement”) being set forth on Section 4.13(b) of the NexVerse Disclosure Schedule. NexVerse has all rights in the NexVerse Intellectual Property, which includes all rights necessary to carry out NexVerse’s current activities and NexVerse’s future activities relating to the NexVerse Intellectual Property, to the extent such future activities are proposed to be conducted, including without limitation, to the extent required to carry out such activities, rights to make, use, reproduce, modify, adapt, create derivative works based on, translate, distribute (directly and indirectly), transmit, display and perform publicly, license, rent, .lease, import and export and, other than with respect to the NexVerse Licensed Intellectual Property, assign, sell and offer for sale, the NexVerse Intellectual Property.

     (c) The reproduction, manufacturing, distribution, licensing, sublicensing, sale or any other exercise of rights in any NexVerse Intellectual Property as now used or offered or proposed for use, licensing or sale by NexVerse does not, to the knowledge of NexVerse, infringe on any proprietary or personal right of any person, including any rights in any patent, industrial design, trademark, trade name, service mark, trade dress, Internet domain name, copyright, database, or trade secret of any person, anywhere in the world. NexVerse has not received notice of any pending or threatened claims (including offers to grant licenses) (i) challenging the validity, effectiveness or, other than with respect to the NexVerse Licensed Intellectual Property, ownership by NexVerse of any NexVerse Intellectual Property, or (ii) to the effect that the use, distribution, licensing, sublicensing, sale or any other exercise of rights in any product, work, technology or process as now used or offered or proposed for use, licensing, sublicensing or sale by NexVerse or its agents or use by its customers infringes or will infringe on or misappropriate any intellectual property or other proprietary or personal right of any person. To the knowledge of NexVerse, (a) no such claims have been threatened by any person, and (b) there are no valid grounds for any bona fide claim of any such kind. To the knowledge of NexVerse, all of the rights within the NexVerse Intellectual Property are enforceable and subsisting. To the knowledge of NexVerse, there is no unauthorized use, infringement or misappropriation of any NexVerse Intellectual Property by any third party, employee or former employee.

     (d) Except as disclosed in Section 4.13(d) of the NexVerse Disclosure Schedule, all personnel, including employees, agents, consultants and contractors, who have contributed to or participated in the conception and development of the NexVerse Intellectual Property on behalf of NexVerse, have executed nondisclosure agreements and either (i) have been a party to an enforceable agreement with NexVerse in accordance with applicable national and state law that accords NexVerse full, effective, exclusive and original ownership of all tangible and intangible property as “works-for-hire,” arising from the efforts of such personnel, or (ii) have executed appropriate instruments of assignment in favor of NexVerse that have conveyed to NexVerse full, effective and exclusive ownership of all tangible and intangible property arising from the efforts of such personnel, or (iii) otherwise have by operation of law vested in the NexVerse all right, title and interest in all such NexVerse Intellectual Property by virtue of their employment relationship with the NexVerse.

     (e) NexVerse is not, nor as a result of the execution or delivery of this Agreement, or performance of NexVerse’s obligations hereunder, will NexVerse be, in violation of any license, sublicense, agreement or instrument to which NexVerse is a party or otherwise

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bound, nor will execution or delivery of this Agreement, or performance of NexVerse’s obligations hereunder, cause the diminution, termination or forfeiture of any NexVerse Intellectual Property.

     (f) Section 4.13(f) of the NexVerse Disclosure Schedule contains a true and complete list of all of NexVerse’s computer software programs included within the NexVerse Intellectual Property, whether in source code, object code or human readable form, other than any fully-paid off-the-shelf software programs (the “NexVerse Software Programs”). NexVerse has full and unrestricted rights to use the NexVerse Software Programs that it licenses, pursuant to license agreements listed in Section 4.13(b) of the NexVerse Disclosure Schedule.

     (g) To the knowledge of NexVerse, the source code and system documentation relating to the NexVerse Software Programs have been maintained in strict confidence and (i) have been disclosed by NexVerse only to those of its employees who have a “need to know” the contents thereof in connection with the performance of their duties to NexVerse and who have executed nondisclosure agreements with NexVerse; and (ii) have been disclosed to only those third parties who have executed nondisclosure agreements with NexVerse.

     (h) Except as set forth in Section 4.13(h) of the NexVerse Disclosure Schedule, the NexVerse Software Programs and the NexVerse Intellectual Property are free and clear of any and all Liens.

     (i) Except as set forth in Section 4.13(i) of the NexVerse Disclosure Schedule, NexVerse does not owe nor will it owe any royalties or other payments to third parties in respect of the NexVerse Intellectual Property. All such royalties or other payments that have accrued prior to the Closing have been paid.

     (j) It is the NexVerse’s practice to scan, with commercially available virus scan software, the NexVerse Intellectual Property listed in Section 4.13(f) of the NexVerse Disclosure Schedule that are capable of being scanned for “viruses”, and to the knowledge of NexVerse, the NexVerse Software Programs and other NexVerse Intellectual Property contain no viruses, as defined in Section 3.13(j) of this Agreement.

     SECTION 4.14 Taxes

     (a) NexVerse has properly completed and timely filed all Tax Returns required to be filed by it and has paid all Taxes shown thereon to be due to the extent such Taxes are due and payable as of the Closing Date. NexVerse is not delinquent in the payment of any Taxes. NexVerse has provided adequate accruals in NexVerse Financial Statements for any Taxes that have not been paid as of the dates thereof, whether or not shown as being due on any Tax Returns. NexVerse has no material liability for unpaid Taxes accruing after the date of NexVerse Unaudited Financial Statements, other than Taxes incurred in the ordinary course of business consistent with past practice.

     (b) There is (i) no material claim for Taxes that is, or could give rise to, a Lien against the property of NexVerse or is being asserted against NexVerse other than Liens for Taxes not yet due and payable, (ii) no audit of any Tax Return of NexVerse is being conducted

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by a tax authority; (iii) no extension of the statute of limitations for the assessment of any Taxes has been granted by NexVerse, except for extensions that are no longer in effect, and (iv) no agreement, contract or arrangement to which NexVerse is a party that is reasonably expected to result in the payment of any amount that would not be deductible by reason of Section 280G or Section 404 of the Code.

     (c) There has been no change in ownership of NexVerse that has caused the utilization of any losses of NexVerse to be limited pursuant to Section 382 of the Code, and any loss carryovers reflected on NexVerse Financial Statements are properly computed and reflected.

     (d) NexVerse is not required to include any material amounts in Taxable income for any Tax period (or portion thereof) ending after the Closing Date pursuant to Section 481 or 263A of the Code or any comparable provision under state or foreign Tax laws as a result of transactions or events occurring or accounting methods employed prior to the Exchange Transaction.

     (e) NexVerse has not filed consent to have the provisions of Section 341(0(2) of the Code (or comparable provisions of any state Tax laws) apply to NexVerse.

     (f) NexVerse is not a party to any Tax sharing or Tax allocation agreement nor does NexVerse have any liability or potential liability to another party under any such agreement.

     (g) NexVerse has not filed any disclosures under Section 6662 of the Code or comparable provisions of state, local or foreign law to prevent the imposition of penalties with respect to any Tax reporting position taken on any Tax Return.

     (h) NexVerse is not and has never been a member of a consolidated, combined or unitary group.

     (i) NexVerse has in its possession receipts for any Taxes paid to foreign Tax authorities. NexVerse is not and has never been a “United Sates real property holding corporation” within the meaning of Section 897 of the Code.

     (j) No claim has ever been made by any authority in a jurisdiction where NexVerse does not file Tax Returns that it is or may be subject to taxation by that jurisdiction.

     (k) NexVerse has withheld and paid over all Taxes required to have been withheld and paid over and complied with all material information reporting and backup withholding requirements, including maintenance of required records with respect thereto, in connection with material amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party.

     (l) NexVerse has not constituted either a “distributing corporation” or a “controlled corporation” in a distribution of stock qualifying for tax-free treatment under Section 355 of the Code (x) in the two years prior to the date of this Agreement or (y) in a distribution which could otherwise constitute part of a “plan” or “series of related transactions” (within the meaning of Section 355(e) of the Code) in conjunction with the Exchange Transaction.

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     SECTION 4.15 Insurance

     NexVerse is presently insured, and since inception has been insured, against such risks as companies engaged in a similar business would, in accordance with good business practice, customarily be insured. The policies of fire, theft, liability and other insurance maintained with respect to the assets or businesses of NexVerse provide adequate coverage against loss. There is no material claim pending under any of such policies. Section 4.15 of the NexVerse Disclosure Schedule contains a complete and correct list as of the date hereof of all insurance policies maintained by NexVerse, and NexVerse has made available to the Sellers complete and correct copies of all such policies, together with all riders and amendments thereto. All such policies are in full force and effect and all premiums due thereon have been paid to the date hereof. NexVerse has complied in all material respects with the terms of such policies. NexVerse has no knowledge of any threatened termination of, or material premium increase with respect to, any of such policies.

     SECTION 4.16 Properties

     NexVerse has good and indefeasible title, free and clear of all Liens to all its properties and assets, whether tangible or intangible, real, personal or mixed, reflected in the NexVerse Unaudited Financial Statements as being owned by NexVerse, other than (i) any properties or assets that have been sold or otherwise disposed of in the ordinary course of business since the date of such financial statements and (ii) Liens arising in the ordinary course of business after the date of such financial statements and set forth on Section 4.16 of the NexVerse Disclosure Schedule. All properties used in NexVerse’s operations are reflected in the balance sheets included in the NexVerse Financial Statements to the extent GAAP require the same to be reflected. All buildings, and all fixtures, equipment and other property and assets that are material to its business, held under leases or sub-leases by NexVerse are held under valid instruments enforceable in accordance with their respective terms, subject to applicable laws of bankruptcy, insolvency or similar laws relating to creditors’ rights generally and to general principles of equity (whether applied in a proceeding in law or equity). Substantially all of NexVerse’s equipment in regular use has been reasonably maintained and is in serviceable condition, reasonable wear and tear excepted. NexVerse owns or has the valid and subsisting right to use all assets and properties necessary or advisable to operate NexVerse’s business in substantially the manner presently conducted and, except with respect to the Assets to be transferred pursuant to this Agreement by the Sellers, as proposed to be conducted.

     SECTION 4.17 Affiliates

     Except as set forth on Section 4.17 of NexVerse Disclosure Schedule, there are no obligations of NexVerse to officers, directors, stockholders, or employees of NexVerse other than (a) for payment of salary for services rendered, (b) reimbursement for reasonable expenses incurred on behalf of NexVerse and (c) for other standard employee benefits made generally available to all employees (including stock option agreements outstanding under any stock option plan approved by the Board of Directors of NexVerse). None of the officers, directors, key employees or stockholders of NexVerse, or any members of their immediate families, is indebted to NexVerse or has any direct or indirect ownership interest in any firm or corporation with which NexVerse is affiliated or with which NexVerse has a business relationship, or any firm or corporation which competes with NexVerse, other than passive investments in publicly traded companies (representing less than 1% of such company) which may compete with NexVerse. No officer, director or stockholder, or any member of their immediate families, is, directly or indirectly, interested in any material contract with NexVerse (other than such contracts as relate to any such person’s ownership of capital stock or other securities of NexVerse).

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     SECTION 4.18 Brokers

     No broker, finder or investment banker is entitled to any Broker Fees to be paid by NexVerse or its stockholders based upon arrangements made by or on behalf of NexVerse or its stockholders.

     SECTION 4.19 Business Practices

     Neither NexVerse nor any directors, officers, agents or employees of NexVerse (in their capacities as such) has (i) used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating 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, as amended, or (iii) made any other unlawful payment.

     SECTION 4.20 Business Activity Restriction

     There is no non-competition or other similar agreement, commitment, judgment, injunction, order or decree to which NexVerse is a party or subject to that has or could reasonably be expected to have the effect of prohibiting or materially impairing the conduct of business by NexVerse. NexVerse has not entered into any agreement under which NexVerse is restricted from selling, licensing or otherwise distributing any of its technology or products to, or providing services to, customers or potential customers or any class of customers, in any geographic area, during any period of time or in any segment of the market or line of business.

     SECTION 4.21 Customers and Suppliers

     (a) No customer which individually accounted for more than 5% of NexVerse’s gross revenues during the period from inception until August 31, 2002 has canceled, otherwise terminated or materially decreased its relationship with NexVerse or its usage of the products or services of NexVerse, or made any written threat to NexVerse to cancel, otherwise terminate or materially decrease its relationship with NexVerse or its usage of the products or services of NexVerse.

     (b) (i) Except as set forth on Section 4.21 of the NexVerse Disclosure Schedule, NexVerse has not purchased from any single supplier goods or services for which the aggregate purchase price exceeded 5% of the goods and services purchased by NexVerse during the period from inception until August 31, 2002 and (ii) there has been no material adverse change in the business relationship between NexVerse and any of the suppliers set forth on Section 4.21 of the NexVerse Disclosure Schedule.

     SECTION 4.22 Employee Matters

     NexVerse is in compliance in all material respects with all currently applicable laws and regulations respecting employment, discrimination in employment, terms and conditions of employment, wages, hours and occupational safety and health and employment practices. NexVerse has withheld all amounts required by Law or by agreement to be withheld from the wages, salaries, and other payments to employees and is not liable for any arrears of wages or any taxes or any penalty for failure to comply with any of the foregoing. NexVerse is not liable for any payment to any trust or other fund or to any Governmental Entity with respect to unemployment compensation benefits, social security or other

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benefits or obligations for employees (other than routine payments to be made in the normal course of business and consistent with past practice). There are no pending claims against NexVerse under any workers compensation plan or policy or for long term disability. There are no controversies pending or, to the knowledge of NexVerse, threatened, between NexVerse and any of its employees (the “NexVerse Employees”), which controversies have or could reasonably be expected to result in an action, suit, proceeding, claim, arbitration or investigation before any Governmental Entity. To the knowledge of NexVerse, no NexVerse Employees are in violation of any term of any employment contract, non-disclosure agreement, noncompetition agreement, or any restrictive covenant to a former employer relating to the right of any such employee to be employed by NexVerse because of the nature of the business conducted or presently proposed to be conducted by NexVerse or to the use of trade secrets or proprietary information of others. No NexVerse Employees have given notice to NexVerse, nor is NexVerse otherwise aware, that any such employee intends to terminate his or her employment with NexVerse.

     SECTION 4.23 Registration Rights and Voting Rights

     Except as required pursuant to that certain Investor Rights Agreement, dated November 27, 2001, by and among NexVerse and the investors listed on the Schedule of Investors attached thereto, and as will be required by the Series C Financing Documents upon the execution of such documents and the consummation of the Series C Financing, NexVerse is not under any obligation, and has not granted any rights, to register any of NexVerse’s presently outstanding securities or any of its securities that may hereafter be issued. To the knowledge of NexVerse, except as contemplated in that certain Voting Agreement, dated November 27, 2001, by and among certain securityholders of NexVerse, and as will be required by the Series C Financing Documents upon the execution of such documents, no stockholder has entered into any agreement with respect to the voting of equity securities of NexVerse.

     SECTION 4.24 Investment Representation

     NexVerse is acquiring the Chorale Networks Israel Shares and the Chorale Networks U.S. Shares for its own account for investment and not for resale or distribution in any transaction that would be in violation of the securities laws of the United States of America or any state thereof. NexVerse has the knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of an investment in the Chorale Networks Israel Shares and the Chorale Networks U.S. Shares.

     SECTION 4.25 Full Disclosure

     NexVerse has provided the Sellers with all information requested by the Sellers in connection with their decision to enter into the Transactions. This Agreement, including the schedules and exhibits hereto, does not contain any untrue statement of a material fact nor omit to state a material fact necessary in order to make the statements contained herein not misleading.

ARTICLE V

COVENANTS

     SECTION 5.01 Conduct of the Business Pending the Closing

     Each of the Sellers agrees that, between the date of this Agreement and the Closing, unless NexVerse shall otherwise agree in writing, (x) the Business shall be conducted only in, and neither the Sellers nor NGTS Israel shall take any action with respect to the Business except in the ordinary

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course of business consistent with past practice and (y) each of the Sellers and NGTS Israel shall use all reasonable efforts to keep available the services of such of their respective current officers, significant employees and consultants and to preserve the current relationships with such of their respective corporate partners, customers, suppliers and other persons with which either of them has significant business relations in order to preserve substantially intact the Business. By way of amplification and not limitation, each of the Sellers and NGTS Israel shall not, between the date of this Agreement and the Closing, directly or indirectly do, or agree to do, any of the following without the prior written consent of NexVerse:

          (a) amend or otherwise change its certificate of incorporation or bylaws or memorandum or articles of association, as applicable, except as could not reasonably be expected to have an adverse effect on the Business or the Assets;

          (b) sell, pledge, dispose of, transfer, lease, license, guarantee or encumber, or authorize the sale, pledge, disposition, transfer, lease, license, guarantee, or encumbrance of Assets, except sales of inventory or grants of licenses related to such sales in the ordinary course of business consistent with past practice and except pursuant to the Separation Agreements;

          (c) (i) acquire (including, without limitation, by merger, consolidation, or acquisition of stock or assets) any interest in any corporation, partnership, other business organization or person or any division thereof, except for such interests as will not be included in the Assets or (ii) terminate, cancel or request any material change in, or agree to any material change in, any Company Material Contract or Company License Agreement;

          (d) increase the compensation payable or to become payable to the Transferring Employees, grant any rights to severance or termination pay to, or enter into any employment or severance agreement which provides benefits upon a change in control of the Business or the Companies that would be triggered by the Exchange Transaction with, any Transferring Employee who is not currently entitled to such benefits from the Exchange Transaction, establish, adopt, enter into or amend any collective bargaining, bonus, profit sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination, severance or other plan, agreement, trust, fund, policy or arrangement for the benefit of any Transferring Employee, except to the extent required by applicable Law or the terms of a collective bargaining agreement, or enter into or amend any contract, agreement, commitment or arrangement with any Transferring Employees; or

          (e) authorize or enter into any formal or informal agreement or otherwise make any commitment to do any of the foregoing or to take any action that would make any of the representations or warranties of the Seller contained in this Agreement untrue or incorrect or prevent the Seller from performing their covenants hereunder or result in any of the conditions to the Exchange Transaction set forth herein not being satisfied.

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          SECTION 5.02 Conduct of Business by NexVerse Pending the Closing

          NexVerse agrees that, between the date of this Agreement and the Closing, unless the Sellers shall otherwise agree in writing, (x) the business of NexVerse shall be conducted only in, and NexVerse shall not take any action except in, the ordinary course of business consistent with past practice and (y) NexVerse shall use all reasonable efforts to keep available the services of such of the current officers, significant employees and consultants of NexVerse and to preserve the current relationships of NexVerse with such of the corporate partners, customers, suppliers and other persons with which NexVerse has significant business relations in order to preserve substantially intact its business organization. By way of amplification and not limitation, NexVerse shall not, between the date of this Agreement and the Closing, directly or indirectly do, or agree to do, any of the following without the prior written consent of the Sellers:

          (a) amend or otherwise change its certificate of incorporation or bylaws;

          (b) other than to effect the Recapitalization and the Series C Financing, issue, sell, pledge, dispose of, grant, transfer, lease, license, guarantee or encumber, or authorize the issuance, sale, pledge, disposition, grant, transfer, lease, license or encumbrance of (i) any shares of capital stock of NexVerse of any class, or securities convertible into or exchangeable or exercisable for any shares of such capital stock, or any options, warrants or other rights of any kind to acquire any shares of such capital stock, or any other ownership interest (including, without limitation, any phantom interest), of NexVerse or (ii) any property or assets of NexVerse except sales of inventory in the ordinary course of business consistent with past practice;

          (c) (i) acquire (including, without limitation, by merger, consolidation, or acquisition of stock or assets) any interest in any corporation, partnership, other business organization or person or any division thereof; (ii) incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, or otherwise as an accommodation become responsible for, the obligations of any person for borrowed money or make any loans or advances material to the business, assets, liabilities, financial condition or results of operations of NexVerse; (iii) terminate, cancel or request any material change in, or agree to any material change in, any NexVerse Material Contract or NexVerse License Agreement; (iv) make or authorize any capital expenditure, other than capital expenditures in the ordinary course of business consistent with past practice that have been budgeted for fiscal year 2002 and disclosed in writing to the Sellers and that are not, in the aggregate, in excess of $50,000; or (v) except in connection with the Transactions, enter into or amend any contract, agreement, commitment or arrangement that, if fully performed, would not be permitted under this Section 5.02(c);

          (d) declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock;

          (e) reclassify, combine, split, subdivide or redeem, purchase or otherwise acquire, directly or indirectly, any of its capital stock, except in connection with the Recapitalization;

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          (f) amend the terms of, repurchase, redeem or otherwise acquire, any of its securities or propose to do any of the foregoing, except in connection with the Recapitalization;

          (g) increase the compensation payable or to become payable to its directors, officers, consultants or employees, grant any rights to severance or termination pay to, or enter into any employment or severance agreement which provides benefits upon a change in control of NexVerse that would be triggered by the Transactions with, any director, officer, consultant or other employee of NexVerse who is not currently entitled to such benefits from the Transactions, establish, adopt, enter into or amend any collective bargaining, bonus, profit sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination, severance or other plan, agreement, trust, fund, policy or arrangement for the benefit of any director, officer, consultant or employee of NexVerse, except to the extent required by applicable Law or the terms of a collective bargaining agreement, or enter into or amend any contract, agreement, commitment or arrangement between NexVerse and any of NexVerse’s directors, officers, consultants or employees;

          (h) pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction in the ordinary course of business and consistent with past practice of liabilities reflected or reserved against on the balance sheet of NexVerse included in the NexVerse Unaudited Financial Statements and only to the extent of such reserves;

          (i) make any change with respect to NexVerse’s accounting policies, principles, methods or procedures, including, without limitation, revenue recognition policies, other than as required by GAAP;

          (j) make any material Tax election or settle or compromise any material Tax liability;

          (k) or authorize or enter into any formal or informal agreement or otherwise make any commitment to do any of the foregoing or to take any action that would make any of the representations or warranties of NexVerse contained in this Agreement untrue or incorrect or prevent NexVerse from performing its covenants hereunder or result in any of the conditions to the Exchange Transaction set forth herein not being satisfied.

          SECTION 5.03 Notices of Certain Events

          Each of the Sellers, on the one hand, and NexVerse on the other hand, shall give prompt notice to the other of (i) any notice or other communication from any person alleging that the consent of such person is or may be required in connection with the Exchange Transaction; (ii) any notice or other communication from any Governmental Entity in connection with the Exchange Transaction; (iii) any actions, suits, claims, investigations or proceedings commenced or, to its knowledge, threatened against, relating to or involving or otherwise affecting it, or that relate to the consummation of the Exchange Transaction; (iv) the occurrence of a default or event that, with the giving of notice or lapse of time or

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both, will become a default under any Company Material Contract or NexVerse Material Contract, as applicable; and (v) any change that could reasonably be expected to have a Companies Material Adverse Effect or NexVerse Material Adverse Effect, as applicable, or to delay or impede the ability of either the Sellers, on the one hand, or NexVerse, on the other hand, to perform their respective obligations pursuant to this Agreement and to effect the consummation of the Transactions.

     SECTION 5.04 Access to Information; Confidentiality

     (a) From the date of this Agreement to the Closing, the Sellers, on the one hand, and NexVerse, on the other hand, shall (i) provide to the other (and its officers, directors, employees, accountants, consultants, legal counsel, agents and other representatives (collectively, “Representatives”)) access at reasonable times upon prior notice to its officers, employees, agents, properties, offices and other facilities and to the books and records thereof, and (ii) furnish promptly such information concerning its business, properties, contracts, assets, liabilities and personnel as the other party or its Representatives may reasonably request in connection with completing the Transactions. No investigation conducted pursuant to this Section 5.04 shall affect or be deemed to modify any representation or warranty made in this Agreement.

     (b) The parties hereto shall comply with, and shall cause their respective Representatives to comply with, all of their respective obligations under that certain Non-Disclosure Agreement by and between ECI and NexVerse (the “Non-Disclosure Agreement”) with respect to the information disclosed pursuant to this Section 5.04 or pursuant to the Non-Disclosure Agreement.

     SECTION 5.05 No Solicitation of Transactions

     The Sellers and NGTS Israel, on the one hand, and NexVerse, on the other hand, shall not, directly or indirectly, and shall cause their respective Representatives not to, directly or indirectly, solicit, initiate or encourage (including by way of furnishing nonpublic information), any inquiries or the making of any proposal or offer that constitutes, or may reasonably be expected to lead to, any Competing Transaction, or enter into or maintain or continue discussions or negotiate with any person in furtherance of such inquiries or to obtain a Competing Transaction, or agree to or endorse any Competing Transaction, or authorize or permit any of their respective Representatives to take any such action. Any violation of the restrictions set forth in this Section 5.05 by any of such Representative, whether or not such Person is purporting to act on behalf of the party of which such Person is a Representative or otherwise, shall be deemed to be a breach of this Section 5.05 by such party. The Sellers shall notify NexVerse promptly, and NexVerse shall notify the Sellers promptly, if any proposal or offer, or any inquiry or contact with any person with respect thereto, regarding a Competing Transaction is made, such notice to include the identity of the person making such proposal, offer, inquiry or contact, and the terms of such Competing Transaction, and shall keep NexVerse or the Sellers, as applicable, apprised, on a current basis, of the status of such Competing Transaction. All parties hereto immediately shall cease and cause to be terminated al] existing discussions or negotiations with any parties conducted heretofore with respect to a Competing Transaction. No party hereto shall release any third party from, or waive any provision of, any confidentiality or standstill agreement to which it is a party.

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     SECTION 5.06 Further Action; Consents; Filings

     (a) Upon the terms and subject to the conditions hereof, each of the parties hereto shall use all reasonable efforts to (i) take, or cause to be taken, all appropriate action, and do, or cause to be done, all things necessary, proper or advisable under applicable Law or otherwise to consummate the Transactions, (ii) obtain from Governmental Entities any consents, licenses, permits, waivers, approvals, authorizations or orders required to be obtained or made by it in connection with the authorization, execution and delivery of this Agreement and the consummation of the Transactions and (iii) make all necessary filings, and thereafter make any other required or appropriate submissions, with respect to this Agreement and the Transactions required under any applicable Laws. The parties hereto shall cooperate and consult with each other in connection with the making of all such filings.

     (b) Each of the parties hereto will give any notices to third persons, and use reasonable efforts to obtain any consents from third persons, necessary, proper or advisable to consummate the transactions contemplated by this Agreement.

     SECTION 5.07 Public Announcements

     Except as may be required by Law or the regulations of any securities exchange, Nasdaq or other regulatory body to whose rules any party hereto is subject, until the earlier of termination of this Agreement or the Closing, (a) neither the Sellers nor any affiliate of the Sellers shall, without NexVerse’s prior written approval, issue a press release or make any other public announcement regarding the Agreement or the Exchange Transaction to any third party (other than any Governmental Entity as necessary to obtain any required approval of the Exchange Transaction) and (b) NexVerse shall not, without the Sellers’ prior written approval, issue a press release or make any other public announcement regarding the Agreement or the Exchange Transaction to any third party (other than any Governmental Entity as necessary to obtain any required approval of the Exchange Transaction).

     SECTION 5.08 Line of Credit

     NexVerse will use its reasonable best efforts to obtain, within one year from the Closing Date, a line of credit in the amount of at least $10,000,000 from a commercial bank that is secured only by accounts receivable of NexVerse. In the event such a line of credit is not available to NexVerse on commercially reasonable terms, ECI and NexVerse shall enter into a line of credit of up to $10,000,000, substantially in the form attached hereto as Exhibit 9 (the “ECI Line of Credit”), which would be secured by pre-approved accounts receivable of NexVerse and, if applicable, the Companies, subject to such terms and conditions as are contained therein.

     SECTION 5.09 Employee Benefit Matters

     On or as soon as practicable following the Closing, the Transferring Employees will be, to the extent applicable, eligible to participate in those benefit plans and programs maintained for similarly situated employees of NexVerse (or in substantially similar plans or programs) on the same terms applicable to similarly situated employees of NexVerse and to the extent that such plans and programs provide the following benefits: medical/dental/vision care, life insurance, disability income, sick pay, holiday and vacation pay, 401(k) plan coverage, Code Section 125 benefit arrangements, bonus, profit-sharing or other incentive plans, pension or retirement programs, dependent care assistance, severance benefits, and employee stock option and stock purchase plans. NexVerse will assume accrued vacation liabilities relating to the Transferring Employees, including, if ECI is required to pay the

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amounts of such liabilities in connection with the Transactions, by reimbursing ECI for such amounts at the Closing; provided, however, that NexVerse’s liability under this Section 5.09 shall not exceed $100,000.

          SECTION 5.10 Grant of NexVerse Options to Employees of NGTS Israel and NGTS U.S.

          At or as soon as practicable following the Closing, but in no event sooner than January 1, 2003, NexVerse will enter into option agreements, in accordance with the terms of the applicable option plan, with the Transferring Employees set forth on Exhibit 17 hereto pursuant to which options will be granted to such Transferring Employees to purchase an aggregate of 15,003,048 shares of NexVerse Common Stock (the “Closing Options”); provided, that if any Transferring Employees do not accept NexVerse’s (or an Affiliate of NexVerse’s) offer of employment, such options will be re-allocated among some or all of those Transferring Employees who do accept such offers of employment. The Closing Options will be vested as of the grant date with respect to 37.5% of such options as of the grant date in the case of each Transferring Employee, the balance of which will vest ratably over 48 months minus the applicable number of months for which vesting credit has already been received, except for Tal Simchony, whose Closing Options will be vested with respect to 50% of such options as of the grant date, the balance of which will vest ratably over 48 months from the date of his acceptance of NexVerse’s offer of employment..

ARTICLE VI

CONDITIONS TO THE TRANSACTIONS

          SECTION 6.01 Conditions to the Obligations of Each Party to Consummate the Transactions

          The obligations of the parties hereto to consummate the Transactions are subject to the satisfaction or, if permitted by applicable Law, waiver of the following conditions:

          (a) no court of competent jurisdiction shall have issued or entered any order, writ, injunction or decree, and no other Governmental Entity shall have issued any order, which is then in effect and has the effect of making the Transactions illegal or otherwise prohibiting its consummation;

          (b) all consents, approvals and authorizations legally required to be obtained to consummate the Transactions, including, but not limited to, any consents, approvals or authorizations required by the Office of the Chief Scientist in Israel, shall have been obtained from all Governmental Entities, except where the failure to obtain any such consent, approval or authorization could not reasonably be expected to result in either a Companies Material Adverse Effect or a NexVerse Material Adverse Effect, as applicable; and

          (c) the consent of the Banks, as defined in Section 3.05 of the Sellers’ Disclosure Schedule, shall have been obtained.

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          SECTION 6.02 Conditions to the Obligations of the Sellers

          The obligations of the Sellers to consummate the Transactions are subject to the satisfaction or, if permitted by applicable Law, waiver of the following further conditions:

          (a) NexVerse Consents. All NexVerse Consents and all assignments to NexVerse of the licenses and agreements listed on Schedule 6.02(a) hereto, or rights to use the intellectual property that is the subject of such licenses and agreements, shall have been obtained;

          (b) Recapitalization. NexVerse shall have been recapitalized as set forth in Exhibit 13 (such recapitalization, the “Recapitalization,” and the post-recapitalization table attached hereto in Exhibit 13, the “Recapitalization Summary”). (i) The New Charter shall have been filed with the Secretary of State of Delaware, (ii) all outstanding shares of Series A Preferred Stock and Series B Preferred Stock will have been converted into shares of NexVerse Common Stock and Series A-1 Preferred Stock as set forth in the New Charter, (iii) all liquidation preferences of any kind relating to any share or shares of Series A Preferred Stock or Series B Preferred Stock that are set forth in any agreement between NexVerse and any holder of Series A Preferred Stock or Series B Preferred Stock or any other document, including NexVerse’s certificate of incorporation, shall have been duly and validly terminated as set forth in the New Charter, except for the liquidation preferences contained in the New Charter, and upon completion of all steps contemplated by the Recapitalization and concurrently with the Closing 446,292 shares of Series A-] Preferred Stock (including 21,137 shares issuable upon exercise of a warrant) will have been retired by NexVerse, such shares having been exchanged by Comdisco for one share of Series A-2 Preferred Stock, and such 446,292 shares of Series A-1 Preferred Stock shall not be subject to reissuance by NexVerse and (iv) the terms of the promissory notes made by NexVerse in favor of Comerica Bank California, Dominion Venture Finance L.L.C., GATX Ventures, Inc. and Comdisco Inc. shall have been amended as set forth in the Recapitalization Summary;

          (c) Reservation of Shares. NexVerse shall have authorized and reserved a sufficient number of shares of NexVerse Common Stock for issuance pursuant to its obligations contained in Article VIII below;

          (d) Cooley Godward Opinion. A legal opinion letter will be delivered by Cooley Godward LLP, counsel to NexVerse, containing the opinions set forth in Exhibit 12 hereto;

          (e) the Transferring Employees who accept NexVerse’s offer of employment shall have executed releases with ECI or the applicable affiliate of ECI in the form attached to the applicable Separation Agreement.

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          SECTION 6.03 Conditions to the Obligations of NexVerse

          The obligations of NexVerse to consummate the Transactions are subject to the satisfaction or, if permitted by applicable Law, waiver of the following conditions:

          (a) Seller Consents. All Seller Consents listed on Schedule 6.03(a) hereto shall have been obtained;

          (b) Goldfarb Levy Opinion. A legal opinion letter will be delivered by Goldfarb, Levy, Eran & Co., counsel to Sellers, containing the opinions set forth in Exhibit 14 hereto;

          (c) Brobeck Opinion. A legal opinion letter will be delivered by Brobeck, Phleger & Harrison LLP, counsel to Sellers, containing the opinions set forth in Exhibit 15 hereto; and

          (d) Transferring Employees. At least 75% of the Transferring Employees, including Tal Simchony, listed on Exhibit 10 hereto shall have accepted NexVerse’s offer of employment with NexVerse, Chorale Networks Israel or Chorale Networks U.S., as applicable, following the Closing, and shall have executed releases with ECI or the applicable affiliate of ECI in the form attached to the applicable Separation Agreement

ARTICLE VII

TERMINATION, AMENDMENT AND WAIVER

          SECTION 7.01 Termination

          This Agreement may be terminated and the Exchange Transaction may be abandoned at any time prior to the Closing, notwithstanding any requisite adoption and approval of this Agreement, as follows:

          (a) by mutual written consent duly authorized by the boards of directors of each of the Sellers and NexVerse;

          (b) by either the Sellers or NexVerse, if the Closing shall not have occurred on or before January 30, 2003; provided, however, that the right to terminate this Agreement under this Section 7.01(b) shall not be available to any party whose failure to fulfill any obligation under this Agreement shall have caused, or resulted in, the failure of the Closing to occur on or before such date; or

          (c) by either the Sellers or NexVerse, if any Governmental Order, writ, injunction or decree preventing the consummation of the Exchange Transaction shall have been entered by any court of competent jurisdiction and shall have become final and nonappealable.

The right of any party hereto to terminate this Agreement pursuant to this Section 7.01 will remain operative and in full force and effect regardless of any investigation made by or on behalf of any party

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hereto, any person controlling any such party or any of their respective officers, directors, representatives or agents, whether prior to or after the execution of this Agreement.

     SECTION 7.02 Effect of Termination

     Except as provided in Section 8.04, in the event of termination of this Agreement pursuant to Section 7.01, this Agreement shall immediately become void, there shall be no liability under this Agreement on the part of any party hereto or any of its affiliates or any of its or their officers or directors, and all rights and obligations of each party hereto shall cease; provided, however, that nothing herein shall relieve any party hereto from liability for the breach of any provisions of this Agreement prior to its termination; and provided, further that the provisions of Section 5.04 (Confidentiality), this Section 7.02 and Article IX, shall remain in full force and effect and survive any termination of this Agreement.

ARTICLE VIII

INDEMNIFICATION

     SECTION 8.01 Indemnification

     (a) Subject to the limitations set forth in this Article VIII, the Sellers will indemnify and hold harmless NexVerse, its officers, directors, advisors, shareholders, affiliates, agents, employees and each person, if any, who controls or may control NexVerse within the meaning of the Securities Act (hereinafter referred to individually as a “NexVerse Indemnified Person” and collectively as “NexVerse Indemnified Persons”) from and against any and all losses, damages, judgments, settlements, claims, liabilities, costs and expenses (whether or not resulting from third party claims), including, without limitation, reasonable attorneys’ fees and other out-of-pocket expenses (collectively, “Damages”) arising out of, based upon or resulting from any misrepresentation or breach of or default in connection with any representations or warranties given by or made by either of the Sellers in this Agreement, including the Sellers’ Disclosure Schedule, or certificate delivered pursuant to this Agreement.

     (b) Subject to the limitations set forth in this Article VIII, NexVerse will indemnify and hold harmless the Sellers and each of their officers, directors, shareholders, advisors, affiliates, agents, employees and each person, if any, who controls or may control either Seller within the meaning of the Securities Act (hereinafter referred to individually as a “Seller Indemnified Person” and collectively as “Seller Indemnified Persons”) from and against (i) any and all Damages arising out of, based upon or resulting from any misrepresentation or breach of or default in connection with any representations or warranties, given by or made by NexVerse in this Agreement, including the NexVerse Disclosure Schedule, or certificate delivered pursuant to this Agreement (but excluding any Damages subject to section 8.01(b)(ii)) and (ii) any and all Damages incurred by the Sellers (as calculated in Section 8.02(c) below) arising out of, based upon or resulting from any claim made against NexVerse or either Seller relating to the liabilities, business or operations of ipVerse, including without limitation matters described in Section 4.11 of the NexVerse Disclosure Schedule (“ipVerse Liabilities”).

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     (c) Nothing in this Agreement shall limit the liability of the Sellers or NexVerse for fraud.

     SECTION 8.02 Limitations on Indemnification

     (a) Notwithstanding anything to the contrary contained in this Agreement, (i) a NexVerse Indemnified Person may not make a claim for Damages until the aggregate amount of claims by NexVerse Indemnified Persons exceeds five hundred thousand dollars ($500,000), at which time and thereafter the NexVerse Indemnified Persons shall be entitled to recover all such Damages, and (ii) a Seller Indemnified Person may not make a claim for Damages (x) under Section 8.01(b)(i) until the aggregate amount of claims by Seller Indemnified Persons under Section 8.01(b)(i) exceeds five hundred thousand dollars ($500,000), and (y) under Section 8.01(b)(ii) until the aggregate amount of claims by Seller Indemnified Persons under Section 8.01(b)(ii) exceeds one hundred fifty thousand dollars ($150,000), at which time in each such instance and thereafter the Seller Indemnified Persons shall be entitled to recover all such Damages.

     (b) Notwithstanding anything to the contrary contained in this Agreement, (1) the aggregate liability of the Sellers pursuant to this Article VIII shall not exceed seven million five hundred thousand dollars ($7,500,000) and (ii) the aggregate liability of NexVerse pursuant to this Article VIII shall not exceed seven million five hundred thousand dollars ($7,500,000).

     (c) Notwithstanding anything to the contrary contained in this Agreement, the aggregate Damages incurred by the Sellers shall, for purposes of Section 8.01(b)(ii) above, equal, (i) with respect to Damages incurred by the Sellers, the Damages incurred by the Sellers arising out of, based on or resulting from such claims and (ii) with respect to Damages incurred by NexVerse, the product of (x) the Damages incurred by NexVerse arising out of, based on or resulting from such claims and (y) the percentage obtained by dividing the number of outstanding shares of NexVerse capital stock held by ECI and its affiliates immediately following the closing of the transactions contemplated by the Series C Financing Documents by the total number of outstanding shares of NexVerse capital stock immediately following such closing, in both cases in an as-converted to common basis.

     (d) Notwithstanding anything to the contrary contained in this Agreement, the form of remedy with respect to Damages under Section 8.01(a) and 8.01(b) shall be as follows:

          (i) In the case of a claim or claims by NexVerse Indemnified Persons pursuant to Section 8.01(a) for aggregate Damages of up to three million five hundred thousand dollars ($3,500,000) (the “Cash Indemnity Threshold”), the remedy for all such Damages shall be in the form of the cancellation of shares of NexVerse Common Stock issued to the Sellers (“Indemnity Shares”) having a value equal to such Damages, based upon a price per share of $0.1716 (the “Stipulated Value”).

          (ii) In the case of a claim or claims by NexVerse Indemnified Persons pursuant to Section 8.01(a) for aggregate Damages in excess of the Cash Indemnity Threshold, the remedy for all such Damages (from the first dollar of Damages) shall be the pursuit of all remedies at law for breach of this Agreement available to such NexVerse Indemnified Person for

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the full amount of Damages, subject to the limitations on aggregate liability set forth in Section 8.02(b) above.

          (iii) In the case of a claim or claims by Seller Indemnified Persons pursuant to Section 8.01(b) for aggregate Damages up to the Cash Indemnity Threshold, the remedy for all such Damages shall be in the form of the issuance by NexVerse of Indemnity Shares having a value equal to such Damages, based upon the Stipulated Value.

          (iv) In the case of a claim or claims by Seller Indemnified Persons pursuant to Section 8;01(b) for aggregate Damages in excess of the Cash Indemnity Threshold, the remedy for all such Damages (from the first dollar of Damages) shall be the pursuit of all remedies at law for breach of this Agreement available to the Seller Indemnified Persons for the full amount of Damages, subject to the limitations on liability set forth in Section 8.02(b) above.

          (v) In order to effectuate the provisions of this paragraph (d) relating to the form of remedy, the NexVerse Indemnified Persons or the Seller Indemnified Persons, as applicable, shall have until the first anniversary of the Closing to initiate pursuit of their claims for indemnification under this Section 8.01, notwithstanding the requirement to comply with the notice provisions of Section 8.03 with respect to third party claims.

     SECTION 8.03 Procedures

     (a) Promptly after receipt by any NexVerse Indemnified Person or any Seller Indemnified Person (each, as applicable, an “Indemnified Person”) of notice of the commencement of any action in respect of which the Indemnified Person will seek indemnification hereunder, the Indemnified Person shall notify the Sellers or NexVerse (each, as applicable, an “Indemnifying Party”) thereof in writing, but any failure to so notify an Indemnifying Party shall not relieve it from any liability that it may have to the Indemnified Person except to the extent the Indemnifying Party shall be materially prejudiced by such failure. The Indemnifying Party shall be entitled to participate in the defense of such action and to assume control of such defense with counsel reasonably acceptable to the Indemnified Person; provided, however, that:

(i) the Indemnified Person shall be entitled to participate in the defense of such claim and to employ counsel at its own expense to assist in the handling of such claim;

(ii) the Indemnifying Party shall obtain the prior written approval of the Indemnified Person before entering into any settlement of such claim or ceasing to defend against such claim, if, pursuant to or as a result of such settlement or cessation, injunctive or other equitable relief would be imposed against the Indemnified Person or would otherwise restrict the future activity or conduct of the Indemnified Person; and

(iii) the Indemnifying Party shall not consent to the entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to each Indemnified Person of a release from all liability in respect of such claim.

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     (b) If the Indemnifying Party does not assume control of the defense of such claims by promptly notifying the Indemnified Person of such assumption, the Indemnified Person shall have the right to defend such claim in such manner as it may deem appropriate at the cost and expense of the Indemnifying Party, and the Indemnifying Party will promptly reimburse the Indemnified Person therefor in accordance with the terms hereof. The reimbursement of fees, costs and expenses required by this Section 8.03 shall be made by periodic payments during the course of the investigation or defense, as and when bills are received or expenses incurred.

     SECTION 8.04 Exclusive Remedy

     (a) The rights and remedies provided by this Article shall be the exclusive rights and remedies of the parties to this Agreement for monetary damages arising out of (i) any inaccuracy in or breach of a representation or warranty herein or (ii) any other claim, actions, demand, loss, cost, expense, liability, penalty, or other damage relating to or arising out of this Agreement or the transactions contemplated by this Agreement except as the agreements set forth as exhibits hereto explicitly contemplate otherwise. No party to this Agreement shall make a claim relating to this Agreement against another party to this Agreement except pursuant to, and subject to the limitations contained in, this Article.

     (b) EXCEPT IN THE CASE OF FRAUD (FOR WHICH LIABILITY SHALL BE GOVERNED BY APPLICABLE LAW), IN NO EVENT SHALL ANY PARTY HERETO BE LIABLE TO ANY OTHER PARTY HERETO FOR ANY CONSEQUENTIAL, INDIRECT, INCIDENTAL OR OTHER SIMILAR DAMAGES FOR ANY BREACH OR DEFAULT UNDER, OR ANY ACT OR OMISSION ARISING OUT OF OR IN ANY WAY RELATING TO THIS AGREEMENT UNDER ANY FORM OF ACTION WHATSOEVER, WHETHER IN CONTRACT OR OTHERWISE.

ARTICLE IX

GENERAL PROVISIONS

     SECTION 9.01 Survival

     The representations and warranties of the Sellers and NexVerse contained in this Agreement will survive for a period of one (1) year following the Closing. This Section 9.01 shall not limit any covenant or agreement of the parties hereto that by its terms contemplates performance beyond one (1) year following the Closing.

     SECTION 9.02 Amendment Waivers

     (a) Any provision of this Agreement may be amended or waived prior to the Closing if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by each of the parties hereto, or in the case of a waiver, by the party against whom the waiver is to be effective.

     (b) No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof

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preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

     SECTION 9.03 Waiver

     At any time prior to the Closing, any party hereto may (a) extend the time for or waive compliance with the performance of any obligation or other act of any other party hereto, (b) waive any inaccuracy in the representations and warranties contained herein or in any document delivered pursuant hereto and (c) waive compliance by the other party with any of the agreements or conditions contained herein. Any such extension or waiver shall only be valid if set forth in an instrument in writing signed by the party or parties to be bound thereby.

     SECTION 9.04 Expenses

     All Expenses incurred in connection with this Agreement and the Transactions shall be paid by the party incurring such Expenses, whether or not the Transactions are consummated.

     SECTION 9.05 Notices

All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given upon (a) on the date of delivery, if delivered in person, or if delivered by fax upon confirmation of receipt, (b) on the first business day following the date of dispatch if delivered by a nationally recognized overnight courier service and (c) on the 5th business day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid, at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 9.05):

(a)	if to the Sellers, to:
	ECI Telecom Ltd.
	ECI Telecom – NGTS Inc.
	30 Hasivim Street
	Petah Tikva 49133, Israel
	Attn: General Counsel
	Fax: 972 (3) 926-6070
	with a copy to:
	Brobeck, Phleger & Harrison LLP
	1633 Broadway, 47th Floor
	New York, New York 10019
	Attn: Richard Gilden
	Fax: (212) 586-7878

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(b)	if to NexVerse, to:
	NexVerse Networks, Inc.
	926 Rock Avenue
	San Jose, California 95131
	Attn: Amit Chawla
	Fax: (408) 750-9409
	with a copy to:
	Cooley Godward LLP
	Five Palo Alto Square
	3000 El Camino Real
	Palo Alto, California 94306-2155
	Attn: James Fulton
	Fax: (650) 849-7400

     SECTION 9.06 Severability

     If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of 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 Exchange Transaction 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 hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner to the fullest extent permitted by applicable Law in order that the Transactions may be consummated as originally contemplated to the fullest extent possible.

     SECTION 9.07 Assignment; Binding Effect; Benefit

     Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of Law or otherwise) without the prior written consent of the other parties hereto. Subject to the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. Notwithstanding anything contained in this Agreement to the contrary, nothing in this Agreement, expressed or implied, is intended to confer on any person other than the parties hereto or their respective successors and permitted assigns any rights or remedies under or by reason of this Agreement.

     SECTION 9.08 Incorporation of Exhibits

     The Sellers’ Disclosure Schedule, the NexVerse Disclosure Schedule and all Exhibits attached hereto and referred to herein are hereby incorporated herein and made a part of this Agreement for all purposes as if fully set forth herein.

     SECTION 9.09 Governing Law

     This agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of New York other than conflict of laws principles thereof directing the application of any law other than that of New York. Courts within the State of New York will have jurisdiction over all disputes between the parties hereto arising out of or relating to this agreement and the agreements, instruments and documents contemplated hereby. The parties hereby consent to and agree to submit to the

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jurisdiction of such courts. Each of the parties hereto waives, and agrees not to assert in any such dispute, to the fullest extent permitted by applicable law, any claim that (i) such party is not personally subject to the jurisdiction of such courts, (ii) such party and such party’s property is immune from any legal process issued by such courts or (iii) any litigation commenced in such courts is brought in an inconvenient forum.

     SECTION 9.10 Waiver of Jury Trial

     Each party hereto hereby irrevocably waives all right to trial by jury in any proceeding (whether based on contract, tort or otherwise) arising out of or relating to this agreement or any transaction or agreement contemplated hereby or the actions of any party hereto in the negotiation, administration, performance or enforcement hereof.

     SECTION 9.11 Headings; Interpretation

     The descriptive headings contained in this Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. The parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.

     SECTION 9.12 Counterparts

     This Agreement may be executed and delivered (including by facsimile transmission) in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed and delivered shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.

     SECTION 9.13 Entire Agreement

     This Agreement (including the Exhibits, the Sellers’ Disclosure Schedule, the NexVerse Disclosure Schedule and the Non-Disclosure Agreement) constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior agreements and understandings among the parties with respect thereto. No addition to or modification of any provision of this Agreement shall be binding upon any party hereto unless made in writing and signed by all parties hereto.

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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

ECI TELECOM LTD.
By:	/s/ Doron Inbar
	Name: Doron Inbar
	Title: Chief Executive Officer
ECI TELECOM – NGTS INC.
By:	/s/ Tal Simchony
	Name: Tal Simchony
	Title: Chief Executive Officer
NEXVERSE NETWORKS, INC.
By:	/s/ Amit Chawla
	Name: Amit Chawla
	Title: Chief Executive Officer

EX-2.2

Exhibit 2.2

AMENDMENT NO. 1 TO THE

SHARE EXCHANGE AGREEMENT

among

ECI TELECOM LTD.,

ECI TELECOM – NGTS INC.,

and

VERAZ NETWORKS, INC.,

Dated December 31, 2002

AMENDMENT NO. 1 TO THE

SHARE EXCHANGE AGREEMENT

     This Amendment No. 1 to the Share Exchange Agreement (“Amendment”) is entered into this 31st day of December, 2002 and modifies the SHARE EXCHANGE AGREEMENT, dated October 30, 2002 (the “Agreement”), by and among ECI Telecom Ltd., an Israeli corporation (“ECI”), ECI Telecom – NGTS Inc. (“NGTS U.S.” and together with ECI, the “Sellers”), a Delaware corporation and an indirect wholly-owned subsidiary of ECI, and Veraz Networks, Inc. (f/k/a NexVerse Networks, Inc.), a Delaware corporation (“Veraz”) (the Sellers and Veraz are collectively referred to herein as the “Parties”).

     The provisions of this Amendment are intended to modify certain provisions of the Agreement. Where the provisions of the Amendment are specifically stated and differ from those in the Agreement, the provisions of the Amendment shall control. All other terms and conditions of the Agreement remain unchanged.

RECITALS

     WHEREAS, the Parties have entered into the Agreement dated October 30, 2002;

     WHEREAS, pursuant to Section 9.02 of the Agreement, the Parties have the authority to amend the Agreement; and

     WHEREAS, the Parties desire to amend the Agreement as set forth herein.

AGREEMENT

     Now, Therefore, in consideration of the above recitals and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and intending to be legally bound hereby, the Parties hereby agree as follows:

     1. Definitions; Interpretation. Unless otherwise defined herein, all capitalized terms used herein and defined in the Agreement shall have the respective meanings given to those terms in the Agreement.

     2. Amendments to the Agreement.

          (a) The Israeli Separation Agreement, which is attached as Exhibit 1 to the Agreement, shall be amended and superseded in its entirety as set forth on Exhibit A attached hereto.

          (b) Each exhibit to the Israeli Separation Agreement set forth on Exhibit B attached hereto shall be amended and superseded in its entirety as set forth on Exhibit B.

          (c) The U.S. Separation Agreement, which is attached as Exhibit 2 to the Agreement, shall be amended and superseded in its entirety as set forth on Exhibit C attached hereto.

          (d) Each exhibit to the U.S. Separation Agreement set forth on Exhibit D attached hereto shall be amended as set forth on Exhibit D.

          (e) The NexVerse Disclosure Schedule referenced in the Agreement shall be amended as set forth on Exhibit E attached hereto.

          (f) The Sellers’ Disclosure Schedule referenced in the Agreement shall be amended as set forth on Exhibit F attached hereto.

          (g) Each exhibit to the Transitional Services Agreement – Israel set forth on Exhibit G attached hereto, shall be amended and superseded in its entirety as set forth on Exhibit G.

          (h) The Transitional Services Agreement – United States, which is attached as Exhibit 7B to the Agreement, shall be amended and superseded in its entirety as set forth on Exhibit H attached hereto.

          (i) Each exhibit to the Transitional Services Agreement– United States set forth on Exhibit I attached hereto, shall be amended and superseded in its entirety as set forth on Exhibit I.

          (j) The Sublease Agreements set forth as Exhibit 6A and Exhibit 6B to the Transitional Services Agreement – United States shall be amended and superseded in their entirety as set forth on Exhibit J-1 and Exhibit J-2 attached hereto, respectively.

          (k) The VoIP Agreement which is attached as Exhibit 6 to the Agreement, shall be amended and superseded in its entirety as set forth on Exhibit K attached hereto.

          (l) Each exhibit to the VoIP Agreement set forth on Exhibit L attached hereto shall be amended and superseded in its entirety as set forth on Exhibit L.

          (m) Each exhibit to the DCME Master Agreement set forth on Exhibit M attached hereto, shall be amended and superseded in its entirety as set forth on Exhibit M.

          (n) Exhibit 13 to the Agreement (the Recapitalization Summary) is amended and superseded in its entirety as set forth on Exhibit N attached hereto (the “Final Recapitalization Summary”).

     3. Waiver of Covenants.

          (a) By Sellers. In accordance with Sections 9.02 of the Agreement, the Sellers hereby waive:

          (i) the covenant of Veraz (and any notice provisions with respect thereto) set forth in Section 5.02(c) of the Agreement with respect to the payment of certain debt by Veraz pursuant to the terms of the Final Recapitalization Summary, as defined above.

          (ii) the covenant of Veraz (and any notice provisions with respect thereto) set forth in Section 5.02(g) of the Agreement with respect to entry into an agreement based upon the terms of that certain separation letter delivered to Gursharan Sidhu, dated December 12, 2002.

     4. Waiver of Closing Conditions.

          (a) By Sellers. In accordance with Sections 9.02 and 6.02 of the Agreement, the Sellers hereby:

               (i) waive the obligation of Veraz to obtain, as a condition to the Sellers’ obligation to consummate the Transactions, the assignments of the following agreements set forth on Schedule 6.02(a) to the Agreement: (1) the Reseller Agreement between ipVerse and Roots, dated August 14, 2001, and (2) the New World Ecosystem Program Agreement between Cisco Systems, Inc. and ipVerse, Inc. dated January 18, 2000.

               (ii) waive the obligation of Veraz to, as a condition to the Sellers’ obligation to consummate the Transactions, amend the promissory notes held by Comerica Bank- California, Dominion Venture Finance, L.L.C. and GATX Ventures, Inc. as set forth on the Recapitalization Summary; provided that in lieu thereof Veraz effect the Final Recapitalization Summary.

          (b) By Veraz In accordance with Sections 9.02 and 6.03 of the Agreement, Veraz hereby waives the obligations of the Sellers to obtain, as a condition to Veraz’s obligation to consummate the Transactions, the assignments of the agreements set forth on Schedule 6.03(a) to the Agreement that have not been obtained on or prior to the date hereof.

5.	Effect of the Amendment. On and after the date hereof, each reference to the Agreement in the Agreement or in any other document shall mean the Agreement as amended by this Amendment. The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power, or remedy of any party, nor constitute a waiver of any provision of the Agreement.
6.	Full Force and Effect. Except as amended above, the Agreement remains in full force and effect.
7.	Governing Law. This Amendment shall be governed by, and construed and enforced in accordance with, the laws of the State of New York other than conflict of laws principles thereof directing the application of any law other than that of New York. Courts within the State of New York will have jurisdiction over all disputes between the parties hereto arising out of or relating to this agreement and the agreements, instruments and documents contemplated hereby. The parties hereby consent to and agree to submit to the jurisdiction of such courts. Each of the parties hereto waives, and agrees not to assert in any such dispute, to

	the fullest extent permitted by applicable law, any claim that (i) such party is not personally subject to the jurisdiction of such courts, (ii) such party and such party’s property is immune from any legal process issued by such courts or (iii) any litigation commenced in such courts is brought in an inconvenient forum.
8.	Counterparts. This Amendment may be executed and delivered (including by facsimile transmission) in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed and delivered shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to be executed as of the date first written above by their respective officers thereunto duly authorized.

ECI TELECOM LTD.
By:	/s/ Giora Bitan
	Name:	Giora Bitan
	Title:

ECI TELECOM – NGTS INC.
By:	/s/ Illegible
	Name:
	Title:

VERAZ NETWORKS, INC.
By:	/s/ Amit Chawla
	Name:	Amit Chawla
	Title:

[Signature page to Amendment]

List of Exhibits

Exhibit A — Israeli Separation Agreement
Exhibit B — Amended Exhibits to Israeli Separation Agreement
Exhibit C — U.S. Separation Agreement
Exhibit D — Amended Exhibits to U.S. Separation Agreement
Exhibit E — NexVerse Disclosure Schedule
Exhibit F — Sellers’ Disclosure Schedule
Exhibit G — Amended Exhibits to Transitional Services Agreement — Israel
Exhibit H — Transitional Services Agreement – United States
Exhibit I — Amended Exhibits to Transitional Services Agreement — United Stated
Exhibit J-1 — Sublease Agreement (Ft. Lauderdale)
Exhibit J-2 — Sublease Agreement (Herndon)
Exhibit K — VoIP Agreement
Exhibit L — Amended Exhibits to VoIP Agreement
Exhibit M — Amended Exhibits to DCME Master Agreement
Exhibit N — Final Recapitalization Summary

EX-3.1

Exhibit 3.1

AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
VERAZ NETWORKS, INC.

     Doug Sabella hereby certifies that:

     ONE: The original name of this company is Softswitch Enterprises, Inc. and the date of filing the original Certificate of Incorporation of this company with the Secretary of State of the State of Delaware was October 18, 2001. The name of the company was changed to NexVerse Networks, Inc. with the filing of a Certificate of Amendment of the Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware on December 11, 2001. The name of the company was changed to Veraz Networks, Inc. with the filing of an Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware on December 31, 2002.

     TWO: He is the duly elected and acting President and Chief Executive Officer of Veraz Networks, Inc., a Delaware corporation.

     THREE: The Certificate of Incorporation of this company is hereby amended and restated to read as follows:

I.

     The name of this company is Veraz Networks, Inc. (the “Company” or the “Corporation”).

II.

     The address of the registered office of the corporation in the State of Delaware is 9 East Loockerman Street, City of Dover, County of Kent, 19901, and the name of the registered agent of the corporation in the State of Delaware at such address is National Registered Agents, Inc.

III.

     The purpose of the Company is to engage in any lawful act or activity for which a corporation may be organized under the Delaware General Corporation Law (“DGCL”).

IV.

     A. The Company is authorized to issue two classes of stock to be designated, respectively, “Common Stock” and “Preferred Stock.” The total number of shares which the Company is authorized to issue is one hundred fifty million four hundred forty six thousand five hundred one (150,446,501) shares, one hundred million (100,000,000) shares of which shall be Common Stock (the “Common Stock”) and fifty million four hundred forty six thousand five hundred one (50,446,501) shares of which shall be Preferred Stock (the “Preferred Stock”). The

1.

Preferred Stock shall have a par value of one-tenth of one cent ($0.001) per share and the Common Stock shall have a par value of one-tenth of one cent ($0.001) per share.

     B. The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares of Common Stock then outstanding) by the affirmative vote of the holders of a majority of the stock of the Company (voting together on an as-if-converted basis).

     C. Five million four hundred forty six thousand five hundred (5,446,500) shares of the authorized shares of Preferred Stock are hereby designated Series A-1 Preferred Stock (the “Series A-1 Preferred”), one (1) share of the authorized shares of Preferred Stock is hereby designated Series A-2 Preferred Stock (the “Series A-2 Preferred”), nine million (9,000,000) shares of the authorized shares of Preferred Stock are hereby designated Series B-1 Preferred Stock (the “Series B-1 Preferred”), and thirty six million (36,000,000) shares of the authorized shares of Preferred Stock are hereby designated “Series C Preferred Stock” (the “Series C Preferred”).

     D. Effective as of the date and time this Amended and Restated Certificate of Incorporation is filed with the Secretary of State of the State of Delaware, (A) every one (1) share of the Company’s Common Stock outstanding shall be split into four (4) shares of Common Stock described herein and (B) every one (1) share of the Company’s Series C Preferred Stock outstanding shall be split into four (4) shares of Series C Preferred Stock (the “Stock Split”).

     E. The rights, preferences, privileges, restrictions and other matters relating to the Preferred Stock are as follows:

     1. Dividend Rights.

               (a) Holders of Series C Preferred, in preference to the holders of Common Stock, shall be entitled to receive, when and as declared by the Board of Directors (the “Board”), but only out of funds that are legally available therefor, cash dividends at the rate of eight percent (8%) of the Original Issue Price (as defined below) per annum on each outstanding share of Series C Preferred (as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to such shares after the filing date hereof). Such dividends shall be payable only when, as and if declared by the Board and shall be non-cumulative.

               (b) The “Original Issue Price” of the Series C Preferred shall be eighty five and eight-tenths cents ($0.858).

               (c) So long as any shares of Series C Preferred are outstanding, the Company shall not pay or declare any dividend, whether in cash or property, or make any other distribution on the Common Stock, or purchase, redeem or otherwise acquire for value any shares of Common Stock until all dividends as set forth in Section 1(a) above on the Series C Preferred shall have been paid or declared and set apart, except for:

2.

                    (i) acquisitions of Common Stock by the Company pursuant to agreements which permit the Company to repurchase such shares at cost (or the lesser of cost or fair market value) upon termination of services to the Company; or

                    (ii) acquisitions of Common Stock in exercise of the Company’s right of first refusal to repurchase such shares where such exercise of the Company’s right of first refusal was unanimously approved by the Board of Directors.

               (d) In the event dividends are paid on any share of Common Stock, the Company shall pay an additional dividend on all outstanding shares of Series C Preferred in a per share amount equal (on an as-if-converted to Common Stock basis) to the amount paid or set aside for each share of Common Stock.

               (e) The provisions of Sections 1(c) and 1(d) shall not apply to a dividend payable in Common Stock, or any repurchase of any outstanding securities of the Company that is unanimously approved by the Board.

               (f) The holders of the Preferred Stock expressly waive their rights, if any, as described in California Code Sections 502, 503 and 506 as they relate to repurchases of shares of Common Stock upon termination of employment or service as a consultant or director.

               (g) The Company shall not pay any dividends on the Series A-1 Preferred, Series A-2 Preferred or Series B-1 Preferred.

     2. Voting Rights.

               (a) General Rights. Each holder of shares of the Series C Preferred shall be entitled to the number of votes equal to the number of shares of Common Stock into which such shares of Series C Preferred could be converted (pursuant to Section 4 hereof) immediately after the close of business on the record date fixed for such meeting or the effective date of such written consent and shall have voting rights and powers equal to the voting rights and powers of the Common Stock and shall be entitled to notice of any stockholders’ meeting in accordance with the bylaws of the Company. Except as otherwise provided herein or as required by law, the Series C Preferred shall vote together with the Common Stock at any annual or special meeting of the stockholders and not as a separate class, and may act by written consent in the same manner as the Common Stock. Except as otherwise provided herein or as required by law, the holders of Series A-1 Preferred and Series B-1 Preferred shall not have any voting rights with respect to such shares.

               (b) Separate Vote of Series C Preferred. For so long as at least one million (1,000,000) shares of Series C Preferred (subject to adjustment for any stock split, reverse stock split or other similar event affecting the Series C Preferred after the filing date hereof without a corresponding adjustment hereto) remain outstanding, in addition to any other vote or consent required herein or by law, the vote or written consent of the holders of at least two-thirds of the outstanding Series C Preferred shall be necessary for effecting or validating the following actions:

3.

                    (i) Any amendment, alteration, or repeal of any provision of the Certificate of Incorporation or the Bylaws of the Company (including any filing of a Certificate of Designation);

                    (ii) Any increase or decrease in the authorized number of shares of Preferred Stock;

                    (iii) Any authorization or any designation, whether by reclassification or otherwise, of any new class or series of stock or any other securities convertible into equity securities of the Company ranking on a parity with or senior to the Series C Preferred in right of redemption, liquidation preference, voting or dividends or any increase in the authorized or designated number of any such new class or series;

                    (iv) Any redemption, repurchase, payment of dividends or other distributions (or payment into or set aside for a sinking fund for such purpose) with respect to Common Stock or Preferred Stock (except for acquisitions of Common Stock by the Company permitted by Section 1 hereof and except for redemption of the Series A-1 Preferred and Series B-1 Preferred as provided by Section 5 hereof);

                    (v) Any agreement by the Company or its stockholders regarding an Asset Transfer or Acquisition (each as defined in Section 3);

                    (vi) Any action that results in the payment or declaration of a dividend on any shares of Common Stock or Preferred Stock;

                    (vii) Any voluntary dissolution or liquidation of the Company; or

                    (viii) Any grant of rights to intellectual property of the Company other than to customers in the ordinary course of business.

               (c) Election of Board of Directors.

                    (i) For so long as at least six million (6,000,000) shares of Series C Preferred remain outstanding (subject to adjustment for any stock split, reverse stock split or similar event affecting the Series C Preferred after the filing date hereof without a corresponding adjustment hereto) the holders of Series C Preferred, voting as a separate class, shall be entitled to elect six (6) members of the Board at each meeting or pursuant to each consent of the Company’s stockholders for the election of directors, and to remove from office such directors and to fill any vacancy caused by the resignation, death or removal of such directors;

                    (ii) the holders of Common Stock, voting as a separate class, shall be entitled to elect two (2) members of the Board at each meeting or pursuant to each consent of the Company’s stockholders for the election of directors, and to remove from office such directors and to fill any vacancy caused by the resignation, death or removal of such directors; and

4.

                    (iii) the holders of Common Stock and Series C Preferred, voting together as a single class on an as-if-converted basis, shall be entitled to elect all remaining members of the Board at each meeting or pursuant to each consent of the Company’s stockholders for the election of directors, and to remove from office such directors and to fill any vacancy caused by the resignation, death or removal of such directors.

                    (iv) No person entitled to vote at an election for directors may cumulate votes to which such person is entitled, unless, at the time of such election, the Company is subject to Section 2115 of the California General Corporation Law (“CGCL”). During such time or times that the Company is subject to Section 2115(b) of the CGCL, every stockholder entitled to vote at an election for directors may cumulate such stockholder’s votes and give one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which such stockholder’s shares are otherwise entitled, or distribute the stockholder’s votes on the same principle among as many candidates as such stockholder desires. No stockholder, however, shall be entitled to so cumulate such stockholder’s votes unless (i) the names of such candidate or candidates have been placed in nomination prior to the voting and (ii) the stockholder has given notice at the meeting, prior to the voting, of such stockholder’s intention to cumulate such stockholder’s votes. If any stockholder has given proper notice to cumulate votes, all stockholders may cumulate their votes for any candidates who have been properly placed in nomination. Under cumulative voting, the candidates receiving the highest number of votes, up to the number of directors to be elected, are elected.

                    (v) Removal. During such time or times that the Company is subject to Section 2115(b) of the CGCL, the Board or any individual director may be removed from office at any time without cause by the affirmative vote of the holders of at least a majority of the outstanding shares entitled to vote; provided, however, that unless the entire Board is removed, no individual director may be removed when the votes cast against such director’s removal, or not consenting in writing to such removal, would be sufficient to elect that director if voted cumulatively at an election which the same total number of votes were cast (or, if such action is taken by written consent, all shares entitled to vote were voted) and the entire number of directors authorized at the time of such director’s most recent election were then being elected.

     3. Liquidation Rights.

               (a) Upon any liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary, before any distribution or payment shall be made to the holders of any Series A-2 Preferred, Series A-1 Preferred, Series B-1 Preferred or Common Stock, the holders of Series C Preferred shall be entitled to be paid out of the assets of the Company legally available for distribution, or the consideration received in such transaction, an amount per share of Series C Preferred equal to two times the Original Issue Price for the Series C Preferred plus all declared and unpaid dividends on the Series C Preferred (as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to such shares after the filing date hereof) for each share of Series C Preferred held by them. If, upon any such liquidation, dissolution, or winding up, the assets of the Company (or the consideration

5.

received in such transaction) shall be insufficient to make payment in full to all holders of Series C Preferred of the liquidation preference set forth in this Section 3(a), then such assets (or consideration) shall be distributed among the holders of Series C Preferred at the time outstanding, ratably in proportion to the full amounts to which they would otherwise be respectively entitled pursuant to this Section 3(a).

               (b) After the payment of the full liquidation preference of the Series C Preferred as set forth in Section 3(a) above, the holder of Series A-2 Preferred shall be entitled to be paid out of the assets of the Company legally available for distribution, or the consideration received in such transaction, an amount equal to one million dollars ($1,000,000). If, upon any such liquidation, dissolution, or winding up, the assets of the Company (or the consideration received in such transaction) shall be insufficient to make payment in full of the liquidation preference set forth in this Section 3(b), then the assets of the Company legally available for distribution shall be distributed to the holder of Series A-2 Preferred.

               (c) After the payment of the full liquidation preference of the Series C Preferred and Series A-2 Preferred as set forth in Sections 3(a) and 3(b) above, the holders of Series A-1 Preferred shall be entitled to be paid out of the assets of the Company legally available for distribution, or the consideration received in such transaction, an amount per share equal to one dollar ($1.00) for each share of Series A-1 Preferred held by them. If, upon any such liquidation, dissolution, or winding up, the assets of the Company (or the consideration received in such transaction) shall be insufficient to make payment in full of the liquidation preference set forth in this Section 3(c), then such assets (or consideration) shall be distributed among the holders of Series A-1 Preferred at the time outstanding, ratably in proportion to the full amounts to which they would otherwise be respectively entitled pursuant to this Section 3(c).

               (d) After the payment of the full liquidation preferences of the Series C Preferred, Series A-2 Preferred and Series A-1 Preferred as set forth in Sections 3(a), 3(b) and 3(c) above, the holders of Series B-1 Preferred shall be entitled to be paid out of the assets of the Company legally available for distribution, or the consideration received in such transaction, an amount per share equal to one dollar ($1.00) for each share of Series B-1 Preferred held by them. If, upon any such liquidation, dissolution, or winding up, the assets of the Company (or the consideration received in such transaction) shall be insufficient to make payment in full to of the liquidation preference set forth in this Section 3(d), then such assets (or consideration) shall be distributed among the holders of Series B-1 Preferred at the time outstanding, ratably in proportion to the full amounts to which they would otherwise be respectively entitled pursuant to this Section 3(d).

               (e) After the payment of the full liquidation preferences of the Series C Preferred, the Series A-2 Preferred, the Series A-1 Preferred and Series B-1 Preferred as set forth in Sections 3(a), 3(b), 3(c) and 3(d) above, the holders of Series A-1 Preferred shall be entitled to be paid out of the assets of the Company legally available for distribution, or the consideration received in such transaction, an amount per share equal to sixty cents ($0.60) for each share of Series A-1 Preferred held by them, and the holders of Series B-1 Preferred shall be entitled to be paid out of the assets of the Company legally available for distribution, or the consideration received in such transaction, an amount per share equal to fifty cents ($0.50) for each share of

6.

Series B-1 Preferred held by them. If, upon any such liquidation, dissolution, or winding up, the assets of the Company (or the consideration received in such transaction) shall be insufficient to make payment in full to the holders of Series A-1 Preferred and Series B-1 Preferred of the liquidation preference set forth in this Section 3(e), then such assets (or consideration) shall be distributed among the holders of Series A-1 Preferred and Series B-1 Preferred at the time outstanding, ratably in proportion to the full amounts to which they would otherwise be respectively entitled pursuant to this Section 3(e).

               (f) After the payment of the liquidation preferences of the Series C Preferred, Series A-2 Preferred, Series A-1 Preferred and Series B-1 Preferred as set forth in Sections 3(a), 3(b), 3(c), 3(d) and 3(e) above, the remaining assets of the Company legally available for distribution (or the consideration received in such transaction), if any, shall be distributed ratably to the holders of the Common Stock.

               (g) The following events shall be considered a liquidation, dissolution or winding up of the Company under this Section 3:

                    (i) (A) any consolidation or merger of the Company with or into any other corporation or other entity or person, or any other corporate reorganization, in which the stockholders of the Company immediately prior to such consolidation, merger or reorganization, do not own more than fifty percent (50%) of the voting power of the surviving entity immediately after such consolidation, merger or reorganization (for purposes of determining the Company’s stockholders’ post-transaction percentage ownership of voting power, the securities that they hold as a result of shares, if any, that the Company’s stockholders owned pre-consolidation or merger in the entity with which the Company consolidated or merged shall not be considered), or (B) any transaction or series of related transactions to which the Company is a party in which in excess of fifty percent (50%) of the Company’s voting power is transferred, excluding (x) any consolidation or merger effected exclusively to change the domicile of the Company, (y) the transactions contemplated by that certain Share Exchange Agreement dated October 30, 2002, or (z) any transaction or series of transactions principally for bona fide equity financing purposes in which cash is received by the Company or indebtedness of the Company is cancelled or converted or a combination thereof (an “Acquisition”); or

                    (ii) a sale, lease or other disposition of all or substantially all of the assets of the Company (an “Asset Transfer”).

                    (iii) In any of such events, if the consideration received by this corporation or its stockholders is other than cash, its value will be deemed its fair market value as determined in good faith by the Board of Directors. Any securities shall be valued as follows:

                         (A) Securities not subject to investment letter or other similar restrictions on free marketability covered by (B) below:

                              (1) If traded on a securities exchange or through the Nasdaq National Market, the value shall be deemed to be the average of the closing prices of the securities on such quotation system over the thirty (30) day period ending three (3) days prior to the closing;

7.

                              (2) If actively traded over-the-counter, the value shall be deemed to be the average of the closing bid or sale prices (whichever is applicable) over the thirty (30) day period ending three (3) days prior to the closing; and

                              (3) If there is no active public market, the value shall be the fair market value thereof, as determined by the Board of Directors.

                         (B) The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a stockholder’s status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in (A) (1), (2) or (3) to reflect the approximate fair market value thereof, as determined in good faith by the Board of Directors.

     4. Conversion Rights.

               The Series A-1 Preferred, Series A-2 Preferred and Series B-1 Preferred shall not be convertible into Common Stock. The holders of the Series C Preferred shall have the following rights with respect to the conversion of the Series C Preferred into shares of Common Stock (the “Conversion Rights”):

               (a) Optional Conversion. Subject to and in compliance with the provisions of this Section 4, any shares of Series C Preferred may, at the option of the holder, be converted at any time into fully-paid and nonassessable shares of Common Stock. The number of shares of Common Stock to which a holder of Series C Preferred shall be entitled upon conversion shall be the product obtained by multiplying the “Series C Preferred Conversion Rate” then in effect (determined as provided in Section 4(b)) by the number of shares of Series C Preferred being converted.

               (b) Series C Preferred Conversion Rate. The conversion rate in effect at any time for conversion of the Series C Preferred (the “Series C Preferred Conversion Rate”) shall be the quotient obtained by dividing the Original Issue Price of the Series C Preferred by the “Series C Preferred Conversion Price,” calculated as provided in Section 4(c).

               (c) Series C Preferred Conversion Price. The conversion price for the Series C Preferred shall initially be the Original Issue Price of the Series C Preferred (the “Series C Conversion Price”). Such initial Series C Conversion Price shall be adjusted from time to time in accordance with this Section 4. All references to the Series C Conversion Price herein shall mean the Series C Conversion Price as so adjusted.

               (d) Mechanics of Conversion. Each holder of Series C Preferred who desires to convert the same into shares of Common Stock pursuant to this Section 4 shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Company or any transfer agent for the Series C Preferred, and shall give written notice to the Company at such office that such holder elects to convert the same. Such notice shall state the number of shares of Series C Preferred being converted. Thereupon, the Company shall promptly issue and deliver at such office to such holder a certificate or certificates for the number of shares of Common Stock to which such holder is entitled and shall promptly pay (i) in cash or, to the

8.

extent sufficient funds are not then legally available therefor, in Common Stock (at the Common Stock’s fair market value determined by the Board as of the date of such conversion), any declared and unpaid dividends on the shares of Series C Preferred being converted and (ii) in cash (at the Common Stock’s fair market value determined by the Board as of the date of conversion) the value of any fractional share of Common Stock otherwise issuable to any holder of Series C Preferred. Such conversion shall be deemed to have been made at the close of business on the date of such surrender of the certificates representing the shares of Series C Preferred to be converted, and the person entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder of such shares of Common Stock on such date.

               (e) Adjustment for Stock Splits and Combinations. If at any time or from time to time after the date that the first share of Series C Preferred is issued (the “Original Issue Date”) the Company effects a subdivision of the outstanding Common Stock without a corresponding subdivision of the Preferred Stock, the Series C Preferred Conversion Price in effect immediately before that subdivision shall be proportionately decreased. Conversely, if at any time or from time to time after the Original Issue Date the Company combines the outstanding shares of Common Stock into a smaller number of shares without a corresponding combination of the Preferred Stock, the Series C Preferred Conversion Price in effect immediately before the combination shall be proportionately increased. Any adjustment under this Section 4(e) shall become effective at the close of business on the date the subdivision or combination becomes effective.

               (f) Adjustment for Common Stock Dividends and Distributions. If at any time or from time to time after the Original Issue Date the Company pays a dividend or other distribution in additional shares of Common Stock, the Series C Preferred Conversion Price that is then in effect shall be decreased as of the time of such issuance, as provided below:

                    (i) The Series C Preferred Conversion Price shall be adjusted by multiplying the Series C Preferred Conversion Price then in effect by a fraction equal to:

                         (A) the numerator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance, and

                         (B) the denominator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance plus the number of shares of Common Stock issuable in payment of such dividend or distribution;

                    (ii) If the Company fixes a record date to determine which holders of Common Stock are entitled to receive such dividend or other distribution, the Series C Preferred Conversion Price shall be fixed as of the close of business on such record date and the number of shares of Common Stock shall be calculated immediately prior to the close of business on such record date; and

                    (iii) If such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Series C Preferred Conversion Price shall be recomputed accordingly as of the close of business on such record date

9.

and thereafter such Series C Preferred Conversion Price shall be adjusted pursuant to this Section 4(f) to reflect the actual payment of such dividend or distribution.

               (g) Adjustment for Reclassification, Exchange and Substitution. If at any time or from time to time after the Original Issue Date, the Common Stock issuable upon the conversion of the Series C Preferred is changed into the same or a different number of shares of any class or classes of stock, whether by recapitalization, reclassification or otherwise (other than an Acquisition or Asset Transfer as defined in Section 3 or a subdivision or combination of shares or stock dividend or a reorganization, merger, consolidation or sale of assets provided for elsewhere in this Section 4), in any such event each holder of Series C Preferred shall then have the right to convert such stock into the kind and amount of stock and other securities and property receivable upon such recapitalization, reclassification or other change by holders of the maximum number of shares of Common Stock into which such shares of Series C Preferred could have been converted immediately prior to such recapitalization, reclassification or change, all subject to further adjustment as provided herein or with respect to such other securities or property by the terms thereof.

               (h) Reorganizations, Mergers or Consolidations. If at any time or from time to time after the Original Issue Date, there is a capital reorganization of the Common Stock or a merger or consolidation of the Company with or into another corporation or another entity or person (other than an Acquisition or Asset Transfer as defined in Section 3 or a recapitalization, subdivision, combination, reclassification, exchange or substitution of shares provided for elsewhere in this Section 4), as a part of such capital reorganization, provision shall be made so that the holders of the Series C Preferred shall thereafter be entitled to receive upon conversion of the Series C Preferred the number of shares of stock or other securities or property of the Company to which a holder of the number of shares of Common Stock deliverable upon conversion of the Series C Preferred would have been entitled on such capital reorganization, subject to adjustment in respect of such stock or securities by the terms thereof. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 4 with respect to the rights of the holders of Series C Preferred after the capital reorganization to the end that the provisions of this Section 4 (including adjustment of the Series C Preferred Conversion Price then in effect and the number of shares issuable upon conversion of the Series C Preferred) shall be applicable after that event and be as nearly equivalent as practicable.

               (i) Sale of Shares Below Series C Preferred Conversion Price.

                    (i) If at any time or from time to time after the Original Issue Date, the Company issues or sells, or is deemed by the express provisions of this Section 4(i) to have issued or sold, Additional Shares of Common Stock (as defined below), other as provided in Section 4(f), 4(g) or 4(h) above, for an Effective Price (as defined below) less than the then effective Series C Preferred Conversion Price (a “Qualifying Dilutive Issuance”), then and in each such case, the then existing Series C Preferred Conversion Price shall be reduced, as of the opening of business on the date of such issue or sale, to a price determined by multiplying the Series C Preferred Conversion Price in effect immediately prior to such issuance or sale by a fraction equal to:

10.

                         (A) the numerator of which shall be (A) the number of shares of Common Stock deemed outstanding (as determined below) immediately prior to such issue or sale, plus (B) the number of shares of Common Stock which the Aggregate Consideration (as defined below) received by the Company for the total number of Additional Shares of Common Stock so issued would purchase at such then-existing Series C Preferred Conversion Price, and

                         (B) the denominator of which shall be the number of shares of Common Stock deemed outstanding (as determined below) immediately prior to such issue or sale plus the total number of Additional Shares of Common Stock so issued.

     For the purposes of the preceding sentence, the number of shares of Common Stock deemed to be outstanding as of a given date shall be the sum of (A) the number of shares of Common Stock outstanding, and (B) the number of shares of Common Stock into which the then outstanding shares of Series C Preferred could be converted if fully converted on the day immediately preceding the given date.

                    (ii) No adjustment shall be made to the Series C Preferred Conversion Price in an amount less than one cent per share. Any adjustment otherwise required by this Section 4(i) that is not required to be made due to the preceding sentence shall be included in any subsequent adjustment to such Series C Preferred Conversion Price.

                    (iii) For the purpose of making any adjustment required under this Section 4(i), the aggregate consideration received by the Company for any issue or sale of securities (the “Aggregate Consideration”) shall be defined as: (A) to the extent it consists of cash, be computed at the net amount of cash received by the Company after deduction of any underwriting or similar commissions, compensation or concessions paid or allowed by the Company in connection with such issue or sale but without deduction of any expenses payable by the Company, (B) to the extent it consists of property other than cash, be computed at the fair value of that property as determined in good faith by the Board, and (C) if Additional Shares of Common Stock, Convertible Securities (as defined below) or rights or options to purchase either Additional Shares of Common Stock or Convertible Securities are issued or sold together with other stock or securities or other assets of the Company for a consideration which covers both, be computed as the portion of the consideration so received that may be reasonably determined in good faith by the Board to be allocable to such Additional Shares of Common Stock, Convertible Securities or rights or options.

                    (iv) For the purpose of the adjustment required under this Section 4(i), if the Company issues or sells (x) stock or other securities convertible into, Additional Shares of Common Stock (such convertible stock or securities being herein referred to as “Convertible Securities”) or (y) rights or options for the purchase of Additional Shares of Common Stock or Convertible Securities and if the Effective Price of such Additional Shares of Common Stock is less than the Series C Preferred Conversion Price, in each case the Company shall be deemed to have issued at the time of the issuance of such rights or options or Convertible Securities the maximum number of Additional Shares of Common Stock issuable upon exercise or conversion thereof and to have received as consideration for the issuance of

11.

such shares an amount equal to the total amount of the consideration, if any, received by the Company for the issuance of such rights or options or Convertible Securities plus:

                         (A) in the case of such rights or options, the minimum amounts of consideration, if any, payable to the Company upon the exercise of such rights or options; and

                         (B) in the case of Convertible Securities, the minimum amounts of consideration, if any, payable to the Company upon the conversion thereof (other than by cancellation of liabilities or obligations evidenced by such Convertible Securities); provided that if the minimum amounts of such consideration cannot be ascertained, but are a function of antidilution or similar protective clauses, the Company shall be deemed to have received the minimum amounts of consideration without reference to such clauses.

                         (C) If the minimum amount of consideration payable to the Company upon the exercise or conversion of rights, options or Convertible Securities is reduced over time or on the occurrence or non-occurrence of specified events other than by reason of antidilution adjustments, the Effective Price shall be recalculated using the figure to which such minimum amount of consideration is reduced; provided further, that if the minimum amount of consideration payable to the Company upon the exercise or conversion of such rights, options or Convertible Securities is subsequently increased, the Effective Price shall be again recalculated using the increased minimum amount of consideration payable to the Company upon the exercise or conversion of such rights, options or Convertible Securities.

                         (D) No further adjustment of the Series C Preferred Conversion Price, as adjusted upon the issuance of such rights, options or Convertible Securities, shall be made as a result of the actual issuance of Additional Shares of Common Stock or the exercise of any such rights or options or the conversion of any such Convertible Securities. If any such rights or options or the conversion privilege represented by any such Convertible Securities shall expire without having been exercised, the Series C Preferred Conversion Price as adjusted upon the issuance of such rights, options or Convertible Securities shall be readjusted to the Series C Preferred Conversion Price which would have been in effect had an adjustment been made on the basis that the only Additional Shares of Common Stock so issued were the Additional Shares of Common Stock, if any, actually issued or sold on the exercise of such rights or options or rights of conversion of such Convertible Securities, and such Additional Shares of Common Stock, if any, were issued or sold for the consideration actually received by the Company upon such exercise, plus the consideration, if any, actually received by the Company for the granting of all such rights or options, whether or not exercised, plus the consideration received for issuing or selling the Convertible Securities actually converted, plus the consideration, if any, actually received by the Company (other than by cancellation of liabilities or obligations evidenced by such Convertible Securities) on the conversion of such Convertible Securities, provided that such readjustment shall not apply to prior conversions of Series C Preferred.

                    (v) For the purpose of making any adjustment to the Conversion Price of the Series C Preferred required under this Section 4(i), “Additional Shares

12.

of Common Stock” shall mean all shares of Common Stock issued by the Company or deemed to be issued pursuant to this Section 4(i) (including shares of Common Stock subsequently reacquired or retired by the Company), other than:

                         (A) shares of Common Stock issued upon conversion of the Series C Preferred;

                         (B) shares of Common Stock and/or options, warrants or other Common Stock purchase rights and the Common Stock issued pursuant to such options, warrants or other rights (as adjusted for any stock dividends, combinations, splits, recapitalizations and the like after the filing date hereof) after the Original Issue Date to employees, officers or directors of, or consultants or advisors to, the Company or any subsidiary pursuant to stock purchase or stock option plans that are approved by the Board;

                         (C) shares of Common Stock issued pursuant to the exercise of options, warrants or convertible securities outstanding as of the Original Issue Date;

                         (D) shares of Common Stock and/or options, warrants or other Common Stock purchase rights, and the Common Stock issued pursuant to such options, warrants or other rights issued for consideration other than cash pursuant to a merger, consolidation, acquisition, strategic alliance or similar business combination approved by the Board;

                         (E) shares of Common Stock or Preferred Stock issued pursuant to any equipment loan or leasing arrangement, real property leasing arrangement or debt financing from a bank or similar financial institution approved by the Board;

                         (F) any equity securities issued in connection with strategic transactions involving the Company and other entities, including (i) joint ventures, manufacturing, marketing or distribution arrangements or (ii) technology transfer or development arrangements; provided that the issuance of shares therein has been approved by the Board;

                         (G) any shares of Series A-2 Preferred; and

                         (H) any shares issued in connection with the Stock Split.

     References to Common Stock in the subsections of this clause (v) above shall mean all shares of Common Stock issued by the Company or deemed to be issued pursuant to this Section 4(i). The “Effective Price” of Additional Shares of Common Stock shall mean the quotient determined by dividing the total number of Additional Shares of Common Stock issued or sold, or deemed to have been issued or sold by the Company under this Section 4(i), into the Aggregate Consideration received, or deemed to have been received by the Company for such issue under this Section 4(i), for such Additional Shares of Common Stock.

                    (vi) In the event that the Company issues or sells, or is deemed to have issued or sold, Additional Shares of Common Stock in a Qualifying Dilutive Issuance

13.

(the “First Dilutive Issuance”), then in the event that the Company issues or sells, or is deemed to have issued or sold, Additional Shares of Common stock in a Qualifying Dilutive Issuance other than the First Dilutive Issuance (a “Subsequent Dilutive Issuance”) pursuant to the same instruments and as part of the same transaction or series of transactions as the First Dilutive Issuance, then and in each such case upon a Subsequent Dilutive Issuance the Series C Preferred Conversion Price shall be reduced to the Series C Preferred Conversion Price that would have been in effect had the First Dilutive Issuance and each Subsequent Dilutive Issuance all occurred on the closing date of the First Dilutive Issuance.

               (j) Certificate of Adjustment. In each case of an adjustment or readjustment of the Series C Preferred Conversion Price for the number of shares of Common Stock or other securities issuable upon conversion of the Series C Preferred, if the Series C Preferred is then convertible pursuant to this Section 4, the Company, at its expense, shall compute such adjustment or readjustment in accordance with the provisions hereof and prepare a certificate showing such adjustment or readjustment, and shall mail such certificate, by first class mail, postage prepaid, to each registered holder of Series C Preferred at the holder’s address as shown in the Company’s books. The certificate shall set forth such adjustment or readjustment, showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (i) the consideration received or deemed to be received by the Company for any Additional Shares of Common Stock issued or sold or deemed to have been issued or sold, (ii) the Series C Preferred Conversion Price at the time in effect, (iii) the number of Additional Shares of Common Stock and (iv) the type and amount, if any, of other property which at the time would be received upon conversion of the Series C Preferred.

               (k) Notices of Record Date. Upon (i) any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or (ii) any Acquisition (as defined in Section 3) or other capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company, any merger or consolidation of the Company with or into any other corporation, or any Asset Transfer (as defined in Section 3), or any voluntary or involuntary dissolution, liquidation or winding up of the Company, the Company shall mail to each holder of Series C Preferred at least ten (10) days prior to the record date specified therein (or such shorter period approved by the holders of a majority of the outstanding Series C Preferred) a notice specifying (A) the date on which any such record is to be taken for the purpose of such dividend or distribution and a description of such dividend or distribution, (B) the date on which any such Acquisition, reorganization, reclassification, transfer, consolidation, merger, Asset Transfer, dissolution, liquidation or winding up is expected to become effective, and (C) the date, if any, that is to be fixed as to when the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or other securities) for securities or other property deliverable upon such Acquisition, reorganization, reclassification, transfer, consolidation, merger, Asset Transfer, dissolution, liquidation or winding up.

14.

               (l) Automatic Conversion.

                    (i) Each share of Series C Preferred shall automatically be converted into shares of Common Stock, based on the then-effective Series C Preferred Conversion Price, (A) at any time upon the affirmative election of the holders of at least a majority of the outstanding shares of the Series C Preferred, or (B) immediately upon the closing of a firmly underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offer and sale of Common Stock for the account of the Company in which the pre-offering valuation of the Company is at least $90,000,000 (a “Qualified IPO”). Upon such automatic conversion, any declared and unpaid dividends shall be paid in accordance with the provisions of Section 4(d).

                    (ii) Upon the occurrence of either of the events specified in Section 4(l)(i) above, the outstanding shares of Series C Preferred shall be converted automatically without any further action by the holders of such shares and whether or not the certificates representing such shares are surrendered to the Company or its transfer agent; provided, however, that the Company shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon such conversion unless the certificates evidencing such shares of Series C Preferred are either delivered to the Company or its transfer agent as provided below, or the holder notifies the Company or its transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Company to indemnify the Company from any loss incurred by it in connection with such certificates. Upon the occurrence of such automatic conversion of the Series C Preferred, the holders of Series C Preferred shall surrender the certificates representing such shares at the office of the Company or any transfer agent for the Series C Preferred. Thereupon, there shall be issued and delivered to such holder promptly at such office and in its name as shown on such surrendered certificate or certificates, a certificate or certificates for the number of shares of Common Stock into which the shares of Series C Preferred surrendered were convertible on the date on which such automatic conversion occurred, and any declared and unpaid dividends shall be paid in accordance with the provisions of Section 4(d).

               (m) Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of Series C Preferred. All shares of Common Stock (including fractions thereof) issuable upon conversion of more than one share of Series C Preferred by a holder thereof shall be aggregated for purposes of determining whether the conversion would result in the issuance of any fractional share. If, after the aforementioned aggregation, the conversion would result in the issuance of any fractional share, the Company shall, in lieu of issuing any fractional share, pay cash equal to the product of such fraction multiplied by the Common Stock’s fair market value (as determined by the Board) on the date of conversion.

               (n) Reservation of Stock Issuable Upon Conversion. The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Series C Preferred, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Series C Preferred. If at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion

15.

of all then outstanding shares of the Series C Preferred, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose.

               (o) Notices. Any notice required by the provisions of this Section 4 shall be in writing and shall be deemed effectively given: (i) upon personal delivery to the party to be notified, (ii) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient; if not, then on the next business day, (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (iv) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with verification of receipt. All notices shall be addressed to each holder of record at the address of such holder appearing on the books of the Company.

               (p) Payment of Taxes. The Company will pay all taxes (other than taxes based upon income) and other governmental charges that may be imposed with respect to the issue or delivery of shares of Common Stock upon conversion of shares of Series C Preferred, excluding any tax or other charge imposed in connection with any transfer involved in the issue and delivery of shares of Common Stock in a name other than that in which the shares of Series C Preferred so converted were registered.

               (q) No Dilution or Impairment. Without the consent of the holders of at least two-thirds of the then outstanding Series C Preferred, the Company shall not amend its Certificate of Incorporation or participate in any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or take any other voluntary action, for the purpose of avoiding or seeking to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but shall at all times in good faith assist in carrying out all such action as may be reasonably necessary or appropriate in order to protect the conversion rights of the holders of the Series C Preferred against dilution or other impairment.

     5. Redemption of Series A-1 Preferred, Series A-2 Preferred and Series B-1 Preferred.

               (a) Each share of Series A-1 Preferred shall be automatically redeemed and canceled (1) at any time upon the affirmative election of the holders of at least a majority of the outstanding shares of the Series A-1 Preferred, or (2) immediately upon the closing of a Qualified IPO (each such event, a “Redemption Date”). Each share of Series A-2 Preferred shall automatically be redeemed and canceled (3) at any time upon the affirmative election of the holders of at least a majority of the outstanding shares of the Series A-2 Preferred, or (4) immediately upon the closing of a Qualified IPO (each such event, a “Redemption Date”). Each share of Series B-1 Preferred shall automatically be redeemed and canceled (5) at any time upon the affirmative election of the holders of at least a majority of the outstanding shares of the Series B-1 Preferred, or (6) immediately upon the closing of a Qualified IPO (each such event, a “Redemption Date”). The Company shall effect such redemptions by paying to the holders of such shares as soon as practicable on or after the applicable Redemption Date in cash in exchange for the shares of Series A-1 Preferred, Series A-2 Preferred and/or Series B-1 Preferred so redeemed a sum equal to the par value of such shares.

16.

               (b) Upon the occurrence of the events specified in Section 5(a), the outstanding shares of Series A-1 Preferred, Series A-2 Preferred and/or Series B-1 Preferred shall be automatically canceled without any further action by the holders of such shares and whether or not the certificates representing such shares are surrendered to the Company or its transfer agent and shall represent only the right to receive the cash payment described in Section 5(a).

     6. No Reissuance of Preferred Stock.

               No share or shares of Preferred Stock acquired by the Company by reason of redemption, purchase, conversion or otherwise shall be reissued.

V.

     A. The liability of the directors of the Company for monetary damages shall be eliminated to the fullest extent under applicable law.

     B. The Company is authorized to provide indemnification of agents (as defined in Section 317 of the CGCL) for breach of duty to the Company and its stockholders through bylaw provisions or through agreements with the agents, or through stockholder resolutions, or otherwise, in excess of the indemnification otherwise permitted by Section 317 of the CGCL, subject, at any time or times that the Company is subject to Section 2115(b) of the CGCL, to the limits on such excess indemnification set forth in Section 204 of the CGCL.

     C. Any repeal or modification of this Article V shall only be prospective and shall not affect the rights under this Article V in effect at the time of the alleged occurrence of any action or omission to act giving rise to liability.

VI.

     For the management of the business and for the conduct of the affairs of the Company, and in further definition, limitation and regulation of the powers of the Company, of its directors and of its stockholders or any class thereof, as the case may be, it is further provided that:

     A. The management of the business and the conduct of the affairs of the Company shall be vested in its Board. The number of directors which shall constitute the whole Board shall be fixed by the Board in the manner provided in the Bylaws, subject to any restrictions which may be set forth in this Restated Certificate.

     B. The Board is expressly empowered to adopt, amend or repeal the Bylaws of the Company. The stockholders shall also have the power to adopt, amend or repeal the Bylaws of the Company; provided however, that, in addition to any vote of the holders of any class or series of stock of the Company required by law or by this Certificate of Incorporation, the affirmative vote of the holders of at least a majority of the voting power of all of the then-outstanding shares of the capital stock of the Company entitled to vote generally in the election of directors, voting together as a single class, shall be required to adopt, amend or repeal any provision of the Bylaws of the Company.

17.

     C. The directors of the Company need not be elected by written ballot unless the Bylaws so provide.

* * * *

     FOUR: This Amended and Restated Certificate of Incorporation has been duly approved by the Board of the Company.

     FIVE: This Amended and Restated Certificate of Incorporation was approved by the holders of the requisite number of shares of said corporation in accordance with Section 228 of the General Corporation Law. This Amended and Restated Certificate of Incorporation has been duly adopted in accordance with the provisions of Sections 242 and 245 of the DGCL by the stockholders of the Company.

     In Witness Whereof, Veraz Networks, Inc. has caused this Amended and Restated Certificate of Incorporation to be signed by its Chief Executive Officer this 29th day of June, 2005.

Veraz Networks, Inc.
By:	/s/ Doug Sabella
	Doug Sabella, Chief Executive Officer

18.

EX-3.2

Exhibit 3.2

AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF

VERAZ NETWORKS, INC.

      Doug Sabella hereby certifies that:

      ONE: The original name of this company is Softswitch Enterprises, Inc. and the date of filing the original Certificate of Incorporation of this company with the Secretary of State of the State of Delaware was October 18, 2001. The name of the company was changed to NexVerse Networks, Inc. with the filing of a Certificate of Amendment of the Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware on December 11, 2001. The name of the company was changed to Veraz Networks, Inc. with the filing of an Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware on December 31, 2002.

      TWO: He is the duly elected and acting Chief Executive Officer of Veraz Networks, Inc., a Delaware corporation.

      THREE: The Certificate of Incorporation of this company is hereby amended and restated to read as follows:

ARTICLE I.

      The name of this company is Veraz Networks, Inc. (the “Company” or the “Corporation”).

ARTICLE II.

      The address of the registered office of the corporation in the State of Delaware is 9 East Loockerman Street, City of Dover, County of Kent, 19901, and the name of the registered agent of the corporation in the State of Delaware at such address is National Registered Agents, Inc.

ARTICLE III.

      The purpose of this corporation is to engage in any lawful act or activity for which a corporation may be organized under the Delaware General Corporation Law (“DGCL”).

ARTICLE IV.

      (A) This corporation is authorized to issue two classes of stock to be designated, respectively, “Common Stock” and “Preferred Stock.” The total number of shares which the corporation is authorized to issue is two hundred ten million (210,000,000) shares. Two hundred million (200,000,000) shares shall be Common Stock, each having a par value of one-tenth of one cent ($.001). Ten million (10,000,000) shares shall be Preferred Stock, each having a par value of one-tenth of one cent ($.001).

1

      (B) The Preferred Stock may be issued from time to time in one or more series. The Board of Directors is hereby expressly authorized to provide for the issue of all of any of the shares of the Preferred Stock in one or more series, and to fix the number of shares and to determine or alter for each such series, such voting powers, full or limited, or no voting powers, and such designation, preferences, and relative, participating, optional, or other rights and such qualifications, limitations, or restrictions thereof, as shall be stated and expressed in the resolution or resolutions adopted by the Board of Directors providing for the issuance of such shares and as may be permitted by the DGCL. The Board of Directors is also expressly authorized to increase or decrease the number of shares of any series subsequent to the issuance of shares of that series, but not below the number of shares of such series then outstanding. In case the number of shares of any series shall be decreased in accordance with the foregoing sentence, the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series.

      (C) Each outstanding share of Common Stock shall entitle the holder thereof to one vote on each matter properly submitted to the stockholders of the Corporation for their vote; provided, however, that, except as otherwise required by law, holders of Common Stock shall not be entitled to vote on any amendment to this Certificate of Incorporation (including any certificate of designation filed with respect to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together as a class with the holders of one or more other such series, to vote thereon by law or pursuant to this Certificate of Incorporation (including any certificate of designation filed with respect to any series of Preferred Stock).

ARTICLE V.

      For the management of the business and for the conduct of the affairs of the corporation, and in further definition, limitation and regulation of the powers of the corporation, of its directors and of its stockholders or any class thereof, as the case may be, it is further provided that:

      (A)

          1. The management of the business and the conduct of the affairs of the corporation shall be vested in its Board of Directors. The number of directors which shall constitute the Board of Directors shall be fixed exclusively by resolutions adopted by a majority of the authorized number of directors constituting the Board of Directors.

          2. Board of Directors

               (a) Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, following the closing of the initial public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “1933 Act”), covering the offer and sale of Common Stock to the public (the “Initial Public Offering”), the directors shall be divided into three classes designated as Class I, Class II and Class III, respectively. At the first annual meeting of stockholders following the closing of the Initial Public Offering, the term of office of the Class I directors shall expire and

2

Class I directors shall be elected for a full term of three years. At the second annual meeting of stockholders following the Initial Public Offering, the term of office of the Class II directors shall expire and Class II directors shall be elected for a full term of three years. At the third annual meeting of stockholders following the Initial Public Offering, the term of office of the Class III directors shall expire and Class III directors shall be elected for a full term of three years. At each succeeding annual meeting of stockholders, directors shall be elected for a full term of three years to succeed the directors of the class whose terms expire at such annual meeting.

               (b) During such time or times that the corporation is subject to Section 2115(b) of the California General Corporation Law (“CGCL”), Section A. 2. a. of this Article V shall not apply and all directors shall be elected at each annual meeting of stockholders to hold office until the next annual meeting.

               (c) No stockholder entitled to vote at an election for directors may cumulate votes to which such stockholder is entitled, unless, at the time of such election, the corporation is subject to Section 2115(b) of the CGCL. During such time or times that the corporation is subject to Section 2115(b) of the CGCL, every stockholder entitled to vote at an election for directors may cumulate such stockholder’s votes and give one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which such stockholder’s shares are otherwise entitled, or distribute the stockholder’s votes on the same principle among as many candidates as such stockholder thinks fit. No stockholder, however, shall be entitled to so cumulate such stockholder’s votes unless (i) the names of such candidate or candidates have been placed in nomination prior to the voting and (ii) the stockholder has given notice at the meeting, prior to the voting, of such stockholder’s intention to cumulate such stockholder’s votes. If any stockholder has given proper notice to cumulate votes, all stockholders may cumulate their votes for any candidates who have been properly placed in nomination. Under cumulative voting, the candidates receiving the highest number of votes, up to the number of directors to be elected, are elected.

      Notwithstanding the foregoing provisions of this section, each director shall serve until his successor is duly elected and qualified or until his death, resignation or removal. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.

          3. Removal of Directors

               (a) During such time or times that the corporation is subject to Section 2115(b) of the CGCL, the Board of Directors or any individual director may be removed from office at any time without cause by the affirmative vote of the holders of at least a majority of the outstanding shares entitled to vote on such removal; provided, however, that unless the entire Board is removed, no individual director may be removed when the votes cast against such director’s removal, or not consenting in writing to such removal, would be sufficient to elect that director if voted cumulatively at an election which the same total number of votes were cast (or, if such action is taken by written consent, all shares entitled to vote were voted) and the entire

3

number of directors authorized at the time of such director’s most recent election were then being elected.

               (b) At any time or times that the corporation is not subject to Section 2115(b) of the CGCL and subject to any limitations imposed by law, Section A. 3. a. above shall no longer apply and removal shall be as provided in Section 141(k) of the DGCL.

          4. Vacancies

               (a) Subject to the rights of the holders of any series of Preferred Stock, any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other causes and any newly created directorships resulting from any increase in the number of directors, shall, unless the Board of Directors determines by resolution that any such vacancies or newly created directorships shall be filled by the stockholders, except as otherwise provided by law, be filled only by the affirmative vote of a majority of the directors then in office, even though less than a quorum of the Board of Directors, and not by the stockholders. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the director for which the vacancy was created or occurred and until such director’s successor shall have been elected and qualified.

               (b) At any time or times that the corporation is subject to Section 2115(b) of the CGCL, if, after the filling of any vacancy by the directors then in office who have been elected by stockholders shall constitute less than a majority of the directors then in office, then

                    (i) Any holder or holders of an aggregate of five percent (5%) or more of the total number of shares at the time outstanding having the right to vote for those directors may call a special meeting of stockholders; or

                    (ii) The Superior Court of the proper county shall, upon application of such stockholder or stockholders, summarily order a special meeting of stockholders, to be held to elect the entire board, all in accordance with Section 305(c) of the CGCL. The term of office of any director shall terminate upon that election of a successor.

      (B)

          1. Bylaw Amendments. The Board of Directors is expressly empowered to adopt, amend or repeal the Bylaws of the corporation. Any adoption, amendment or repeal of the Bylaws of the corporation by the Board of Directors shall require the approval of a majority of the authorized number of directors. The stockholders shall also have power to adopt, amend or repeal the Bylaws of the corporation; provided, however, that, in addition to any vote of the holders of any class or series of stock of the corporation required by law or by this Certificate of Incorporation, the affirmative vote of the holders of at least sixty-six and two-thirds percent (66 2/3%) of the voting power of all of the then-outstanding shares of the capital stock of the corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to adopt, amend or repeal any provision of the Bylaws of the corporation.

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          2. The directors of the corporation need not be elected by written ballot unless the Bylaws so provide.

          3. No action shall be taken by the stockholders of the corporation except at an annual or special meeting of stockholders called in accordance with the Bylaws or by written consent or electronic transmission of stockholders in accordance with the Bylaws prior to the closing of the Initial Public Offering and following the closing of the Initial Public Offering no action shall be taken by the stockholders by written consent or electronic transmission.

          4. Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the corporation shall be given in the manner provided in the Bylaws of the corporation.

ARTICLE VI.

      (A) The liability of the directors for monetary damages shall be eliminated to the fullest extent under applicable law. If the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the corporation shall be eliminated to the fullest extent permitted by the DGCL, as so amended.

      (B) This corporation is authorized to provide indemnification of agents (as defined in Section 317 of the CGCL) for breach of duty to the corporation and its shareholders through bylaw provisions or through agreements with the agents, or through shareholder resolutions, or otherwise, in excess of the indemnification otherwise permitted by Section 317 of the CGCL, subject, at any time or times the corporation is subject to Section 2115(b) to the limits on such excess indemnification set forth in Section 204 of the CGCL.

      (C) Any repeal or modification of this Article VI shall be prospective and shall not affect the rights under this Article VI in effect at the time of the alleged occurrence of any act or omission to act giving rise to liability or indemnification.

ARTICLE VII.

      (A) The corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, except as provided in paragraph B. of this Article VII, and all rights conferred upon the stockholders herein are granted subject to this reservation.

      (B) Notwithstanding any other provisions of this Certificate of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of the corporation required by law or by this Certificate of Incorporation or any certificate of designation filed with respect to a series of Preferred Stock, the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the then-outstanding shares of capital stock of the corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to alter, amend or repeal Articles.

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EX-3.3

Exhibit 3.3

BYLAWS

OF

VERAZ NETWORKS, INC.
(A DELAWARE CORPORATION)

Table Of Contents

	Page
ARTICLE I Offices		1
Section 1. Registered Office		1
Section 2. Other Offices		1
ARTICLE II Corporate Seal		1
Section 3. Corporate Seal		1
ARTICLE III Stockholders’ Meetings		1
Section 4. Place of Meetings		1
Section 5. Annual Meeting		1
Section 6. Special Meetings		4
Section 7. Notice of Meetings		4
Section 8. Quorum		5
Section 9. Adjournment and Notice of Adjourned Meetings		5
Section 10. Voting Rights		5
Section 11. Joint Owners of Stock		6
Section 12. List of Stockholders		6
Section 13. Action Without Meeting		6
Section 14. Organization		7
ARTICLE IV Directors		8
Section 15. Number and Term of Office		8
Section 16. Powers		8
Section 17. Term of Directors.		8
Section 18. Vacancies		9
Section 19. Resignation		9
Section 20. Removal.		10
Section 21. Meetings		10
(a)Regular Meetings.		10
(b)Special Meetings		10
(c)Meetings by Electronic Communications Equipment		10
(d)Notice of Special Meetings		11
(e)Waiver of Notice		11

i.

Table Of Contents
(continued)

	Page
Section 22. Quorum and Voting		11
Section 23. Action Without Meeting		11
Section 24. Fees and Compensation		12
Section 25. Committees		12
(a)Executive Committee		12
(b)Other Committees		12
(c)Term		12
(d)Meetings		12
Section 26.Organization		13
ARTICLE V Officers		13
Section 27. Officers Designated		13
Section 28. Tenure and Duties of Officers		13
(a)General		13
(b)Duties of Chairman of the Board of Directors		13
(c)Duties of President		14
(d)Duties of Vice Presidents		14
(e)Duties of Secretary		14
(f)Duties of Chief Financial Officer		14
Section 29. Delegation of Authority		15
Section 30. Resignations		15
Section 31. Removal		15
ARTICLE VI Execution Of Corporate Instruments And Voting Of Securities Owned By The Corporation		15
Section 32. Execution of Corporate Instruments		15
Section 33. Voting of Securities Owned by the Corporation		15
ARTICLE VII Shares Of Stock		16
Section 34. Form and Execution of Certificates		16
Section 35. Lost Certificates		16
Section 36. Transfers		16
Section 37. Fixing Record Dates		17

ii.

Table Of Contents
(continued)

	Page
Section 38. Registered Stockholders		18
ARTICLE VIII Other Securities Of The Corporation		18
Section 39 Execution of Other Securities		18
ARTICLE IX Dividends		18
Section 40. Declaration of Dividends		18
Section 41. Dividend Reserve		19
ARTICLE X Fiscal Year		19
Section 42. Fiscal Year		19
ARTICLE XI Indemnification		19
Section 43. Indemnification of Directors, Officers, Employees and Other Agents		19
(a)Directors and Officers		19
(b)Employees and Other Agents		19
(c)Expenses		19
(d)Enforcement		20
(e)Non-Exclusivity of Rights		21
(f)Survival of Rights		21
(g)Insurance		21
(h)Amendments		21
(i)Saving Clause		21
(j)Certain Definitions		21
ARTICLE XII Notices		22
Section 44. Notices		22
(a)Notice to Stockholders		22
(b)Notice to Directors		22
(c)Affidavit of Mailing		22
(d)Methods of Notice		22
(e)Notice to Person with Whom Communication Is Unlawful		22
ARTICLE XIII Amendments		23
Section 45. Amendments		23
ARTICLE XIV Right Of First Refusal		23

iii.

Table Of Contents
(continued)

	Page
Section 46. Right of First Refusal		23
ARTICLE XV Loans To Officers		26
Section 47. Loans to Officers		26
ARTICLE XVI Miscellaneous		26
Section 48. Annual Report		26

iv.

An extra section break has been inserted above this paragraph. Do not delete this section break if you plan to add text after the Table of Contents/Authorities. Deleting this break will cause Table of Contents/Authorities headers and footers to appear on any pages following the Table of Contents/Authorities.

1.

BYLAWS

OF

VERAZ NETWORKS, INC.
(A DELAWARE CORPORATION)

ARTICLE I

OFFICES

     Section 1. Registered Office. The registered office of the corporation in the State of Delaware shall be in the City of Dover, County of Kent.

     Section 2. Other Offices. The corporation shall also have and maintain an office or principal place of business at such place as may be fixed by the Board of Directors, and may also have offices at such other places, both within and without the State of Delaware, as the Board of Directors may from time to time determine or the business of the corporation may require.

ARTICLE II

CORPORATE SEAL

     Section 3. Corporate Seal. The Board of Directors may adopt a corporate seal. The corporate seal shall consist of a die bearing the name of the corporation and the inscription, “Corporate Seal-Delaware.” Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.

ARTICLE III

STOCKHOLDERS’ MEETINGS

     Section 4. Place of Meetings. Meetings of the stockholders of the corporation may be held at such place, either within or without the State of Delaware, as may be determined from time to time by the Board of Directors. The Board of Directors may, in its sole discretion, determine that the meeting shall not be held at any place, but may instead be held solely by means of remote communication as provided under the Delaware General Corporation Law (“DGCL”).

     Section 5. Annual Meeting.

          (a) The annual meeting of the stockholders of the corporation, for the purpose of election of directors and for such other business as may lawfully come before it, shall be held on such date and at such time as may be designated from time to time by the Board of Directors. Nominations of persons for election to the Board of Directors of the corporation and the proposal

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of business to be considered by the stockholders may be made at an annual meeting of stockholders: (i) pursuant to the corporation’s notice of meeting of stockholders; (ii) by or at the direction of the Board of Directors; or (iii) by any stockholder of the corporation who was a stockholder of record at the time of giving of notice provided for in the following paragraph, who is entitled to vote at the meeting and who complied with the notice procedures set forth in Section 5.

          (b) At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of Section 5(a) of these Bylaws, (i) the stockholder must have given timely notice thereof in writing to the Secretary of the corporation, (ii) such other business must be a proper matter for stockholder action under the DGCL, (iii) if the stockholder, or the beneficial owner on whose behalf any such proposal or nomination is made, has provided the corporation with a Solicitation Notice (as defined in this Section 5(b)), such stockholder or beneficial owner must, in the case of a proposal, have delivered a proxy statement and form of proxy to holders of at least the percentage of the corporation’s voting shares required under applicable law to carry any such proposal, or, in the case of a nomination or nominations, have delivered a proxy statement and form of proxy to holders of a percentage of the corporation’s voting shares reasonably believed by such stockholder or beneficial owner to be sufficient to elect the nominee or nominees proposed to be nominated by such stockholder, and must, in either case, have included in such materials the Solicitation Notice, and (iv) if no Solicitation Notice relating thereto has been timely provided pursuant to this section, the stockholder or beneficial owner proposing such business or nomination must not have solicited a number of proxies sufficient to have required the delivery of such a Solicitation Notice under this Section 5. To be timely, a stockholder’s notice shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the ninetieth (90^th) day nor earlier than the close of business on the one hundred twentieth (120^th) day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is advanced more than thirty (30) days prior to or delayed by more than thirty (30) days after the anniversary of the preceding year’s annual meeting, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the one hundred twentieth (120^th) day prior to such annual meeting and not later than the close of business on the later of the ninetieth (90^th) day prior to such annual meeting or the tenth (10^th) day following the day on which public announcement of the date of such meeting is first made. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a stockholder’s notice as described above. Such stockholder’s notice shall set forth: (A) as to each person whom the stockholder proposed to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “1934 Act”) and Rule 14a-11 thereunder (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (B) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any,

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on whose behalf the proposal is made; and (C) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the corporation’s books, and of such beneficial owner, (ii) the class and number of shares of the corporation which are owned beneficially and of record by such stockholder and such beneficial owner, and (iii) whether either such stockholder or beneficial owner intends to deliver a proxy statement and form of proxy to holders of, in the case of the proposal, at least the percentage of the corporation’s voting shares required under applicable law to carry the proposal or, in the case of a nomination or nominations, a sufficient number of holders of the corporation’s voting shares to elect such nominee or nominees (an affirmative statement of such intent, a “Solicitation Notice”).

          (c) Notwithstanding anything in the second sentence of Section 5(b) of these Bylaws to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the corporation at least one hundred (100) days prior to the first anniversary of the preceding year’s annual meeting, a stockholder’s notice required by this Section 5 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the corporation not later than the close of business on the tenth (10^th) day following the day on which such public announcement is first made by the corporation.

          (d) Only such persons who are nominated in accordance with the procedures set forth in this Section 5 shall be eligible to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 5. Except as otherwise provided by law, the Chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made, or proposed, as the case may be, in accordance with the procedures set forth in these Bylaws and, if any proposed nomination or business is not in compliance with these Bylaws, to declare that such defective proposal or nomination shall not be presented for stockholder action at the meeting and shall be disregarded.

          (e) Notwithstanding the foregoing provisions of this Section 5, in order to include information with respect to a stockholder proposal in the proxy statement and form of proxy for a stockholders’ meeting, stockholders must provide notice as required by the regulations promulgated under the 1934 Act. Nothing in these Bylaws shall be deemed to affect any rights of stockholders to request inclusion of proposals in the corporation proxy statement pursuant to Rule 14a-8 under the 1934 Act.

          (f) For purposes of this Section 5, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press, PR Newswire, Business Wire or comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the 1934 Act.

3.

     Section 6. Special Meetings.

          (a) Special meetings of the stockholders of the corporation may be called, for any purpose or purposes, by (i) the Chairman of the Board of Directors, (ii) the Chief Executive Officer, (iii) the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any such resolution is presented to the Board of Directors for adoption) or (iv) by the holders of shares entitled to cast not less than ten percent (10%) of the votes at the meeting and shall be held at such place, on such date, and at such time as the Board of Directors shall fix.

At any time or times that the corporation is subject to Section 2115(b) of the California General Corporation Law (“CGCL”), stockholders holding five percent (5%) or more of the outstanding shares shall have the right to call a special meeting of stockholders as set forth in Section 18(b) herein.

          (b) If a special meeting is properly called by any person or persons other than the Board of Directors, the request shall be in writing, specifying the general nature of the business proposed to be transacted, and shall be delivered personally or sent by certified or registered mail, return receipt requested, or by telegraphic or other facsimile transmission to the Chairman of the Board of Directors, the Chief Executive Officer, or the Secretary of the corporation. No business may be transacted at such special meeting otherwise than specified in such notice. The Board of Directors shall determine the time and place of such special meeting, which shall be held not less than thirty-five (35) nor more than one hundred twenty (120) days after the date of the receipt of the request. Upon determination of the time and place of the meeting, the officer receiving the request shall cause notice to be given to the stockholders entitled to vote, in accordance with the provisions of Section 7 of these Bylaws. Nothing contained in this paragraph (b) shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the Board of Directors may be held.

     Section 7. Notice of Meetings. Except as otherwise provided by law, notice, given in writing or by electronic transmission, of each meeting of stockholders shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting, such notice to specify the place, if any, date and hour, in the case of special meetings, the purpose or purposes of the meeting, and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at any such meeting. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the records of the corporation. Notice of the time, place, if any, and purpose of any meeting of stockholders may be waived in writing, signed by the person entitled to notice thereof or by electronic transmission by such person, either before or after such meeting, and will be waived by any stockholder by his attendance thereat in person, by remote communication, if applicable, or by proxy, except when the stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Any stockholder so waiving notice of such meeting

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shall be bound by the proceedings of any such meeting in all respects as if due notice thereof had been given.

     Section 8. Quorum. At all meetings of stockholders, except where otherwise provided by statute or by the Certificate of Incorporation, or by these Bylaws, the presence, in person, by remote communication, if applicable, or by proxy duly authorized, of the holders of a majority of the outstanding shares of stock entitled to vote shall constitute a quorum for the transaction of business. In the absence of a quorum, any meeting of stockholders may be adjourned, from time to time, either by the chairman of the meeting or by vote of the holders of a majority of the shares represented thereat, but no other business shall be transacted at such meeting. The stockholders present at a duly called or convened meeting, at which a quorum is present, may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. Except as otherwise provided by statute, or by the Certificate of Incorporation or these Bylaws, in all matters other than the election of directors, the affirmative vote of a majority of shares present in person, by remote communication, if applicable, or represented by proxy duly authorized at the meeting and entitled to vote generally on the subject matter shall be the act of the stockholders. Except as otherwise provided by statute, the Certificate of Incorporation or these Bylaws, directors shall be elected by a plurality of the votes of the shares present in person, by remote communication, if applicable, or represented by proxy duly authorized at the meeting and entitled to vote generally on the election of directors. Where a separate vote by a class or classes or series is required, except where otherwise provided by the statute or by the Certificate of Incorporation or these Bylaws, a majority of the outstanding shares of such class or classes or series, present in person, by remote communication, if applicable, or represented by proxy duly authorized, shall constitute a quorum entitled to take action with respect to that vote on that matter. Except where otherwise provided by statute or by the Certificate of Incorporation or these Bylaws, the affirmative vote of the majority (plurality, in the case of the election of directors) of shares of such class or classes or series present in person, by remote communication, if applicable, or represented by proxy at the meeting shall be the act of such class or classes or series.

     Section 9. Adjournment and Notice of Adjourned Meetings. Any meeting of stockholders, whether annual or special, may be adjourned from time to time either by the chairman of the meeting or by the vote of a majority of the shares present in person, by remote communication, if applicable, or represented by proxy. When a meeting is adjourned to another time or place, if any, notice need not be given of the adjourned meeting if the time and place, if any, thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

     Section 10. Voting Rights. For the purpose of determining those stockholders entitled to vote at any meeting of the stockholders, except as otherwise provided by law, only persons in whose names shares stand on the stock records of the corporation on the record date, as provided in Section 12 of these Bylaws, shall be entitled to vote at any meeting of stockholders. Every person entitled to vote or execute consents shall have the right to do so

5.

either in person, by remote communication, if applicable, or by an agent or agents authorized by a proxy granted in accordance with Delaware law. An agent so appointed need not be a stockholder. No proxy shall be voted after three (3) years from its date of creation unless the proxy provides for a longer period.

     Section 11. Joint Owners of Stock. If shares or other securities having voting power stand of record in the names of two (2) or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety, or otherwise, or if two (2) or more persons have the same fiduciary relationship respecting the same shares, unless the Secretary is given written notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the following effect: (a) if only one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the majority so voting binds all; (c) if more than one (1) votes, but the vote is evenly split on any particular matter, each faction may vote the securities in question proportionally, or may apply to the Delaware Court of Chancery for relief as provided in the DGCL, Section 217(b). If the instrument filed with the Secretary shows that any such tenancy is held in unequal interests, a majority or even-split for the purpose of subsection (c) shall be a majority or even-split in interest.

     Section 12. List of Stockholders. The Secretary shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order, showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or during ordinary business hours, at the principal place of business of the corporation. In the event that the corporation determines to make the list available on an electronic network, the corporation may take reasonable steps to ensure that such information is available only to stockholders of the corporation. The list shall be open to examination of any stockholder during the time of the meeting as provided by law.

     Section 13. Action Without Meeting.

          (a) Unless otherwise provided in the Certificate of Incorporation, any action required by statute to be taken at any annual or special meeting of the stockholders, or any action which may be taken at any annual or special meeting of the stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, or by electronic transmission setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.

          (b) Every written consent or electronic transmission shall bear the date of signature of each stockholder who signs the consent, and no written consent or electronic transmission shall be effective to take the corporate action referred to therein unless, within sixty (60) days of the earliest dated consent delivered to the corporation in the manner herein required, written consents or electronic transmissions signed by a sufficient number of stockholders to take action are delivered to the corporation by delivery to its registered office in the State of

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Delaware, its principal place of business or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to a corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested.

          (c) Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing or by electronic transmission and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for such meeting had been the date that written consents signed by a sufficient number of stockholders to take action were delivered to the corporation as provided in Section 228(c) of the DGCL. If the action which is consented to is such as would have required the filing of a certificate under any section of the DGCL if such action had been voted on by stockholders at a meeting thereof, then the certificate filed under such section shall state, in lieu of any statement required by such section concerning any vote of stockholders, that written consent has been given in accordance with Section 228 of the DGCL.

          (d) A telegram, cablegram or other electronic transmission consenting to an action to be taken and transmitted by a stockholder or proxyholder, shall be deemed to be written, signed and dated for the purposes of this section, provided that any such telegram, cablegram or other electronic transmission sets forth or is delivered with information from which the corporation can determine (i) that the telegram, cablegram or other electronic transmission was transmitted by the stockholder or proxyholder or by a person or persons authorized to act for the stockholder and (ii) the date on which such stockholder or proxyholder or authorized person or persons transmitted such telegram, cablegram or electronic transmission. The date on which such telegram, cablegram or electronic transmission is transmitted shall be deemed to be the date on which such consent was signed. No consent given by telegram, cablegram or other electronic transmission shall be deemed to have been delivered until such consent is reproduced in paper form and until such paper form shall be delivered to the corporation by delivery to its registered office in the state of Delaware, its principal place of business or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to a corporation’s registered office shall be made by hand or by certified or registered mail, return receipt requested. Notwithstanding the foregoing limitations on delivery, consents given by telegram, cablegram or other electronic transmission may be otherwise delivered to the principal place of business of the corporation or to an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded if, to the extent and in the manner provided by resolution of the board of directors of the corporation. Any copy, facsimile or other reliable reproduction of a consent in writing may be substituted or used in lieu of the original writing for any and all purposes for which the original writing could be used, provided that such copy, facsimile or other reproduction shall be a complete reproduction of the entire original writing.

     Section 14. Organization.

          (a) At every meeting of stockholders, the Chairman of the Board of Directors, or, if a Chairman has not been appointed or is absent, the President, or, if the President is absent,

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a chairman of the meeting chosen by a majority in interest of the stockholders entitled to vote, present in person or by proxy, shall act as chairman. The Secretary, or, in his absence, an Assistant Secretary directed to do so by the President, shall act as secretary of the meeting.

          (b) The Board of Directors of the corporation shall be entitled to make such rules or regulations for the conduct of meetings of stockholders as it shall deem necessary, appropriate or convenient. Subject to such rules and regulations of the Board of Directors, if any, the chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are necessary, appropriate or convenient for the proper conduct of the meeting, including, without limitation, establishing an agenda or order of business for the meeting, rules and procedures for maintaining order at the meeting and the safety of those present, limitations on participation in such meeting to stockholders of record of the corporation and their duly authorized and constituted proxies and such other persons as the chairman shall permit, restrictions on entry to the meeting after the time fixed for the commencement thereof, limitations on the time allotted to questions or comments by participants and regulation of the opening and closing of the polls for balloting on matters which are to be voted on by ballot. The date and time of the opening and closing of the polls for each matter upon which the stockholders will vote at the meeting shall be announced at the meeting. Unless and to the extent determined by the Board of Directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with rules of parliamentary procedure.

ARTICLE IV

DIRECTORS

     Section 15. Number and Term of Office.

          The authorized number of directors of the corporation shall be fixed at nine (9).

Directors need not be stockholders unless so required by the Certificate of Incorporation. If for any cause, the directors shall not have been elected at an annual meeting, they may be elected as soon thereafter as convenient.

     Section 16. Powers. The powers of the corporation shall be exercised, its business conducted and its property controlled by the Board of Directors, except as may be otherwise provided by statute or by the Certificate of Incorporation.

     Section 17. Term of Directors.

          (a) Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, directors shall be elected at each annual meeting of stockholders for a term of one year. Each director shall serve until his successor is duly elected and qualified or until his death, resignation or removal. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.

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          (b) No person entitled to vote at an election for directors may cumulate votes to which such person is entitled, unless, at the time of such election, the corporation is subject to Section 2115(b) of the CGCL. During such time or times that the corporation is subject to Section 2115(b) of the CGCL, every stockholder entitled to vote at an election for directors may cumulate such stockholder’s votes and give one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which such stockholder’s shares are otherwise entitled, or distribute the stockholder’s votes on the same principle among as many candidates as such stockholder thinks fit. No stockholder, however, shall be entitled to so cumulate such stockholder’s votes unless (i) the names of such candidate or candidates have been placed in nomination prior to the voting and (ii) the stockholder has given notice at the meeting, prior to the voting, of such stockholder’s intention to cumulate such stockholder’s votes. If any stockholder has given proper notice to cumulate votes, all stockholders may cumulate their votes for any candidates who have been properly placed in nomination. Under cumulative voting, the candidates receiving the highest number of votes, up to the number of directors to be elected, are elected.

     Section 18. Vacancies.

          (a) Unless otherwise provided in the Certificate of Incorporation, and subject to the rights of the holders of any series of Preferred Stock, any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other causes and any newly created directorships resulting from any increase in the number of directors shall, unless the Board of Directors determines by resolution that any such vacancies or newly created directorships shall be filled by stockholders, be filled only by the affirmative vote of a majority of the directors then in office, even though less than a quorum of the Board of Directors. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the director for which the vacancy was created or occurred and until such director’s successor shall have been elected and qualified. A vacancy in the Board of Directors shall be deemed to exist under this Bylaw in the case of the death, removal or resignation of any director.

          (b) At any time or times that the corporation is subject to §2115(b) of the CGCL, if, after the filling of any vacancy, the directors then in office who have been elected by stockholders shall constitute less than a majority of the directors then in office, then

                    (i) any holder or holders of an aggregate of five percent (5%) or more of the total number of shares at the time outstanding having the right to vote for those directors may call a special meeting of stockholders; or

                    (ii) the Superior Court of the proper county shall, upon application of such stockholder or stockholders, summarily order a special meeting of the stockholders, to be held to elect the entire board, all in accordance with Section 305(c) of the CGCL, the term of office of any director shall terminate upon that election of a successor. (CGCL §305(c).

     Section 19. Resignation. Any director may resign at any time by delivering his or her notice in writing or by electronic transmission to the Secretary, such resignation to specify

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whether it will be effective at a particular time, upon receipt by the Secretary or at the pleasure of the Board of Directors. If no such specification is made, it shall be deemed effective at the pleasure of the Board of Directors. When one or more directors shall resign from the Board of Directors, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each Director so chosen shall hold office for the unexpired portion of the term of the Director whose place shall be vacated and until his successor shall have been duly elected and qualified.

     Section 20. Removal.

          (a) Subject to any limitations imposed by applicable law (and assuming the corporation is not subject to Section 2115 of the CGCL), the Board of Directors or any director may be removed from office at any time (i) with cause by the affirmative vote of the holders of a majority of the voting power of all then-outstanding shares of capital stock of the corporation entitled to vote generally at an election of directors or (ii) without cause by the affirmative vote of the holders of a majority of the voting power of all then-outstanding shares of capital stock of the corporation, entitled to vote generally at an election of directors.

          (b) During such time or times that the corporation is subject to Section 2115(b) of the CGCL, the Board of Directors or any individual director may be removed from office at any time without cause by the affirmative vote of the holders of at least a majority of the outstanding shares entitled to vote on such removal; provided, however, that unless the entire Board is removed, no individual director may be removed when the votes cast against such director’s removal, or not consenting in writing to such removal, would be sufficient to elect that director if voted cumulatively at an election which the same total number of votes were cast (or, if such action is taken by written consent, all shares entitled to vote were voted) and the entire number of directors authorized at the time of such director’s most recent election were then being elected.

     Section 21. Meetings

          (a) Regular Meetings. Unless otherwise restricted by the Certificate of Incorporation, regular meetings of the Board of Directors may be held at any time or date and at any place within or without the State of Delaware which has been designated by the Board of Directors and publicized among all directors, either orally or in writing, including a voice-messaging system or other system designated to record and communicate messages, facsimile, telegraph or telex, or by electronic mail or other electronic means. No further notice shall be required for a regular meeting of the Board of Directors.

          (b) Special Meetings. Unless otherwise restricted by the Certificate of Incorporation, special meetings of the Board of Directors may be held at any time and place within or without the State of Delaware whenever called by the Chairman of the Board, the President or any director.

          (c) Meetings by Electronic Communications Equipment. Any member of the Board of Directors, or of any committee thereof, may participate in a meeting by means of

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conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting.

          (d) Notice of Special Meetings. Notice of the time and place of all special meetings of the Board of Directors shall be orally or in writing, by telephone, including a voice messaging system or other system or technology designed to record and communicate messages, facsimile, telegraph or telex, or by electronic mail or other electronic means, during normal business hours, at least twenty-four (24) hours before the date and time of the meeting. If notice is sent by US mail, it shall be sent by first class mail, postage prepaid at least three (3) days before the date of the meeting. Notice of any meeting may be waived in writing or by electronic transmission at any time before or after the meeting and will be waived by any director by attendance thereat, except when the director attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.

          (e) Waiver of Notice. The transaction of all business at any meeting of the Board of Directors, or any committee thereof, however called or noticed, or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum be present and if, either before or after the meeting, each of the directors not present who did not receive notice shall sign a written waiver of notice or shall waive notice by electronic transmission. All such waivers shall be filed with the corporate records or made a part of the minutes of the meeting.

     Section 22. Quorum and Voting.

          (a) Unless the Certificate of Incorporation requires a greater number, a quorum of the Board of Directors shall consist of a majority of the exact number of directors fixed from time to time by the Board of Directors in accordance with the Certificate of Incorporation; provided, however, at any meeting, whether a quorum be present or otherwise, a majority of the directors present may adjourn from time to time until the time fixed for the next regular meeting of the Board of Directors, without notice other than by announcement at the meeting.

          (b) At each meeting of the Board of Directors at which a quorum is present, all questions and business shall be determined by the affirmative vote of a majority of the directors present, unless a different vote be required by law, the Certificate of Incorporation or these Bylaws.

     Section 23. Action Without Meeting. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board of Directors or committee, as the case may be, consent thereto in writing or by electronic transmission, and such writing or writings or transmission or transmissions are filed with the minutes of proceedings of the Board of Directors or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

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     Section 24. Fees and Compensation. Directors shall be entitled to such compensation for their services as may be approved by the Board of Directors, including, if so approved, by resolution of the Board of Directors, a fixed sum and expenses of attendance, if any, for attendance at each regular or special meeting of the Board of Directors and at any meeting of a committee of the Board of Directors. Nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity as an officer, agent, employee, or otherwise and receiving compensation therefor.

     Section 25. Committees.

          (a) Executive Committee. The Board of Directors may appoint an Executive Committee to consist of one (1) or more members of the Board of Directors. The Executive Committee, to the extent permitted by law and provided in the resolution of the Board of Directors shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to (i) approving or adopting, or recommending to the stockholders, any action or matter expressly required by the DGCL to be submitted to stockholders for approval, or (ii) adopting, amending or repealing any bylaw of the corporation.

          (b) Other Committees. The Board of Directors may, from time to time, appoint such other committees as may be permitted by law. Such other committees appointed by the Board of Directors shall consist of one (1) or more members of the Board of Directors and shall have such powers and perform such duties as may be prescribed by the resolution or resolutions creating such committees, but in no event shall any such committee have the powers denied to the Executive Committee in these Bylaws.

          (c) Term. The Board of Directors, subject to any requirements of any outstanding series of Preferred Stock, the provisions of subsections (a) or (b) of this Bylaw may at any time increase or decrease the number of members of a committee or terminate the existence of a committee. The membership of a committee member shall terminate on the date of his death or voluntary resignation from the committee or from the Board of Directors. The Board of Directors may at any time for any reason remove any individual committee member and the Board of Directors may fill any committee vacancy created by death, resignation, removal or increase in the number of members of the committee. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee, and, in addition, in the absence or disqualification of any member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.

          (d) Meetings. Unless the Board of Directors shall otherwise provide, regular meetings of the Executive Committee or any other committee appointed pursuant to this Section 25 shall be held at such times and places as are determined by the Board of Directors, or by any such committee, and when notice thereof has been given to each member of such committee, no further notice of such regular meetings need be given thereafter. Special meetings

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of any such committee may be held at any place which has been determined from time to time by such committee, and may be called by any director who is a member of such committee, upon notice to the members of such committee of the time and place of such special meeting given in the manner provided for the giving of notice to members of the Board of Directors of the time and place of special meetings of the Board of Directors. Notice of any special meeting of any committee may be waived in writing at any time before or after the meeting and will be waived by any director by attendance thereat, except when the director attends such special meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Unless otherwise provided by the Board of Directors in the resolutions authorizing the creation of the committee, a majority of the authorized number of members of any such committee shall constitute a quorum for the transaction of business, and the act of a majority of those present at any meeting at which a quorum is present shall be the act of such committee.

     Section 26. Organization. At every meeting of the directors, the Chairman of the Board of Directors, or, if a Chairman has not been appointed or is absent, the President, or if the President is absent, the most senior Vice President, (if a director) or, in the absence of any such person, a chairman of the meeting chosen by a majority of the directors present, shall preside over the meeting. The Secretary, or in his absence, any Assistant Secretary directed to do so by the President, shall act as secretary of the meeting.

ARTICLE V

OFFICERS

     Section 27. Officers Designated. The officers of the corporation shall include, if and when designated by the Board of Directors, the Chairman of the Board of Directors, the Chief Executive Officer, the President, one or more Vice Presidents, the Secretary, the Chief Financial Officer, the Treasurer and the Controller, all of whom shall be elected at the annual organizational meeting of the Board of Directors. The Board of Directors may also appoint one or more Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such other officers and agents with such powers and duties as it shall deem necessary. The Board of Directors may assign such additional titles to one or more of the officers as it shall deem appropriate. Any one person may hold any number of offices of the corporation at any one time unless specifically prohibited therefrom by law. The salaries and other compensation of the officers of the corporation shall be fixed by or in the manner designated by the Board of Directors.

     Section 28. Tenure and Duties of Officers.

          (a) General. All officers shall hold office at the pleasure of the Board of Directors and until their successors shall have been duly elected and qualified, unless sooner removed. Any officer elected or appointed by the Board of Directors may be removed at any time by the Board of Directors. If the office of any officer becomes vacant for any reason, the vacancy may be filled by the Board of Directors.

          (b) Duties of Chairman of the Board of Directors. The Chairman of the Board of Directors, when present, shall preside at all meetings of the stockholders and the Board

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of Directors. The Chairman of the Board of Directors shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors shall designate from time to time. If there is no President, then the Chairman of the Board of Directors shall also serve as the Chief Executive Officer of the corporation and shall have the powers and duties prescribed in paragraph (c) of this Section 28.

          (c) Duties of President. The President shall preside at all meetings of the stockholders and at all meetings of the Board of Directors, unless the Chairman of the Board of Directors has been appointed and is present. Unless some other officer has been elected Chief Executive Officer of the corporation, the President shall be the chief executive officer of the corporation and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and officers of the corporation. The President shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors shall designate from time to time.

          (d) Duties of Vice Presidents. The Vice Presidents may assume and perform the duties of the President in the absence or disability of the President or whenever the office of President is vacant. The Vice Presidents shall perform other duties commonly incident to their office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time.

          (e) Duties of Secretary. The Secretary shall attend all meetings of the stockholders and of the Board of Directors and shall record all acts and proceedings thereof in the minute book of the corporation. The Secretary shall give notice in conformity with these Bylaws of all meetings of the stockholders and of all meetings of the Board of Directors and any committee thereof requiring notice. The Secretary shall perform all other duties provided for in these Bylaws and other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors shall designate from time to time. The President may direct any Assistant Secretary to assume and perform the duties of the Secretary in the absence or disability of the Secretary, and each Assistant Secretary shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time.

          (f) Duties of Chief Financial Officer. The Chief Financial Officer shall keep or cause to be kept the books of account of the corporation in a thorough and proper manner and shall render statements of the financial affairs of the corporation in such form and as often as required by the Board of Directors or the President. The Chief Financial Officer, subject to the order of the Board of Directors, shall have the custody of all funds and securities of the corporation. The Chief Financial Officer shall perform other duties commonly incident to his office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time. The President may direct the Treasurer or any Assistant Treasurer, or the Controller or any Assistant Controller to assume and perform the duties of the Chief Financial Officer in the absence or disability of the Chief Financial Officer, and each Treasurer and Assistant Treasurer and each Controller and Assistant Controller shall perform other duties commonly incident to the office and shall also perform such

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other duties and have such other powers as the Board of Directors or the President shall designate from time to time.

     Section 29. Delegation of Authority. The Board of Directors may from time to time delegate the powers or duties of any officer to any other officer or agent, notwithstanding any provision hereof.

     Section 30. Resignations. Any officer may resign at any time by giving notice in writing or by electronic transmission notice to the Board of Directors or to the President or to the Secretary. Any such resignation shall be effective when received by the person or persons to whom such notice is given, unless a later time is specified therein, in which event the resignation shall become effective at such later time. Unless otherwise specified in such notice, the acceptance of any such resignation shall not be necessary to make it effective. Any resignation shall be without prejudice to the rights, if any, of the corporation under any contract with the resigning officer.

     Section 31. Removal. Any officer may be removed from office at any time, either with or without cause, by the affirmative vote of a majority of the directors in office at the time, or by the unanimous written consent of the directors in office at the time, or by any committee or superior officers upon whom such power of removal may have been conferred by the Board of Directors.

ARTICLE VI

EXECUTION OF CORPORATE INSTRUMENTS AND VOTING
OF SECURITIES OWNED BY THE CORPORATION

     Section 32. Execution of Corporate Instruments. The Board of Directors may, in its discretion, determine the method and designate the signatory officer or officers, or other person or persons, to execute on behalf of the corporation any corporate instrument or document, or to sign on behalf of the corporation the corporate name without limitation, or to enter into contracts on behalf of the corporation, except where otherwise provided by law or these Bylaws, and such execution or signature shall be binding upon the corporation.

     All checks and drafts drawn on banks or other depositaries on funds to the credit of the corporation or in special accounts of the corporation shall be signed by such person or persons as the Board of Directors shall authorize so to do.

     Unless authorized or ratified by the Board of Directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.

     Section 33. Voting of Securities Owned by the Corporation. All stock and other securities of other corporations owned or held by the corporation for itself, or for other parties in any capacity, shall be voted, and all proxies with respect thereto shall be executed, by the person authorized so to do by resolution of the Board of Directors, or, in the absence of such

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authorization, by the Chairman of the Board of Directors, the Chief Executive Officer, the President, or any Vice President.

ARTICLE VII

SHARES OF STOCK

     Section 34. Form and Execution of Certificates. Certificates for the shares of stock of the corporation shall be in such form as is consistent with the Certificate of Incorporation and applicable law. Every holder of stock in the corporation shall be entitled to have a certificate signed by or in the name of the corporation by the Chairman of the Board of Directors, or the President or any Vice President and by the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary, certifying the number of shares owned by him in the corporation. Any or all of the signatures on the certificate may be facsimiles. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued with the same effect as if he were such officer, transfer agent, or registrar at the date of issue. Each certificate shall state upon the face or back thereof, in full or in summary, all of the powers, designations, preferences, and rights, and the limitations or restrictions of the shares authorized to be issued or shall, except as otherwise required by law, set forth on the face or back a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional, or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Within a reasonable time after the issuance or transfer of uncertificated stock, the corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to this section or otherwise required by law or with respect to this section a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

     Section 35. Lost Certificates. A new certificate or certificates shall be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen, or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen, or destroyed. The corporation may require, as a condition precedent to the issuance of a new certificate or certificates, the owner of such lost, stolen, or destroyed certificate or certificates, or the owner’s legal representative, to agree to indemnify the corporation in such manner as it shall require or to give the corporation a surety bond in such form and amount as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen, or destroyed.

     Section 36. Transfers.

          (a) Transfers of record of shares of stock of the corporation shall be made only upon its books by the holders thereof, in person or by attorney duly authorized, and upon the surrender of a properly endorsed certificate or certificates for a like number of shares.

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          (b) The corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the corporation to restrict the transfer of shares of stock of the corporation of any one or more classes owned by such stockholders in any manner not prohibited by the DGCL.

     Section 37. Fixing Record Dates.

          (a) In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix, in advance, a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall, subject to applicable law, not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

          (b) In order that the corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than ten (10) days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. Any stockholder of record seeking to have the stockholders authorize or take corporate action by written consent shall, by written notice to the Secretary, request the Board of Directors to fix a record date. The Board of Directors shall promptly, but in all events within ten (10) days after the date on which such a request is received, adopt a resolution fixing the record date. If no record date has been fixed by the Board of Directors within ten (10) days of the date on which such a request is received, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by applicable law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the corporation by delivery to its registered office in the State of Delaware, its principal place of business or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action.

          (c) In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of

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stock, or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty (60) days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

     Section 38. Registered Stockholders. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

ARTICLE VIII

OTHER SECURITIES OF THE CORPORATION

     Section 39. Execution of Other Securities. All bonds, debentures and other corporate securities of the corporation, other than stock certificates (covered in Section 34), may be signed by the Chairman of the Board of Directors, the President or any Vice President, or such other person as may be authorized by the Board of Directors, and the corporate seal impressed thereon or a facsimile of such seal imprinted thereon and attested by the signature of the Secretary or an Assistant Secretary, or the Chief Financial Officer or Treasurer or an Assistant Treasurer; provided, however, that where any such bond, debenture or other corporate security shall be authenticated by the manual signature, or where permissible facsimile signature, of a trustee under an indenture pursuant to which such bond, debenture or other corporate security shall be issued, the signatures of the persons signing and attesting the corporate seal on such bond, debenture or other corporate security may be the imprinted facsimile of the signatures of such persons. Interest coupons appertaining to any such bond, debenture or other corporate security, authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an Assistant Treasurer of the corporation or such other person as may be authorized by the Board of Directors, or bear imprinted thereon the facsimile signature of such person. In case any officer who shall have signed or attested any bond, debenture or other corporate security, or whose facsimile signature shall appear thereon or on any such interest coupon, shall have ceased to be such officer before the bond, debenture or other corporate security so signed or attested shall have been delivered, such bond, debenture or other corporate security nevertheless may be adopted by the corporation and issued and delivered as though the person who signed the same or whose facsimile signature shall have been used thereon had not ceased to be such officer of the corporation.

ARTICLE IX

DIVIDENDS

     Section 40. Declaration of Dividends. Dividends upon the capital stock of the corporation, subject to the provisions of the Certificate of Incorporation and applicable law, if any, may be declared by the Board of Directors pursuant to law at any regular or special meeting.

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Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation and applicable law.

     Section 41. Dividend Reserve. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the Board of Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the Board of Directors shall think conducive to the interests of the corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created.

ARTICLE X

FISCAL YEAR

     Section 42. Fiscal Year. The fiscal year of the corporation shall be fixed by resolution of the Board of Directors.

ARTICLE XI

INDEMNIFICATION

     Section 43. Indemnification of Directors, Officers, Employees and Other Agents.

          (a) Directors and Officers . The corporation shall indemnify its directors and officers to the fullest extent not prohibited by the DGCL or any other applicable law; provided, however, that the corporation may modify the extent of such indemnification by individual contracts with its directors and officers; and, provided, further, that the corporation shall not be required to indemnify any director or officer in connection with any proceeding (or part thereof) initiated by such person unless (i) such indemnification is expressly required to be made by law, (ii) the proceeding was authorized by the Board of Directors of the corporation, (iii) such indemnification is provided by the corporation, in its sole discretion, pursuant to the powers vested in the corporation under the Delaware General Corporation Law or any other applicable law or (iv) such indemnification is required to be made under subsection (d).

          (b) Employees and Other Agents. The corporation shall have power to indemnify its employees and other agents as set forth in the DGCL or any other applicable law. The Board of Directors shall have the power to delegate the determination of whether indemnification shall be given to any such person to such officers or other persons as the Board of Directors shall determine.

          (c) Expenses. The corporation shall advance to any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director or officer, of the corporation, or is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, prior to the final disposition of the proceeding, promptly following request

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therefor, all expenses incurred by any director or officer in connection with such proceeding, provided, however, that, if the DGCL requires, an advancement of expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such indemnitee, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the corporation of an undertaking, by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such indemnitee is not entitled to be indemnified for such expenses under this Section 43 or otherwise.

Notwithstanding the foregoing, unless otherwise determined pursuant to paragraph (e) of this Bylaw, no advance shall be made by the corporation to an officer of the corporation (except by reason of the fact that such officer is or was a director of the corporation, in which event this paragraph shall not apply) in any action, suit or proceeding, whether civil, criminal, administrative or investigative, if a determination is reasonably and promptly made (i) by a majority vote of a quorum consisting of directors who were not parties to the proceeding, even if not a quorum, or (ii) by a committee of such directors designated by a majority of such directors, even though less than a quorum, or (iii) if there are no such directors, or such directors so direct, by independent legal counsel in a written opinion, that the facts known to the decision-making party at the time such determination is made demonstrate clearly and convincingly that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the corporation.

          (d) Enforcement. Without the necessity of entering into an express contract, all rights to indemnification and advances to directors and officers under this Bylaw shall be deemed to be contractual rights and be effective to the same extent and as if provided for in a contract between the corporation and the director or officer. Any right to indemnification or advances granted by this Bylaw to a director or officer shall be enforceable by or on behalf of the person holding such right in any court of competent jurisdiction if (i) the claim for indemnification or advances is denied, in whole or in part, or (ii) no disposition of such claim is made within ninety (90) days of request therefor. The claimant in such enforcement action, if successful in whole or in part, shall be entitled to be paid also the expense of prosecuting the claim. In connection with any claim for indemnification, the corporation shall be entitled to raise as a defense to any such action that the claimant has not met the standards of conduct that make it permissible under the DGCL or any other applicable law for the corporation to indemnify the claimant for the amount claimed. In connection with any claim by an officer of the corporation (except in any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such officer is or was a director of the corporation) for advances, the corporation shall be entitled to raise a defense as to any such action clear and convincing evidence that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the corporation, or with respect to any criminal action or proceeding that such person acted without reasonable cause to believe that his conduct was lawful. Neither the failure of the corporation (including its Board of Directors, independent legal counsel or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he has met the applicable standard of conduct set forth in the DGCL or any other applicable law, nor an actual determination by the corporation (including its Board of Directors, independent legal counsel or

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its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that claimant has not met the applicable standard of conduct.

          (e) Non-Exclusivity of Rights. The rights conferred on any person by this Bylaw shall not be exclusive of any other right which such person may have or hereafter acquire under any applicable statute, provision of the Certificate of Incorporation, Bylaws, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding office. The corporation is specifically authorized to enter into individual contracts with any or all of its directors, officers, employees or agents respecting indemnification and advances, to the fullest extent not prohibited by the DGCL or any other applicable law.

          (f) Survival of Rights. The rights conferred on any person by this Bylaw shall continue as to a person who has ceased to be a director, officer, employee or other agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

          (g) Insurance. To the fullest extent permitted by the DGCL, or any other applicable law, the corporation, upon approval by the Board of Directors, may purchase insurance on behalf of any person required or permitted to be indemnified pursuant to this Bylaw.

          (h) Amendments. Any repeal or modification of this Bylaw shall only be prospective and shall not affect the rights under this Bylaw in effect at the time of the alleged occurrence of any action or omission to act that is the cause of any proceeding against any agent of the corporation.

          (i) Saving Clause. If this Bylaw or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the corporation shall nevertheless indemnify each director and officer to the full extent not prohibited by any applicable portion of this Bylaw that shall not have been invalidated, or by any other applicable law. If this Section 43 shall be invalid due to the application of the indemnification provisions of another jurisdiction, then the corporation shall indemnify each director and officer to the full extent under applicable law.

          (j) Certain Definitions. For the purposes of this Bylaw, the following definitions shall apply:

               (1) The term “proceeding” shall be broadly construed and shall include, without limitation, the investigation, preparation, prosecution, defense, settlement, arbitration and appeal of, and the giving of testimony in, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative.

               (2) The term “expenses” shall be broadly construed and shall include, without limitation, court costs, attorneys’ fees, witness fees, fines, amounts paid in settlement or judgment and any other costs and expenses of any nature or kind incurred in connection with any proceeding.

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               (3) The term the “corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Bylaw with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued.

               (4) References to a “director,” “executive officer,” “officer,” “employee,” or “agent” of the corporation shall include, without limitation, situations where such person is serving at the request of the corporation as, respectively, a director, executive officer, officer, employee, trustee or agent of another corporation, partnership, joint venture, trust or other enterprise.

               (5) References to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to “serving at the request of the corporation” shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the corporation” as referred to in this Bylaw.

ARTICLE XII

NOTICES

     Section 44. Notices.

          (a) Notice to Stockholders. Written notice to stockholders of stockholder meetings shall be given as provided in Section 7 herein. Without limiting the manner by which notice may otherwise be given effectively to stockholders under any agreement or contract with such stockholder, and except as otherwise required by law, written notice to stockholders for purposes other than stockholder meetings may be sent by United States mail or nationally recognized overnight courier, or by facsimile, telegraph or telex or by electronic mail or other electronic means.

          (b) Notice to Directors. Any notice required to be given to any director may be given by the method stated in subsection (a), or as provided for in Section 21 of these Bylaws. If such notice is not delivered personally, it shall be sent to such address as such director shall have filed in writing with the Secretary, or, in the absence of such filing, to the last known post office address of such director.

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          (c) Affidavit of Mailing. An affidavit of mailing, executed by a duly authorized and competent employee of the corporation or its transfer agent appointed with respect to the class of stock affected or other agent, specifying the name and address or the names and addresses of the stockholder or stockholders, or director or directors, to whom any such notice or notices was or were given, and the time and method of giving the same, shall in the absence of fraud, be prima facie evidence of the facts therein contained.

          (d) Methods of Notice. It shall not be necessary that the same method of giving notice be employed in respect of all recipients of notice, but one permissible method may be employed in respect of any one or more, and any other permissible method or methods may be employed in respect of any other or others.

          (e) Notice to Person with Whom Communication Is Unlawful. Whenever notice is required to be given, under any provision of law or of the Certificate of Incorporation or Bylaws of the corporation, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. In the event that the action taken by the corporation is such as to require the filing of a certificate under any provision of the DGCL, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful.

ARTICLE XIII

AMENDMENTS

     Section 45. Amendments. The Board of Directors is expressly empowered to adopt, amend or repeal Bylaws of the corporation. The stockholders shall also have power to adopt, amend or repeal the Bylaws of the corporation; provided, however, that, in addition to any vote of the holders of any class or series of stock of the corporation required by law or by this Certificate of Incorporation, the affirmative vote of the holders of at least a majority of the voting power of all of the then-outstanding shares of the capital stock of the corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to adopt, amend or repeal any provision of the Bylaws of the corporation.

ARTICLE XIV

RIGHT OF FIRST REFUSAL

     Section 46. Right of First Refusal. No stockholder shall sell, assign, pledge, or in any manner transfer any of the shares of common stock, of the corporation or any right or interest therein, whether voluntarily or by operation of law, or by gift or otherwise, except by a transfer which meets the requirements hereinafter set forth in this bylaw:

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          (a) If the stockholder desires to sell or otherwise transfer any of his shares of common stock (for further clarity, Preferred Stock or shares of common stock issued upon conversion or exchange of such Preferred Stock shall not be subject to this Article XIV), then the stockholder shall first give written notice thereof to the corporation. The notice shall name the proposed transferee and state the number of shares to be transferred, the proposed consideration, and all other terms and conditions of the proposed transfer.

          (b) For thirty (30) days following receipt of such notice, the corporation shall have the option to purchase any or all of the shares specified in the notice at the price and upon the terms set forth in such notice; provided, however, that, with the consent of the stockholder, the corporation shall have the option to purchase a lesser portion of the shares specified in said notice at the price and upon the terms set forth therein. In the event of a gift, property settlement or other transfer in which the proposed transferee is not paying the full price for the shares, and that is not otherwise exempted from the provisions of this Section 46, the price shall be deemed to be the fair market value of the stock at such time as determined in good faith by the Board of Directors. In the event the corporation elects to purchase all of the shares or, with consent of the stockholder, a lesser portion of the shares, it shall give written notice to the transferring stockholder of its election and settlement for said shares shall be made as provided below in paragraph (d).

          (c) The corporation may assign its rights hereunder.

          (d) In the event the corporation and/or its assignee(s) elect to acquire any of the shares of the transferring stockholder as specified in said transferring stockholder’s notice, the Secretary of the corporation shall so notify the transferring stockholder and settlement thereof shall be made in cash within thirty (30) days after the Secretary of the corporation receives said transferring stockholder’s notice; provided that if the terms of payment set forth in said transferring stockholder’s notice were other than cash against delivery, the corporation and/or its assignee(s) shall pay for said shares on the same terms and conditions set forth in said transferring stockholder’s notice.

          (e) In the event the corporation and/or its assignees(s) do not elect to acquire all of the shares specified in the transferring stockholder’s notice, said transferring stockholder may, within the sixty-day period following the expiration of the option rights granted to the corporation and/or its assignees(s) herein, transfer the shares specified in said transferring stockholder’s notice which were not acquired by the corporation and/or its assignees(s) as specified in said transferring stockholder’s notice. All shares so sold by said transferring stockholder shall continue to be subject to the provisions of this bylaw in the same manner as before said transfer.

          (f) Anything to the contrary contained herein notwithstanding, the following transactions shall be exempt from the provisions of this bylaw:

               (1) A stockholder’s transfer of any or all shares held either during such stockholder’s lifetime or on death by will or intestacy to such stockholder’s immediate family or to any custodian or trustee for the account of such stockholder or such stockholder’s immediate family or to any limited partnership of which the stockholder, members of such stockholder’s

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immediate family or any trust for the account of such stockholder or such stockholder’s immediate family will be the general of limited partner(s) of such partnership. “Immediate family” as used herein shall mean spouse, lineal descendant, father, mother, brother, or sister of the stockholder making such transfer.

               (2) A stockholder’s bona fide pledge or mortgage of any shares with a commercial lending institution, provided that any subsequent transfer of said shares by said institution shall be conducted in the manner set forth in this bylaw.

               (3) A stockholder’s transfer of any or all of such stockholder’s shares to the corporation or to any other stockholder of the corporation.

               (4) A stockholder’s transfer of any or all of such stockholder’s shares to a person who, at the time of such transfer, is an officer or director of the corporation.

               (5) A corporate stockholder’s transfer of any or all of its shares pursuant to and in accordance with the terms of any merger, consolidation, reclassification of shares or capital reorganization of the corporate stockholder, or pursuant to a sale of all or substantially all of the stock or assets of a corporate stockholder.

               (6) A corporate stockholder’s transfer of any or all of its shares to any or all of its stockholders.

               (7) A transfer by a stockholder which is a limited or general partnership to any or all of its partners or former partners.

               (8) Any transfer of shares of common stock of the corporation originally acquired upon conversion of preferred stock of the corporation, or originally acquired by a stockholder of the corporation pursuant to that certain Share Exchange Agreement among ECI Telecom Ltd., ECI Telecom – NGTS Inc., and the corporation, dated October 30, 2002.

     In any such case, the transferee, assignee, or other recipient shall receive and hold such stock subject to the provisions of this bylaw, and there shall be no further transfer of such stock except in accord with this bylaw.

          (g) The provisions of this bylaw may be waived with respect to any transfer either by the corporation, upon duly authorized action of its Board of Directors, or by the stockholders, upon the express written consent of the owners of a majority of the voting power of the corporation (excluding the votes represented by those shares to be transferred by the transferring stockholder). This bylaw may be amended or repealed either by a duly authorized action of the Board of Directors or by the stockholders, upon the express written consent of the owners of a majority of the voting power of the corporation.

          (h) Any sale or transfer, or purported sale or transfer, of securities of the corporation shall be null and void unless the terms, conditions, and provisions of this bylaw are strictly observed and followed.

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          (i) The foregoing right of first refusal shall terminate on either of the following dates, whichever shall first occur:

               (1) On October 1, 2011; or

               (2) Upon the date securities of the corporation are first offered to the public pursuant to a registration statement filed with, and declared effective by, the United States Securities and Exchange Commission under the Securities Act of 1933, as amended.

          (j) The certificates representing shares of stock of the corporation shall bear on their face the following legend so long as the foregoing right of first refusal remains in effect:

“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION AND/OR ITS ASSIGNEE(S), AS PROVIDED IN THE BYLAWS OF THE CORPORATION.”

ARTICLE XV

LOANS TO OFFICERS

     Section 47. Loans to Officers. The corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the corporation or of its subsidiaries, including any officer or employee who is a Director of the corporation or its subsidiaries, whenever, in the judgment of the Board of Directors, such loan, guarantee or assistance may reasonably be expected to benefit the corporation. The loan, guarantee or other assistance may be with or without interest and may be unsecured, or secured in such manner as the Board of Directors shall approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing in these Bylaws shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute.

ARTICLE XVI

MISCELLANEOUS

     Section 48. Annual Report.

          (a) Subject to the provisions of paragraph (b) of this Bylaw, the Board of Directors shall cause an annual report to be sent to each stockholder of the corporation not later than one hundred twenty (120) days after the close of the corporation’s fiscal year. Such report shall include a balance sheet as of the end of such fiscal year and an income statement and statement of changes in financial position for such fiscal year, accompanied by any report thereon of independent accounts or, if there is no such report, the certificate of an authorized officer of the corporation that such statements were prepared without audit from the books and records of the corporation. When there are more than 100 stockholders of record of the corporation’s shares, as determined by Section 605 of the CGCL, additional information as required by Section 1501(b) of the CGCL shall also be contained in such report, provided that if

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the corporation has a class of securities registered under Section 12 of the 1934 Act, the 1934 Act shall take precedence. Such report shall be sent to stockholders at least fifteen (15) days prior to the next annual meeting of stockholders after the end of the fiscal year to which it relates.

          (b) If and so long as there are fewer than 100 holders of record of the corporation’s shares, the requirement of sending of an annual report to the stockholders of the corporation is hereby expressly waived.

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EX-3.4

Exhibit 3.4

AMENDED AND RESTATED BYLAWS

ARTICLE I

OFFICES

      Section 1. Registered Office. The registered office of the corporation in the State of Delaware shall be in the City of Dover, County of Kent.

      Section 2. Other Offices. The corporation shall also have and maintain an office or principal place of business at such place as may be fixed by the Board of Directors, and may also have offices at such other places, both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the corporation may require.

ARTICLE II

CORPORATE SEAL

      Section 3. Corporate Seal. The Board of Directors may adopt a corporate seal. The corporate seal shall consist of a die bearing the name of the corporation and the inscription, “Corporate Seal-Delaware.” Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.

ARTICLE III

STOCKHOLDERS’ MEETINGS

      Section 4. Place Of Meetings. Meetings of the stockholders of the corporation may be held at such place, either within or without the State of Delaware, as may be determined from time to time by the Board of Directors. The Board of Directors may, in its sole discretion, determine that the meeting shall not be held at any place, but may instead be held solely by means of remote communication as provided under the Delaware General Corporation Law (“DGCL”).

      Section 5. Annual Meetings.

          (a) The annual meeting of the stockholders of the corporation, for the purpose of election of directors and for such other business as may lawfully come before it, shall be held on such date and at such time as may be designated from time to time by the Board of Directors. Nominations of persons for election to the Board of Directors of the corporation and the proposal of business to be considered by the stockholders may be made at an annual meeting of

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stockholders: (i) pursuant to the corporation’s notice of meeting of stockholders; (ii) by or at the direction of the Board of Directors; or (iii) by any stockholder of the corporation who was a stockholder of record at the time of giving the stockholder’s notice provided for in the following paragraph, who is entitled to vote at the meeting and who complied with the notice procedures set forth in Section 5.

          (b) At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of Section 5(a) of these Bylaws, (i) the stockholder must have given timely notice thereof in writing to the Secretary of the corporation, (ii) such other business must be a proper matter for stockholder action under DGCL, (iii) if the stockholder, or the beneficial owner on whose behalf any such proposal or nomination is made, has provided the corporation with a Solicitation Notice (as defined in clause (iii) of the last sentence of this Section 5(b)), such stockholder or beneficial owner must, in the case of a proposal, have delivered a proxy statement and form of proxy to holders of at least the percentage of the corporation’s voting shares required under applicable law to carry any such proposal, or, in the case of a nomination or nominations, have delivered a proxy statement and form of proxy to holders of a percentage of the corporation’s voting shares reasonably believed by such stockholder or beneficial owner to be sufficient to elect the nominee or nominees proposed to be nominated by such stockholder, and must, in either case, have included in such materials the Solicitation Notice, and (iv) if no Solicitation Notice relating thereto has been timely provided pursuant to this section, the stockholder or beneficial owner proposing such business or nomination must not have solicited a number of proxies sufficient to have required the delivery of such a Solicitation Notice under this Section 5. To be timely, a stockholder’s notice shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the ninetieth (90^th) day nor earlier than the close of business on the one hundred twentieth (120^th) day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is advanced more than thirty (30) days prior to or delayed by more than thirty (30) days after the anniversary of the preceding year’s annual meeting, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the one hundred twentieth (120^th) day prior to such annual meeting and not later than the close of business on the later of the ninetieth (90^th) day prior to such annual meeting or the tenth (10^th) day following the day on which public announcement of the date of such meeting is first made. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a stockholder’s notice as described above. Such stockholder’s notice shall set forth: (A) as to each person whom the stockholder proposed to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “1934 Act”) and Rule 14a-4(d) thereunder (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (B) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (C) as to the stockholder giving the

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notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the corporation’s books, and of such beneficial owner, (ii) the class and number of shares of the corporation which are owned beneficially and of record by such stockholder and such beneficial owner, and (iii) whether either such stockholder or beneficial owner intends to deliver a proxy statement and form of proxy to holders of, in the case of the proposal, at least the percentage of the corporation’s voting shares required under applicable law to carry the proposal or, in the case of a nomination or nominations, a sufficient number of holders of the corporation’s voting shares to elect such nominee or nominees (an affirmative statement of such intent, a “Solicitation Notice”).

          (c) Notwithstanding anything in the third sentence of Section 5(b) of these Bylaws to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the corporation at least one hundred (100) days prior to the first anniversary of the preceding year’s annual meeting, a stockholder’s notice required by this Section 5 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the corporation not later than the close of business on the tenth (10^th) day following the day on which such public announcement is first made by the corporation.

          (d) Only such persons who are nominated in accordance with the procedures set forth in this Section 5 shall be eligible to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 5. Except as otherwise provided by law, the chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made, or proposed, as the case may be, in accordance with the procedures set forth in these Bylaws and, if any proposed nomination or business is not in compliance with these Bylaws, to declare that such defective proposal or nomination shall not be presented for stockholder action at the meeting and shall be disregarded.

          (e) Notwithstanding the foregoing provisions of this Section 5, in order to include information with respect to a stockholder proposal in the proxy statement and form of proxy for a stockholders’ meeting, a stockholder must also comply with all applicable requirements of the 1934 Act and the rules and regulations thereunder with respect to matters set forth in this Section 5. Nothing in these Bylaws shall be deemed to affect any rights of stockholders to request inclusion of proposals in the corporation’s proxy statement pursuant to Rule 14a-8 under the 1934 Act.

          (f) For purposes of this Section 5, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the 1934 Act.

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      Section 6. Special Meetings.

          (a) Special meetings of the stockholders of the corporation may be called, for any purpose or purposes, by (i) the Chairman of the Board of Directors, (ii) the Chief Executive Officer, or (iii) the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any such resolution is presented to the Board of Directors for adoption).

          (b) The Board of Directors shall determine the time and place of such special meeting. Upon determination of the time and place of the meeting, the Secretary shall cause a notice of meeting to be given to the stockholders entitled to vote, in accordance with the provisions of Section 7 of these Bylaws. No business may be transacted at such special meeting otherwise than specified in the notice of meeting. Nothing contained in this paragraph (b) shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the Board of Directors may be held.

          (c) Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the corporation’s notice of meeting (i) by or at the direction of the Board of Directors or (ii) by any stockholder of the corporation who is a stockholder of record at the time of giving notice provided for in this paragraph who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in Section 5 of these Bylaws. In the event the corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, any such stockholder may nominate a person or persons (as the case may be), for election to such position(s) as specified in the corporation’s notice of meeting, if the stockholder’s notice required by Section 5(b) of these Bylaws shall be delivered to the Secretary at the principal executive offices of the corporation not earlier than the close of business on the one hundred twentieth (120^th) day prior to such special meeting and not later than the close of business on the later of the ninetieth (90^th) day prior to such meeting or the tenth (10^th) day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the public announcement of an adjournment of a special meeting commence a new time period for the giving of a stockholder’s notice as described above.

          (d) Notwithstanding the foregoing provisions of this Section 6, a stockholder must also comply with all applicable requirements of the 1934 Act and the rules and regulations thereunder with respect to matters set forth in this Section 6. Nothing in these Bylaws shall be deemed to affect any rights of stockholders to request inclusion of proposals in the corporation’s proxy statement pursuant to Rule 14a-8 under the 1934 Act.

      Section 7. Notice Of Meetings. Except as otherwise provided by law, notice, given in writing or by electronic transmission, of each meeting of stockholders shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting, such notice to specify the place, if any, date and hour, in the case of special meetings, the purpose or purposes of the meeting, and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present

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in person and vote at any such meeting. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the records of the corporation. Notice of the time, place, if any, and purpose of any meeting of stockholders may be waived in writing, signed by the person entitled to notice thereof, or by electronic transmission by such person, either before or after such meeting, and will be waived by any stockholder by his attendance thereat in person, by remote communication, if applicable, or by proxy, except when the stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Any stockholder so waiving notice of such meeting shall be bound by the proceedings of any such meeting in all respects as if due notice thereof had been given.

      Section 8. Quorum. At all meetings of stockholders, except where otherwise provided by statute or by the Certificate of Incorporation, or by these Bylaws, the presence, in person, by remote communication, if applicable, or by proxy duly authorized, of the holders of a majority of the outstanding shares of stock entitled to vote shall constitute a quorum for the transaction of business. In the absence of a quorum, any meeting of stockholders may be adjourned, from time to time, either by the chairman of the meeting or by vote of the holders of a majority of the shares represented thereat, but no other business shall be transacted at such meeting. The stockholders present at a duly called or convened meeting, at which a quorum is present, may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. Except as otherwise provided by statute or by applicable stock exchange or Nasdaq rules, or by the Certificate of Incorporation or these Bylaws, in all matters other than the election of directors, the affirmative vote of the majority of shares present in person, by remote communication, if applicable, or represented by proxy at the meeting and entitled to vote generally on the subject matter shall be the act of the stockholders. Except as otherwise provided by statute, the Certificate of Incorporation or these Bylaws, directors shall be elected by a plurality of the votes of the shares present in person, by remote communication, if applicable, or represented by proxy at the meeting and entitled to vote generally on the election of directors. Where a separate vote by a class or classes or series is required, except where otherwise provided by the statute or by the Certificate of Incorporation or these Bylaws, a majority of the outstanding shares of such class or classes or series, present in person, by remote communication, if applicable, or represented by proxy duly authorized, shall constitute a quorum entitled to take action with respect to that vote on that matter. Except where otherwise provided by statute or by the Certificate of Incorporation or these Bylaws, the affirmative vote of the majority (plurality, in the case of the election of directors) of shares of such class or classes or series present in person, by remote communication, if applicable, or represented by proxy at the meeting shall be the act of such class or classes or series.

      Section 9. Adjournment And Notice Of Adjourned Meetings. Any meeting of stockholders, whether annual or special, may be adjourned from time to time either by the chairman of the meeting or by the vote of a majority of the shares present in person, by remote communication, if applicable, or represented by proxy at the meeting. When a meeting is adjourned to another time or place, if any, notice need not be given of the adjourned meeting if the time and place, if any, thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the corporation may transact any business which might have

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been transacted at the original meeting. If the adjournment is for more than thirty (30) days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

      Section 10. Voting Rights. For the purpose of determining those stockholders entitled to vote at any meeting of the stockholders, except as otherwise provided by law, only persons in whose names shares stand on the stock records of the corporation on the record date, as provided in Section 12 of these Bylaws, shall be entitled to vote at any meeting of stockholders. Every person entitled to vote shall have the right to do so either in person, by remote communication, if applicable, or by an agent or agents authorized by a proxy granted in accordance with Delaware law. An agent so appointed need not be a stockholder. No proxy shall be voted after three (3) years from its date of creation unless the proxy provides for a longer period.

      Section 11. Joint Owners Of Stock. If shares or other securities having voting power stand of record in the names of two (2) or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety, or otherwise, or if two (2) or more persons have the same fiduciary relationship respecting the same shares, unless the Secretary is given written notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the following effect: (a) if only one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the majority so voting binds all; (c) if more than one (1) votes, but the vote is evenly split on any particular matter, each faction may vote the securities in question proportionally, or may apply to the Delaware Court of Chancery for relief as provided in the DGCL, Section 217(b). If the instrument filed with the Secretary shows that any such tenancy is held in unequal interests, a majority or even-split for the purpose of subsection (c) shall be a majority or even-split in interest.

      Section 12. List Of Stockholders. The Secretary shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order, showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, (a) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (b) during ordinary business hours, at the principal place of business of the corporation. In the event that the corporation determines to make the list available on an electronic network, the corporation may take reasonable steps to ensure that such information is available only to stockholders of the corporation. The list shall be open to examination of any stockholder during the time of the meeting as provided by law.

      Section 13. Action Without Meeting.

          (a) No action shall be taken by the stockholders except at an annual or special meeting of stockholders called in accordance with these Bylaws, and no action shall be taken by the stockholders by written consent or by electronic transmission.

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      Section 14. Organization.

          (a) At every meeting of stockholders, the Chairman of the Board of Directors, or, if a Chairman has not been appointed or is absent, the President, or, if the President is absent, a chairman of the meeting chosen by a majority in interest of the stockholders entitled to vote, present in person or by proxy, shall act as chairman. The Secretary, or, in his or her absence, an Assistant Secretary directed to do so by the President, shall act as secretary of the meeting.

          (b) The Board of Directors of the corporation shall be entitled to make such rules or regulations for the conduct of meetings of stockholders as it shall deem necessary, appropriate or convenient. Subject to such rules and regulations of the Board of Directors, if any, the chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are necessary, appropriate or convenient for the proper conduct of the meeting, including, without limitation, establishing an agenda or order of business for the meeting, rules and procedures for maintaining order at the meeting and the safety of those present, limitations on participation in such meeting to stockholders of record of the corporation and their duly authorized and constituted proxies and such other persons as the chairman shall permit, restrictions on entry to the meeting after the time fixed for the commencement thereof, limitations on the time allotted to questions or comments by participants and regulation of the opening and closing of the polls for balloting on matters which are to be voted on by ballot. The date and time of the opening and closing of the polls for each matter upon which the stockholders will vote at the meeting shall be announced at the meeting. Unless and to the extent determined by the Board of Directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with rules of parliamentary procedure.

ARTICLE IV

DIRECTORS

      Section 15. Number And Term Of Office. The authorized number of directors of the corporation shall be fixed in accordance with the Certificate of Incorporation. Directors need not be stockholders unless so required by the Certificate of Incorporation. If for any cause, the directors shall not have been elected at an annual meeting, they may be elected as soon thereafter as convenient at a special meeting of the stockholders called for that purpose in the manner provided in these Bylaws.

      Section 16. Powers. The powers of the corporation shall be exercised, its business conducted and its property controlled by the Board of Directors, except as may be otherwise provided by statute or by the Certificate of Incorporation.

      Section 17. Classes of Directors. Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, the directors shall be divided into three classes designated as Class I, Class II and Class III, respectively. At the first annual meeting of stockholders following the initial classification of the Board of Directors, the term of office of the Class I directors shall expire and Class I directors shall be elected for a full

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term of three years. At the second annual meeting of stockholders following such initial classification, the term of office of the Class II directors shall expire and Class II directors shall be elected for a full term of three years. At the third annual meeting of stockholders following such initial classification, the term of office of the Class III directors shall expire and Class III directors shall be elected for a full term of three years. At each succeeding annual meeting of stockholders, directors shall be elected for a full term of three years to succeed the directors of the class whose terms expire at such annual meeting.

      Notwithstanding the foregoing provisions of this section, each director shall serve until his successor is duly elected and qualified or until his earlier death, resignation or removal. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.

      Section 18. Vacancies.

          (a) Unless otherwise provided in the Certificate of Incorporation, and subject to the rights of the holders of any series of Preferred Stock, any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other causes and any newly created directorships resulting from any increase in the number of directors shall, unless the Board of Directors determines by resolution that any such vacancies or newly created directorships shall be filled by stockholders, be filled only by the affirmative vote of a majority of the directors then in office, even though less than a quorum of the Board of Directors, or by a sole remaining director, provided, however, that whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the Certificate of Incorporation, vacancies and newly created directorships of such class or classes or series shall, unless the Board of Directors determines by resolution that any such vacancies or newly created directorships shall be filled by stockholders, be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the director for which the vacancy was created or occurred and until such director’s successor shall have been elected and qualified. A vacancy in the Board of Directors shall be deemed to exist under this Bylaw in the case of the death, removal or resignation of any director.

      Section 19. Resignation. Any director may resign at any time by delivering his or her notice in writing or by electronic transmission to the Secretary, such resignation to specify whether it will be effective at a particular time, upon receipt by the Secretary or at the pleasure of the Board of Directors. If no such specification is made, it shall be deemed effective at the pleasure of the Board of Directors. When one or more directors shall resign from the Board of Directors, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each Director so chosen shall hold office for the unexpired portion of the term of the Director whose place shall be vacated and until his successor shall have been duly elected and qualified.

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      Section 20. Removal.

          (a) Subject to the rights of any series of Preferred Stock to elect additional directors under specified circumstances, following the closing of the Initial Public Offering, neither the Board of Directors nor any individual director may be removed without cause.

          (b) Subject to any limitation imposed by law, any individual director or directors may be removed with cause by the affirmative vote of the holders of two-thirdsof the voting power of all then outstanding shares of capital stock of the corporation entitled to vote generally at an election of directors.

      Section 21. Meetings.

          (a) Regular Meetings. Unless otherwise restricted by the Certificate of Incorporation, regular meetings of the Board of Directors may be held at any time or date and at any place within or without the State of Delaware which has been designated by the Board of Directors and publicized among all directors, either orally or in writing, by telephone, including a voice-messaging system or other system designed to record and communicate messages, facsimile, telegraph or telex, or by electronic mail or other electronic means. No further notice shall be required for regular meetings of the Board of Directors.

          (b) Special Meetings. Unless otherwise restricted by the Certificate of Incorporation, special meetings of the Board of Directors may be held at any time and place within or without the State of Delaware whenever called by the Chairman of the Board, the Chief Executive Officer or a majority of the authorized number of directors.

          (c) Meetings by Electronic Communications Equipment. Any member of the Board of Directors, or of any committee thereof, may participate in a meeting by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting.

          (d) Notice of Special Meetings. Notice of the time and place of all special meetings of the Board of Directors shall be orally or in writing, by telephone, including a voice messaging system or other system or technology designed to record and communicate messages, facsimile, telegraph or telex, or by electronic mail or other electronic means, during normal business hours, at least twenty-four (24) hours before the date and time of the meeting. If notice is sent by US mail, it shall be sent by first class mail, charges prepaid, at least three (3) days before the date of the meeting. Notice of any meeting may be waived in writing, or by electronic transmission, at any time before or after the meeting and will be waived by any director by attendance thereat, except when the director attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.

          (e) Waiver of Notice. The transaction of all business at any meeting of the Board of Directors, or any committee thereof, however called or noticed, or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum be

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present and if, either before or after the meeting, each of the directors not present who did not receive notice shall sign a written waiver of notice or shall waive notice by electronic transmission. All such waivers shall be filed with the corporate records or made a part of the minutes of the meeting.

      Section 22. Quorum And Voting.

          (a) Unless the Certificate of Incorporation requires a greater number, and except with respect to questions related to indemnification arising under Section 43 for which a quorum shall be one-third of the exact number of directors fixed from time to time, a quorum of the Board of Directors shall consist of a majority of the exact number of directors fixed from time to time by the Board of Directors in accordance with the Certificate of Incorporation; provided, however, at any meeting whether a quorum be present or otherwise, a majority of the directors present may adjourn from time to time until the time fixed for the next regular meeting of the Board of Directors, without notice other than by announcement at the meeting.

          (b) At each meeting of the Board of Directors at which a quorum is present, all questions and business shall be determined by the affirmative vote of a majority of the directors present, unless a different vote be required by law, the Certificate of Incorporation or these Bylaws.

      Section 23. Action Without Meeting. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board of Directors or committee, as the case may be, consent thereto in writing or by electronic transmission, and such writing or writings or transmission or transmissions are filed with the minutes of proceedings of the Board of Directors or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

      Section 24. Fees And Compensation. Directors shall be entitled to such compensation for their services as may be approved by the Board of Directors, including, if so approved, by resolution of the Board of Directors, a fixed sum and expenses of attendance, if any, for attendance at each regular or special meeting of the Board of Directors and at any meeting of a committee of the Board of Directors. Nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity as an officer, agent, employee, or otherwise and receiving compensation therefor.

      Section 25. Committees.

          (a) Executive Committee. The Board of Directors may appoint an Executive Committee to consist of one (1) or more members of the Board of Directors. The Executive Committee, to the extent permitted by law and provided in the resolution of the Board of Directors shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the

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power or authority in reference to (i) approving or adopting, or recommending to the stockholders, any action or matter (other than the election or removal of directors) expressly required by the DGCL to be submitted to stockholders for approval, or (ii) adopting, amending or repealing any bylaw of the corporation.

          (b) Other Committees. The Board of Directors may, from time to time, appoint such other committees as may be permitted by law. Such other committees appointed by the Board of Directors shall consist of one (1) or more members of the Board of Directors and shall have such powers and perform such duties as may be prescribed by the resolution or resolutions creating such committees, but in no event shall any such committee have the powers denied to the Executive Committee in these Bylaws.

          (c) Term. The Board of Directors, subject to any requirements of any outstanding series of Preferred Stock and the provisions of subsections (a) or (b) of this Section 25, may at any time increase or decrease the number of members of a committee or terminate the existence of a committee. The membership of a committee member shall terminate on the date of his death or voluntary resignation from the committee or from the Board of Directors. The Board of Directors may at any time for any reason remove any individual committee member and the Board of Directors may fill any committee vacancy created by death, resignation, removal or increase in the number of members of the committee. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee, and, in addition, in the absence or disqualification of any member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.

          (d) Meetings. Unless the Board of Directors shall otherwise provide, regular meetings of the Executive Committee or any other committee appointed pursuant to this Section 25 shall be held at such times and places as are determined by the Board of Directors, or by any such committee, and when notice thereof has been given to each member of such committee, no further notice of such regular meetings need be given thereafter. Special meetings of any such committee may be held at any place which has been determined from time to time by such committee, and may be called by any Directorwho is a member of such committee, upon notice to the members of such committee of the time and place of such special meeting given in the manner provided for the giving of notice to members of the Board of Directors of the time and place of special meetings of the Board of Directors. Notice of any special meeting of any committee may be waived in writing at any time before or after the meeting and will be waived by any director by attendance thereat, except when the director attends such special meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Unless otherwise provided by the Board of Directors in the resolutions authorizing the creation of the committee, a majority of the authorized number of members of any such committee shall constitute a quorum for the transaction of business, and the act of a majority of those present at any meeting at which a quorum is present shall be the act of such committee.

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      Section 26. Organization. At every meeting of the directors, the Chairman of the Board of Directors, or, if a Chairman has not been appointed or is absent, the Chief Executive Officer (if a director), or, if a Chief Executive Officer is absent, the President (if a director), or if the President is absent, the most senior Vice President (if a director), or, in the absence of any such person, a chairman of the meeting chosen by a majority of the directors present, shall preside over the meeting. The Secretary, or in his absence, any Assistant Secretary or other officer or director directed to do so by the President, shall act as secretary of the meeting.

ARTICLE V

OFFICERS

      Section 27. Officers Designated. The officers of the corporation shall include, if and when designated by the Board of Directors, the Chairman of the Board of Directors, the Chief Executive Officer, the President, one or more Vice Presidents, the Secretary, the Chief Financial Officer and the Treasurer. The Board of Directors may also appoint one or more Assistant Secretaries and Assistant Treasurers and such other officers and agents with such powers and duties as it shall deem necessary. The Board of Directors may assign such additional titles to one or more of the officers as it shall deem appropriate. Any one person may hold any number of offices of the corporation at any one time unless specifically prohibited therefrom by law. The salaries and other compensation of the officers of the corporation shall be fixed by or in the manner designated by the Board of Directors.

      Section 28. Tenure And Duties Of Officers.

          (a) General. All officers shall hold office at the pleasure of the Board of Directors and until their successors shall have been duly elected and qualified, unless sooner removed. Any officer elected or appointed by the Board of Directors may be removed at any time by the Board of Directors. If the office of any officer becomes vacant for any reason, the vacancy may be filled by the Board of Directors.

          (b) Duties of Chief Executive Officer. The Chief Executive Officer shall preside at all meetings of the stockholders and at all meetings of the Board of Directors, unless the Chairman of the Board of Directors has been appointed and is present. Unless another officer has been appointed Chief Executive Officer of the corporation, the President shall be the chief executive officer of the corporation and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and officers of the corporation. To the extent that a Chief Executive Officer has been appointed, all references in these Bylaws to the President shall be deemed references to the Chief Executive Officer. The Chief Executive Officer shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers, as the Board of Directors shall designate from time to time.

          (c) Duties of President. The President shall preside at all meetings of the stockholders and at all meetings of the Board of Directors, unless the Chairman of the Board of Directors or the Chief Executive Officer has been appointed and is present. Unless another

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officer has been appointed Chief Executive Officer of the corporation, the President shall be the chief executive officer of the corporation and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and officers of the corporation.The President shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers, as the Board of Directors shall designate from time to time.

          (d) Duties of Vice Presidents. The Vice Presidents may assume and perform the duties of the President in the absence or disability of the President or whenever the office of President is vacant. The Vice Presidents shall perform other duties commonly incident to their office and shall also perform such other duties and have such other powers as the Board of Directors or the Chief Executive Officer, or, if the Chief Executive Officer has not been appointed or is absent, the President shall designate from time to time.

          (e) Duties of Secretary. The Secretary shall attend all meetings of the stockholders and of the Board of Directors and shall record all acts and proceedings thereof in the minute book of the corporation. The Secretary shall give notice in conformity with these Bylaws of all meetings of the stockholders and of all meetings of the Board of Directors and any committee thereof requiring notice. The Secretary shall perform all other duties provided for in these Bylaws and other duties commonly incident to the office and shall also perform such other duties and have such other powers, as the Board of Directors shall designate from time to time. The President may direct any Assistant Secretary or other officer to assume and perform the duties of the Secretary in the absence or disability of the Secretary, and each Assistant Secretary shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time.

          (f) Duties of Chief Financial Officer. The Chief Financial Officer shall keep or cause to be kept the books of account of the corporation in a thorough and proper manner and shall render statements of the financial affairs of the corporation in such form and as often as required by the Board of Directors or the President. The Chief Financial Officer, subject to the order of the Board of Directors, shall have the custody of all funds and securities of the corporation. The Chief Financial Officer shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time. The President may direct the Treasurer or any Assistant Treasurer, or the Controller or any Assistant Controller to assume and perform the duties of the Chief Financial Officer in the absence or disability of the Chief Financial Officer, and each Treasurer and Assistant Treasurer and each Controller and Assistant Controller shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time.

      Section 29. Delegation Of Authority. The Board of Directors may from time to time delegate the powers or duties of any officer to any other officer or agent, notwithstanding any provision hereof.

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      Section 30. Resignations. Any officer may resign at any time by giving notice in writing or by electronic transmission to the Board of Directors or to the President or to the Secretary. Any such resignation shall be effective when received by the person or persons to whom such notice is given, unless a later time is specified therein, in which event the resignation shall become effective at such later time. Unless otherwise specified in such notice, the acceptance of any such resignation shall not be necessary to make it effective. Any resignation shall be without prejudice to the rights, if any, of the corporation under any contract with the resigning officer.

      Section 31. Removal. Any officer may be removed from office at any time, either with or without cause, by the affirmative vote of a majority of the directors in office at the time, or by the unanimous written consent of the directors in office at the time, or by any committee or by the Chief Executive Officer or by other superior officers upon whom such power of removal may have been conferred by the Board of Directors.

ARTICLE VI

EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY THE CORPORATION

      Section 32. Execution Of Corporate Instruments. The Board of Directors may, in its discretion, determine the method and designate the signatory officer or officers, or other person or persons, to execute on behalf of the corporation any corporate instrument or document, or to sign on behalf of the corporation the corporate name without limitation, or to enter into contracts on behalf of the corporation, except where otherwise provided by law or these Bylaws, and such execution or signature shall be binding upon the corporation.

      All checks and drafts drawn on banks or other depositaries on funds to the credit of the corporation or in special accounts of the corporation shall be signed by such person or persons as the Board of Directors shall authorize so to do.

      Unless authorized or ratified by the Board of Directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.

      Section 33. Voting Of Securities Owned By The Corporation. All stock and other securities of other corporations owned or held by the corporation for itself, or for other parties in any capacity, shall be voted, and all proxies with respect thereto shall be executed, by the person authorized so to do by resolution of the Board of Directors, or, in the absence of such authorization, by the Chairman of the Board of Directors, the Chief Executive Officer, the President, or any Vice President.

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ARTICLE VII

SHARES OF STOCK

      Section 34. Form And Execution Of Certificates. Certificates for the shares of stock of the corporation shall be in such form as is consistent with the Certificate of Incorporation and applicable law. Every holder of stock in the corporation shall be entitled to have a certificate signed by or in the name of the corporation by the Chairman of the Board of Directors, or the President or any Vice President and by the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary, certifying the number of shares owned by him in the corporation. Any or all of the signatures on the certificate may be facsimiles. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued with the same effect as if he were such officer, transfer agent, or registrar at the date of issue. Each certificate shall state upon the face or back thereof, in full or in summary, all of the powers, designations, preferences, and rights, and the limitations or restrictions of the shares authorized to be issued or shall, except as otherwise required by law, set forth on the face or back a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional, or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Within a reasonable time after the issuance or transfer of uncertificated stock, the corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to this section or otherwise required by law or with respect to this section a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

      Section 35. Lost Certificates. A new certificate or certificates shall be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen, or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen, or destroyed. The corporation may require, as a condition precedent to the issuance of a new certificate or certificates, the owner of such lost, stolen, or destroyed certificate or certificates, or the owner’s legal representative, to agree to indemnify the corporation in such manner as it shall require or to give the corporation a surety bond in such form and amount as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen, or destroyed.

      Section 36. Transfers.

          (a) Transfers of record of shares of stock of the corporation shall be made only upon its books by the holders thereof, in person or by attorney duly authorized, and upon the surrender of a properly endorsed certificate or certificates for a like number of shares.

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          (b) The corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the corporation to restrict the transfer of shares of stock of the corporation of any one or more classes owned by such stockholders in any manner not prohibited by the DGCL.

      Section 37. Fixing Record Dates.

          (a) In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix, in advance, a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall, subject to applicable law, not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

          (b) In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty (60) days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

      Section 38. Registered Stockholders. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

ARTICLE VIII

OTHER SECURITIES OF THE CORPORATION

      Section 39. Execution Of Other Securities. All bonds, debentures and other corporate securities of the corporation, other than stock certificates (covered in Section 34), may be signed by the Chairman of the Board of Directors, the President or any Vice President, or such other person as may be authorized by the Board of Directors, and the corporate seal impressed thereon or a facsimile of such seal imprinted thereon and attested by the signature of the Secretary or an Assistant Secretary, or the Chief Financial Officer or Treasurer or an

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Assistant Treasurer; provided, however, that where any such bond, debenture or other corporate security shall be authenticated by the manual signature, or where permissible facsimile signature, of a trustee under an indenture pursuant to which such bond, debenture or other corporate security shall be issued, the signatures of the persons signing and attesting the corporate seal on such bond, debenture or other corporate security may be the imprinted facsimile of the signatures of such persons. Interest coupons appertaining to any such bond, debenture or other corporate security, authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an Assistant Treasurer of the corporation or such other person as may be authorized by the Board of Directors, or bear imprinted thereon the facsimile signature of such person. In case any officer who shall have signed or attested any bond, debenture or other corporate security, or whose facsimile signature shall appear thereon or on any such interest coupon, shall have ceased to be such officer before the bond, debenture or other corporate security so signed or attested shall have been delivered, such bond, debenture or other corporate security nevertheless may be adopted by the corporation and issued and delivered as though the person who signed the same or whose facsimile signature shall have been used thereon had not ceased to be such officer of the corporation.

ARTICLE IX

DIVIDENDS

      Section 40. Declaration Of Dividends. Dividends upon the capital stock of the corporation, subject to the provisions of the Certificate of Incorporation and applicable law, if any, may be declared by the Board of Directors pursuant to law at any regular or special meeting. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation and applicable law.

      Section 41. Dividend Reserve. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the Board of Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the Board of Directors shall think conducive to the interests of the corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created.

ARTICLE X

FISCAL YEAR

      Section 42. Fiscal Year. The fiscal year of the corporation shall be fixed by resolution of the Board of Directors.

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ARTICLE XI

INDEMNIFICATION

      Section 43. Indemnification Of Directors, Executive Officers, Other Officers, Employees And Other Agents.

          (a) Directorsand executive officers. The corporation shall indemnify its directors and executive officers (for the purposes of this Article XI, “executive officers” shall have the meaning defined in Rule 3b-7 promulgated under the 1934 Act) to the fullest extent not prohibited by the DGCL or any other applicable law; provided, however, that the corporation may modify the extent of such indemnification by individual contracts with its directors and executive officers; and, provided, further, that the corporation shall not be required to indemnify any director or executive officer in connection with any proceeding (or part thereof) initiated by such person unless (i) such indemnification is expressly required to be made by law, (ii) the proceeding was authorized by the Board of Directors of the corporation, (iii) such indemnification is provided by the corporation, in its sole discretion, pursuant to the powers vested in the corporation under the DGCL or any other applicable law or (iv) such indemnification is required to be made under subsection (d).

          (b) Officers,Employees and Other Agents. The corporation shall have power to indemnify its other officersemployees and other agents as set forth in the DGCL or any other applicable law. The Board of Directors shall have the power to delegate the determination of whether indemnification shall be given to any such person except executive officers to such officers or other persons as the Board of Directors shall determine.

          (c) Expenses. The corporation shall advance to any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director or executive officer, of the corporation, or is or was serving at the request of the corporation as a director or executive officer of another corporation, partnership, joint venture, trust or other enterprise, prior to the final disposition of the proceeding, promptly following request therefor, all expenses incurred by any director or executive officer in connection with such proceeding provided, however, that if the DGCL requires, an advancement of expenses incurred by a director or executive officerin his or her capacity as a director or executive officer(and not in any other capacity in which service was or is rendered by such indemnitee, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the corporation of an undertaking (hereinafter an “undertaking”), by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (hereinafter a “final adjudication”) that such indemnitee is not entitled to be indemnified for such expenses under this Section 43 or otherwise.

      Notwithstanding the foregoing, unless otherwise determined pursuant to paragraph (e) of this Section 43, no advance shall be made by the corporation to an executive officer of the corporation (except by reason of the fact that such executive officer is or was a director of the

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corporation in which event this paragraph shall not apply) in any action, suit or proceeding, whether civil, criminal, administrative or investigative, if a determination is reasonably and promptly made (i) by a majority vote of directors who were not parties to the proceeding, even if not a quorum, or (ii) by a committee of such directors designated by a majority vote of such directors, even though less than a quorum, or (iii) if there are no such directors, or such directors so direct, by independent legal counsel in a written opinion, that the facts known to the decision-making party at the time such determination is made demonstrate clearly and convincingly that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the corporation.

          (d) Enforcement. Without the necessity of entering into an express contract, all rights to indemnification and advances to directors and executive officers under this Bylaw shall be deemed to be contractual rights and be effective to the same extent and as if provided for in a contract between the corporation and the director or executive officer. Any right to indemnification or advances granted by this Section 43 to a director or executive officer shall be enforceable by or on behalf of the person holding such right in any court of competent jurisdiction if (i) the claim for indemnification or advances is denied, in whole or in part, or (ii) no disposition of such claim is made within ninety (90) days of request therefor. The claimant in such enforcement action, if successful in whole or in part, shall be entitled to be paid also the expense of prosecuting the claim. In connection with any claim for indemnification, the corporation shall be entitled to raise as a defense to any such action that the claimant has not met the standards of conduct that make it permissible under the DGCL or any other applicable law for the corporation to indemnify the claimant for the amount claimed. In connection with any claim by an executive officer of the corporation (except in any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such executive officer is or was a director of the corporation) for advances, the corporation shall be entitled to raise a defense as to any such action clear and convincing evidence that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the corporation, or with respect to any criminal action or proceeding that such person acted without reasonable cause to believe that his conduct was lawful. Neither the failure of the corporation (including its Board of Directors, independent legal counsel or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he has met the applicable standard of conduct set forth in the DGCL or any other applicable law, nor an actual determination by the corporation (including its Board of Directors, independent legal counsel or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that claimant has not met the applicable standard of conduct.

          (e) Non-Exclusivity of Rights. The rights conferred on any person by this Bylaw shall not be exclusive of any other right which such person may have or hereafter acquire under any applicable statute, provision of the Certificate of Incorporation, Bylaws, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding office. The corporation is specifically authorized to enter into individual contracts with any or all of its directors, officers, employees or agents respecting indemnification and advances, to the fullest extent not prohibited by the DGCL, or by any other applicable law.

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          (f) Survival of Rights. The rights conferred on any person by this Bylaw shall continue as to a person who has ceased to be a directoror executive officerand shall inure to the benefit of the heirs, executors and administrators of such a person.

          (g) Insurance. To the fullest extent permitted by the DGCL or any other applicable law, the corporation, upon approval by the Board of Directors, may purchase insurance on behalf of any person required or permitted to be indemnified pursuant to this Section 43.

          (h) Amendments. Any repeal or modification of this Section 43 shall only be prospective and shall not affect the rights under this Bylaw in effect at the time of the alleged occurrence of any action or omission to act that is the cause of any proceeding against any agent of the corporation.

          (i) Saving Clause. If this Bylaw or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the corporation shall nevertheless indemnify each director and executive officer to the full extent not prohibited by any applicable portion of this Section 43 that shall not have been invalidated, or by any other applicable law. If this Section 43 shall be invalid due to the application of the indemnification provisions of another jurisdiction, then the corporation shall indemnify each director and executive officer to the full extent under any other applicable law.

          (j) Certain Definitions. For the purposes of this Bylaw, the following definitions shall apply:

               (1) The term “proceeding” shall be broadly construed and shall include, without limitation, the investigation, preparation, prosecution, defense, settlement, arbitration and appeal of, and the giving of testimony in, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative.

               (2) The term “expenses” shall be broadly construed and shall include, without limitation, court costs, attorneys’ fees, witness fees, fines, amounts paid in settlement or judgment and any other costs and expenses of any nature or kind incurred in connection with any proceeding.

               (3) The term the “corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Section 43 with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued.

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               (4) References to a “director,” “executive officer,” “officer,” “employee,” or “agent” of the corporation shall include, without limitation, situations where such person is serving at the request of the corporation as, respectively, a director, executive officer, officer, employee, trustee or agent of another corporation, partnership, joint venture, trust or other enterprise.

               (5) References to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to “serving at the request of the corporation” shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the corporation” as referred to in this Section 43.

ARTICLE XII

NOTICES

      Section 44. Notices.

          (a) Notice To Stockholders. Written notice to stockholders of stockholder meetings shall be given as provided in Section 7 herein. Without limiting the manner by which notice may otherwise be given effectively to stockholders under any agreement or contract with such stockholder, and except as otherwise required by law, written notice to stockholders for purposes other than stockholder meetings may be sent by US mail or nationally recognized overnight courier, or by facsimile, telegraph or telex or by electronic mail or other electronic means.

          (b) Notice To Directors. Any notice required to be given to any director may be given by the method stated in subsection (a), as otherwise provided in these Bylaws, or by overnight delivery service, facsimile, telex or telegram, except that such notice other than one which is delivered personally shall be sent to such address as such director shall have filed in writing with the Secretary, or, in the absence of such filing, to the last known post office address of such director.

          (c) Affidavit Of Mailing. An affidavit of mailing, executed by a duly authorized and competent employee of the corporation or its transfer agent appointed with respect to the class of stock affected, or other agent, specifying the name and address or the names and addresses of the stockholder or stockholders, or director or directors, to whom any such notice or notices was or were given, and the time and method of giving the same, shall in the absence of fraud, be prima facie evidence of the facts therein contained.

          (d) Methods of Notice. It shall not be necessary that the same method of giving notice be employed in respect of all recipients of notice, but one permissible method may

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be employed in respect of any one or more, and any other permissible method or methods may be employed in respect of any other or others.

          (e) Notice To Person With Whom Communication Is Unlawful. Whenever notice is required to be given, under any provision of law or of the Certificate of Incorporation or Bylaws of the corporation, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. In the event that the action taken by the corporation is such as to require the filing of a certificate under any provision of the DGCL, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful.

          (f) Notice to Stockholders Sharing an Address. Except as otherwise prohibited under DGCL, any notice given under the provisions of DGCL, the Certificate of Incorporation or the Bylaws shall be effective if given by a single written notice to stockholders who share an address if consented to by the stockholders at that address to whom such notice is given. Such consent shall have been deemed to have been given if such stockholder fails to object in writing to the corporation within 60 days of having been given notice by the corporation of its intention to send the single notice. Any consent shall be revocable by the stockholder by written notice to the corporation.

ARTICLE XIII

AMENDMENTS

      Section 45. Subject to the limitations set forth in Section 43(h) of these Bylaws or the provisions of the Certificate of Incorporation, the Board of Directors is expressly empowered to adopt, amend or repeal the Bylaws of the corporation. Any adoption, amendment or repeal of the Bylaws of the corporation by the Board of Directors shall require the approval of a majority of the authorized number of directors. The stockholders also shall have power to adopt, amend or repeal the Bylaws of the corporation; provided, however, that, in addition to any vote of the holders of any class or series of stock of the corporation required by law or by the Certificate of Incorporation, such action by stockholders shall require the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the then-outstanding shares of the capital stock of the corporation entitled to vote generally in the election of directors, voting together as a single class.

ARTICLE XIV

LOANS TO OFFICERS

      Section 46. Loans To Officers. Except as otherwise prohibited by applicable law, the corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or

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other employee of the corporation or of its subsidiaries, including any officer or employee who is a Director of the corporation or its subsidiaries, whenever, in the judgment of the Board of Directors, such loan, guarantee or assistance may reasonably be expected to benefit the corporation. The loan, guarantee or other assistance may be with or without interest and may be unsecured, or secured in such manner as the Board of Directors shall approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing in these Bylaws shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute.

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EX-10.1

Exhibit 10.1

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

VERAZ NETWORKS, INC.

WARRANT TO PURCHASE SERIES C PREFERRED STOCK

No. PCW-1 December 31, 2002

Void After December 31, 2007

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

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

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

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

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

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

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

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

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

          (c) This Warrant.

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

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

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

X =	Y (A-B)
	A

Where X =	the number of shares of Preferred Stock to be issued to the Holder
Y =	the number of shares of Preferred Stock purchasable under the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being canceled (at the date of such calculation)
A =	the fair market value of one share of the Preferred Stock (at the date of such calculation)
B =	Exercise Price (as adjusted to the date of such calculation)

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

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     3. Covenants of the Company.

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

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

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

     4. Representations of Holder.

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

          4.2 Securities Are Not Registered.

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

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

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

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

          4.3 Disposition of Warrant and Exercise Shares.

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

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

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

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

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

4.

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

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

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

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

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

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

5.

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

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

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

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

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

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

6.

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

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

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

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

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

7.

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

Veraz Networks, Inc.
By:	/s/ Amit Chawla
Name:	Amit Chawla
Title:
Address:	926 Rock Ave.
	San Jose, CA 95131

8.

NOTICE OF EXERCISE

TO: Veraz Networks, Inc.

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

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

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

(Name)

(Address)

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

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

	(Signature)
(Date)	(Print name)

ASSIGNMENT FORM

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

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

Name:
	(Please Print)
Address:
	(Please Print)

Dated:                                         , 20                    

Holder’s
Signature:                                                                                

Holder’s
Address:                                                                                

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

EX-10.2

Exhibit 10.2

U.S. SEPARATION AND ASSET PURCHASE AGREEMENT

BETWEEN

ECI TELECOM-NGTS INC.

AND

VERAZ NETWORKS INTERNATIONAL, INC.

December 31, 2002

INDEX TO SCHEDULES

Schedule 2.1.1:	Veraz U.S. Business Assets
Schedule 2.1.2:	Contracts relating to Veraz U.S.’s Business
Schedule 2.1.6:	Permits and Licenses
Schedule 2.1.10:	VoIP Inventories
Schedule 6.1:	Business Employees
Schedule 6.3:	Employee Termination Agreement
Schedule 7.10:	Assets Not Identified On Time
Schedule 9:	Pro Forma Balance Sheet of Veraz U.S. as of September 30, 2002

U.S. Separation And Asset Purchase Agreement

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

WITNESSETH:

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

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

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

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

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

1. Definitions

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

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

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

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

“VoIP” means Voice over Internet Protocol.

2. Sale of the Businesses

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

3. Closing

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

3

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

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

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

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

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

4. Representations and Warranties of The Seller

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

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

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

4

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

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

5. Representations and Warranties of Veraz U.S.

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

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

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

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

6. Employment Matters

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

5

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

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

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

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

7. Additional Matters

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

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

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

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

6

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

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

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

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

7.5 Ongoing Information and Cooperation.

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

7

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

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

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

7.7 Litigation; Indemnification.

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

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

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

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

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

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

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

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

7.10 Fixed Assets Not Identified on Time.

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

9

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

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

7.11 Parent Guaranties.

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

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

8. Closing Conditions

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

9. Post-Closing Adjustment

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

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

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

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

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

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

10. Non-Solicitation.

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

11

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

11. General Provisions

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

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

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

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

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

12

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

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

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

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

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

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

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

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

     If to Veraz U.S.:

Veraz Networks International, Inc.
c/o Veraz Networks, Inc.
926 Rock Avenue
San Jose, CA 95131
Fax: 408-750-9409
Attn: Chief Executive Officer

     If to NGTS U.S.:

ECI Telecom — NGTS Inc.
c/o ECI Telecom Ltd.
30 Hasivim Street
Petach Tikva 49133
Israel
Fax: 972-3-926-6070
Attn: General Counsel

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

[SIGNATURES APPEAR ON NEXT PAGE]

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

ECI TELECOM — NGTS INC.

By:	/s/ Illegible
	Name: Title:

VERAZ NETWORKS INTERNATIONAL, INC.

By:	/s/ Martin Ossad
	Name: Martin Ossad Title: Vice President

With respect to Section 7.11(a):
VERAZ NETWORKS, INC.

By:	/s/ Amit Chawla
	Name: Amit Chawla Title: CEO

With respect to Section 7.11(b):
ECI TELECOM LTD.

By:	/s/ Giora Bitan
	Name: Giora Bitan Title: Executive VP and CFO

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

Schedule 2.1.1
Veraz U.S. Business Assets

Schedule 2.1.2
Contracts Relating To Veraz U.S. Business

Schedule 2.1.6
Permits and Licenses

Schedule 2.1.10
VoIP Inventories

Schedule 6.1
Business Employees

Schedule 6.3
Employee Termination Agreement

Schedule 7.10
Assets Not Identified On Time

EX-10.3

Exhibit 10.3

SEPARATION AND ASSET PURCHASE AGREEMENT

AMONG

ECI TELECOM LTD.,

ECI TELECOM-NGTS LTD.

AND

VERAZ NETWORKS LTD.

___, 2002

INDEX TO SCHEDULES

Schedule 2.1.1:	Veraz Business Assets
Schedule 2.1.2:	Assigned Contracts
Schedule 2.1.5:	Permits and Licenses
Schedule 2.1.9:	Inventories, including raw materials, work in process and finished goods
Schedule 2.2:	Assumed Liabilities
Schedule 6.1:	Business Employees
Schedule 6.3(a):	Employee Termination Agreement
Schedule 6.3(b):	Employee Letter to Veraz
Schedule 7.4:	Insurance Policies
Schedule 7.12	Assets Not Identified on Time
Schedule 9:	Pro Forma Balance Sheet of Veraz as of September 30, 2002

INDEX TO EXHIBITS

Exhibits
Exhibit A	Bill of Sale
Exhibit B	Assignment and Assumption Agreement
Exhibit C	Intellectual Property Assignment Agreement
Exhibit D	Intellectual Property License Agreement
Exhibit E	Services Agreement
Exhibit F	Sublease Agreement

Separation and Asset Purchase Agreement

     This Separation And Asset Purchase Agreement (this “Agreement”) is made and entered into this ___day of ___, 2002, by and among Veraz Networks Ltd. [formerly Chorale Networks Ltd.] (“Veraz”), ECI Telecom – NGTS Ltd., an Israeli company (“NGTS”) and ECI Telecom Ltd., an Israeli company (“ECI Telecom”). (NGTS and ECI Telecom are each referred to as a “Seller” and collectively the “Sellers”; Veraz, ECI Telecom and NGTS are each referred to as a “Party” and collectively the “Parties”.)

WITNESSETH:

     WHEREAS, ECI Telecom, through its Next-Generation Telephony Solutions division and NGTS, a wholly-owned subsidiary, is engaged in the development, manufacture, marketing, sale, distribution and service of products and solutions for gateways for point-to-point, point-to-multipoint and/or switching and non-switching applications for connecting end-to-end telephony or telephony over packet networks, which gateways include classification and/or compression of telephony signals, such as voice, modem, fax and/or other signals, such as video conference, and conversion of the classified and/or compressed signals into packets in formats suitable for media, such as Ethernet, IP, ATM or MPLS (the “VoIP Business”) and in the development, marketing, sale, distribution and service of its DCME product line (the “DCME Distribution Business” and, together with the VoIP Business, the “Businesses”);

     WHEREAS, the Sellers desire to sell the Businesses to Veraz Networks, Inc. formerly, NexVerse Networks, Inc., a Delaware corporation (“Veraz Networks”), pursuant to a Share Exchange Agreement dated as of October 30, 2002 (the “Share Exchange”);

     WHEREAS, Veraz is a wholly-owned subsidiary of ECI; and

     WHEREAS, to effectuate the Share Exchange, the Sellers desire to separate the Businesses from the Sellers’ businesses as of the Effective Date (the “Separation”) by contributing them to Veraz in a taxable transaction as set forth in this Agreement and the Exhibits hereto and then selling the outstanding shares of Veraz to Veraz Networks.

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

1. Definitions

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

     1.2 “Assigned Contracts” means as defined in Section 2.1.2 hereof.

     1.3 “Assumed Liabilities” means as defined in Section 2.1 hereof.

     1.4 “Businesses” means the VoIP Business and the DCME Distribution Business.

1.

     1.5 “Business Employee” means as defined in Section 6.1 hereof.

     1.6 “Closing” means as defined in Section 3.1. hereof

     1.7 “Closing Date” means as defined in Section 3.1 hereof

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

     1.9 “DCME Distribution Business” means as defined in the recitals hereto.

     1.10 “ECI Conflict” means as defined in Section 4.2 hereof.

     1.11 “Effective Date” means as defined in Section 3.1 hereof.

     1.12 “Government Entity” means as defined in Section 4.3 hereof

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

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

     1.15 “Share Exchange” means as defined in the recitals hereto.

     1.16 “Sister Newco” means as defined in Section 7.9 hereof

     1.17 “Transferred Assets” means as defined in Section 2.1 hereof

     1.18 “VoIP” means Voice over Internet Protocol.

     1.19 “VoIP Business” means as defined in the recitals hereto.

     1.20 “VoIP IP” means the intellectual property relating to the VoIP Business transferred pursuant to the lP Agreement (defined in Section 3.2.3 hereto).

2. Sale of the Businesses

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

2.

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

          2.1.2 all Contracts identified in Schedule 2.1.2 hereto (collectively, the “Assigned Contracts”);

          2.1.3 copies or originals of the business records, books, ledgers, plans, correspondence, lists, plots, architectural plans, drawings, notebooks, specifications, creative materials, advertising and promotional materials, marketing materials, studies, reports, equipment repair, maintenance or service records of the Sellers, whether written or electronically stored or otherwise recorded, in each case as used in the Businesses for, and relating directly to, their activities prior to the Closing;

          2.1.4 the Sellers’ dealer, distributor, customer, agents and representatives lists, in each case as used in the Businesses for and relating directly to, their activities prior to the Closing;

          2.1.5 the permits, licenses, orders, ratings and approvals of all national, local or foreign governmental or regulatory authorities or industrial bodies, homologations, to the extent the same are transferable, all as identified on Schedule 2.1.5 hereto, and copies of any respective third-party approvals to such transfers to Veraz;

          2.1.6 all rights of the Sellers to causes of action, lawsuits, judgments, claims and demands of any nature which relate to the above-referenced Transferred Assets or constitute counterclaims, rights of setoff, and affirmative defenses to any claims brought against Veraz by third parties relating to such Transferred Assets (except that the Sellers reserve their rights with respect to counterclaims, rights of setoff, and affirmative defenses to any claims covered by Section 7.9(B) hereof);

          2.1.7 all rights of the Sellers related to grants received or to be received by ECI from the Office of the Chief Scientist of the Ministry of Industry and Trade (the “OCS”) with respect to the VoIP Business;

          2.1.8 all accounts receivable related to the VoIP Business;

          2.1.9 the inventories related to the VoIP Business, including raw materials, work in process and finished goods, referenced on Schedule 2.1.9 hereto; and

          2.1.10 all prepayments made to the Seller for maintenance, warranty service and products to be performed or sold by the Seller in connection with the Businesses;

     2.2 Assumed Liabilities. Upon the terms and subject to the conditions set forth in this Agreement, Veraz hereby agrees to assume, pay, perform and discharge the Assumed Liabilities, and to pay, perform and discharge the Assumed Liabilities as they become due and payable. The Assumed Liabilities shall consist solely of (i) the obligations and liabilities under the Assigned

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Contracts, but only to the extent such obligations and liabilities in each case relate to sales that are consummated (i.e., product delivered) on or after the Effective Date or the grounds for which arose (e.g., services or supplies delivered) on or after the Effective Date; and (ii) the obligations of the Sellers related to the rights transferred pursuant to Section 2.1.7 above as described in Schedule 2.2.

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

     2.4 Real Estate. Notwithstanding anything in this Agreement to the contrary, nothing in this Agreement shall be construed as an attempt to assign, transfer or sell any contract, agreement, lease or asset which is defined as a “right in real estate” under Section 1 of the Israeli Real Estate (Appreciation, Sale and Purchase) Law, 5723-1963.

     2.5 Investment Center. The Sellers shall file an application (in the form agreed to by the Parties) with the Investment Center of the Israeli Ministry of Industry and Trade to assign all of the tax benefits arising from the Transferred Assets to Veraz commencing on the Effective Date.

3. Closing

     3.1 Closing; Effective Date. The closing of the transactions contemplated hereby (the “Closing”) shall take place as soon as practicable following the date on which the conditions set forth in Article 8 hereto shall have been satisfied or waived (the “Closing Date”), at the offices of Goldfarb, Levy, Eran & Co., Eliahu House, Tel Aviv, unless another place or time is mutually agreed upon by ECI Telecom and Veraz. Upon the Closing, the transactions contemplated by this Agreement shall be effective as if the Closing had occurred on September 30, 2002 (the “Effective Date”), as more fully described in Section 9 below.

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

          3.2.1 Seller Actions. The Sellers shall deliver or cause to be delivered to Veraz the following: (a) a bill of sale relating to transfer of Sellers’ right, title and interest in the Transferred Assets in the form attached hereto as Exhibit A; (b) a duly signed Assignment and Assumption Agreement in the form attached hereto as Exhibit B relating to the assignment of any and all Assigned Contracts and assumption of the Assumed Liabilities, and signed consents to the assignments of the other parties to such Contracts and to Permits that have been obtained; (c) all agreements in the forms attached hereto as Schedules 6.3(a) and (b) executed by the Business Employees; (d) a copy of the resolutions of the boards of directors of ECI Telecom and NGTS authorizing the transactions contemplated hereby and any other corporate approvals required pursuant to the Companies Law and the Sellers’ and Veraz’s Articles of Association; and (e) all other documents and instruments required hereunder to be delivered by the Sellers to Veraz.

          3.2.2 Veraz Actions. Veraz shall deliver or cause to be delivered to the Sellers (a) a duly signed Assignment and Assumption Agreement in the form attached hereto as

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Exhibit B relating to the assignment of any and all Assigned Contracts and assumption of the Assumed Liabilities; (b) a copy of the resolutions of the boards of directors of Veraz authorizing the transactions contemplated hereby and (c) all other documents and instruments required hereunder to be delivered by Veraz to the Sellers.

          3.2.3 Other Agreements. Each party shall deliver or cause to be delivered to the other:

(i)	Intellectual Property Assignment Agreement relating to the VoIP IP, substantially in the form of Exhibit C hereto (the “IP Agreement”);
(ii)	Intellectual Property License Agreement relating to the DCME Business and certain license-backs relating to VoIP IP, substantially in the form of Exhibit D hereto the (“License Agreement”);
(iii)	Services Agreement, substantially in the form of Exhibit E hereto; and
(iv)	Sublease Agreement with ECI Telecom, substantially in the form of Exhibit F hereto.

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

4. Representations and Warranties of ECI Telecom and of NGTS

     Each of the Sellers hereby jointly and severally represent and warrant to Veraz that the following representations and warranties are true and accurate in all respects, as of the date hereof and as of the Closing Date, and acknowledges that Veraz is entering into this Agreement in reliance thereon:

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

     4.2 Authority; No Violation; Due Execution; Etc. The execution and delivery by each Seller of this Agreement and the agreements attached as exhibits hereto and the performance by each Seller of its obligations hereunder have been (or, as of the Closing Date, will be) duly authorized by all requisite corporate action and will not conflict with, or result in any violation of, or default under (with due notice or lapse of time or both), or give rise to a right of termination, cancellation or acceleration of any obligation or loss of any benefit (any such event, an “ECI Conflict”) under (i) any provision of applicable law, (ii) any order of any court or other agency of government by which either Seller or any of its properties or assets is or are

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bound, (iii) the Memorandum of Association and Articles of Association of either Seller, each as amended, or (iv) any provision of any indenture, mortgage, lease or other agreement or instrument, permit, concession, franchise or license to which either Seller is a party or, to the knowledge of either Seller, by which any of its material properties or assets is or are bound, or result in the creation or imposition of any Lien upon any assets (tangible or intangible) of either Seller, in each such event which is reasonably likely to prevent, impede, delay, avoid, condition, enjoin, prohibit or otherwise interfere with, in a material way, the full, valid and complete performance of each Seller’s obligations under this Agreement.

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

5. Representations and Warranties of Veraz

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

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

     5.2 Authority; Due Execution; Etc. The execution and delivery by Veraz of this Agreement and the agreements attached as exhibits hereto and the performance by Veraz of its obligations hereunder have been (or, as of the Closing Date, will be) duly authorized by all requisite corporate action.

     5.3 Shares. On the date hereof and as of the Closing Date, 100 ordinary shares of Veraz are and will be outstanding. All such shares are duly authorized, validly issued, fully paid and non-assessable and were issued free and clear of any Liens and not in violation of any preemptive or similar rights. Except as provided in the Share Exchange, on the date hereof and as of the Closing Date, there are no rights of any Person to acquire any securities of Veraz.

6. Employment Matters

     6.1 Employees of Businesses. Subject to the Closing, as soon as practicable, Veraz or its Affiliates will offer employment to each individual listed on Schedule 6.1 hereto. Each individual who accepts Veraz’s offer of employment of Veraz or its Affiliates and signs an agreement with Veraz or its Affiliates shall be referred to herein as a “Business Employee.” As of December 31^st, 2002, the employment relationship between NGTS and each Business

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Employee shall cease and each such employee shall become an employee of Veraz. Each of ECI Telecom and NGTS hereby confirms that, notwithstanding any confidentiality or non-compete obligations of any Business Employees to ECI Telecom or NGTS, respectively, the Business Employees shall be permitted to engage in the Businesses, as mutually contemplated by the Parties prior to the Closing, on behalf of Veraz and its Affiliates.

     6.2 Business Employee Liability. The Sellers shall pay $200,000, and Veraz shall pay $500,000, towards bonuses to be distributed by NGTS to the Business Employees in connection with their termination from NGTS. Other than such payments, and subject to the proviso set forth in Section 7.9(A)(ii)(b) hereof, any liability with respect to Business Employees the grounds for which arose during the period prior to December 31^st, 2002 shall be the Sellers’, and any liability with respect to Business Employees the grounds for which arose any time after December 31^st, 2002 shall be Veraz’s.

     6.3 Employee Releases. Each Business Employee shall be requested to execute and deliver (i) to NGTS a release and confidentiality and non-competition agreement in the form of Schedule 6.3(a) hereto and (ii) to Veraz a declaration in the form of Schedule 6.3(b) hereto.

     6.4 Options. Any vested options to purchase ordinary shares of ECI Telecom held by a Business Employee on December 31^st, 2002 shall continue to be exercisable for as long as the Business Employee is employed by Veraz or its affiliates and for 30 days thereafter. Any unvested options to purchase ordinary shares of ECI Telecom held by a Business Employee on December 31^st, 2002 shall be governed by the terms of such options and the option plan under which they were granted.

7. Additional Matters

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

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

     7.3 Non-transferable Assets. (a) Each Party will use commercially reasonable efforts to cause the assignment of each contract, agreement, license, permit and claim included in the Transferred Assets or the Assumed Liabilities. Specifically, with respect to the Assigned Contracts the receipt of third-party consents to assignment therefor is a condition to the closing of the Share Exchange, the Sellers shall use commercially reasonable efforts to obtain all such third-party consents prior to the Closing and with respect to any of the other Assigned Contracts, pursuant to the written request of Veraz, the Sellers shall use commercially reasonable efforts to obtain all necessary third-party consents prior to the Closing or as soon as practicable thereafter, provided, however, that, in each case, the Sellers shall not be required to pay any consideration

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for any such consents. Veraz shall not be liable for any such consideration paid or agreed to be paid by any of the Sellers unless otherwise agreed by Veraz.

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

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

     7.4 Insurance. For so long as ECI Telecom shall hold, directly or indirectly, more than 51% of Veraz Networks’ outstanding shares, ECI Telecom shall use commercially reasonable efforts to maintain insurance coverage for Veraz, as well as Veraz Networks and its wholly-owned U.S. subsidiary, as set forth in Schedule 7.4 hereto. Veraz acknowledges that as soon as ECI Telecom’s ownership of Veraz Networks decreases below 51%, such companies shall cease to be beneficiaries of the insurance coverage of ECI Telecom set forth in Schedule 7.4 hereto, and ECI Telecom hereby undertakes to request the inclusion of Veraz, as well as Veraz Networks and its wholly-owned U.S. subsidiary, as additional covered parties under the insurance policies of ECI Telecom set forth in Schedule 7.4 hereto for so long as ECI shall hold, directly or indirectly, as least 40% of Veraz Networks’ outstanding shares. At the request of ECI Telecom, Veraz shall pay ECI Telecom the increase in premiums resulting from the inclusion of Veraz and its Affiliates in any such insurance policies, irrespective of ECI Telecom’s ownership interest in Veraz Networks. ECI’s obligations under this Section 7.4 shall terminate on the third anniversary of the Closing Date.

     7.5 Office of the Chief Scientist. As soon as practicable and in any event prior to the Closing, ECI Telecom shall file an application for the approval of the Office of the Chief Scientist and of any other regulatory authority (to the extent required) with respect to the transactions contemplated by this Agreement.

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

     7.7 Ongoing Information and Cooperation.

          7.7.1 Each Party shall provide, or cause to be provided, to the other Parties, in such form as the requesting Party shall reasonably request, at no charge to the requesting Party, all financial, tax and other data and information as the requesting Party determines necessary or advisable in order to prepare its financial statements and reports or filings with any tax authority and any other governmental authority. The receiving Party shall not use such data or information for purposes other than those for which such data or information was given and shall use reasonable efforts to maintain the confidentiality of such data and information, except as may be required by law. To facilitate the possible exchange of information pursuant to this Agreement after the Closing Date, each Party agrees to use its reasonable commercial efforts to retain all information in their respective possession or control on the Closing Date for a reasonable period, but not less than seven (7) years from the Closing Date.

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

     7.8 No Representation or Warranty. No Seller makes any representation as to, warranty of or covenant with respect to the value of any asset or thing of value to be transferred to Veraz.

     7.9 Litigation; Indemnification. (A) From and after the Closing Date, Veraz shall manage (and, if applicable, assume the defense of) any claims or lawsuits relating to (i) the Transferred Assets or the VoIP IP brought after the Effective Date, when the grounds for such matters, claims or lawsuits arose after Effective Date, and (ii) the Business Employees brought after December 31, 2002, when the grounds for such matters, claims or lawsuits arose after December 31, 2002. Veraz shall indemnify and hold harmless the Sellers and their respective officers, employees, directors, Affiliates and agents with respect to any and all liabilities, damages and expenses (including reasonable attorneys’ fees) suffered or incurred in connection

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with (a) any Transferred Assets, the VoIP IP or in connection with any other Assumed Liabilities, when the grounds therefor arose on or after Effective Date and (b) the Business Employees, when the grounds therefor arose after December 31, 2002, provided, however, that although NGTS shall be responsible to pay directly to each Business Employee the amounts to which such Business Employee is entitled under applicable law and under any applicable employment agreement with respect to the period ending on December 31, 2002, the costs of employing (but not any cost of terminating) the Business Employees during the period commencing on the Effective Date and ending on December 31, 2002 shall be borne by Veraz and reflected in the Closing Date Financial Statements. (B) NGTS shall manage (and, if applicable, assume the defense of) any claims or lawsuits relating to (i) the Transferred Assets or the VoIP IP, when the grounds for such matters, claims or lawsuits arose before the Effective Date and (ii) the Business Employees, when the grounds for such matters, claims or lawsuits arose before December 31, 2002. The Sellers, jointly and severally, shall indemnify and hold harmless Veraz and its officers, employees, directors, Affiliates and agents with respect to any and all liabilities, damages and expenses (including reasonable attorneys’ fees) suffered or incurred in connection with (i) any Transferred Assets, the VoIP IP or in connection with any other Assumed Liabilities, when the grounds therefor arose before the Effective Date, (ii) the Business Employees, when the grounds therefor arose before December 31, 2002 and (iii) any Retained Liabilities. (C) From and after the Effective Date, each Party seeking indemnification hereunder shall give the indemnifying Party prompt notice of the commencement of any applicable claim or lawsuit, provided, however, that any failure to do so shall not limit any of the rights of the indemnities under this Section 7.9 (except to the extent such failure materially prejudices the defense of such claim or lawsuit). (D) The Parties shall cooperate with each other in connection with such matters pursuant to Section 7.7.2 hereof. In the event that any claims or lawsuits brought after the Effective Date relate to the Transferred Assets or VoIP IP and also to the assets transferred by ECI Telecom to one or more other subsidiaries of ECI Telecom (“Sister Newcos”), then ECI Telecom, such Sister Newcos and Veraz shall cooperate to allocate responsibility therefor in good faith. (E) Except for Veraz Networks and its successors and assigns, no Person who is not a Party (or any successor thereto or assign thereof) shall be permitted to assert any indemnification claim or exercise any other remedy under this Agreement unless the applicable Party (or any successor thereto or assign thereof) shall have consented to the assertion of such indemnification claim or the exercise of such other remedy.

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

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

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     7.12 Assets Not Identified on Time. (a) Schedule 7.12 hereto contains a list of fixed, tangible assets related to NGTS which belong to the Sellers but which were not specifically identified as relating to the Businesses on the date hereof. In the event that during the period ending on April 1, 2003, Veraz and NGTS mutually identify any of such fixed, tangible assets as relating to the Business, the parties shall take all steps reasonably necessary to promptly cause the transfer of the relevant asset or assets to Veraz, provided that the aggregate book value of such assets shall not exceed $500,000.

          (b) If, within one year following the Closing Date, Veraz determines that there are any assets owned by any of the Sellers that are reasonably required for operation of the Businesses including, but not limited to intellectual property, intellectual property rights and contract rights (but excluding fixed assets and inventory), which assets are being used by such Seller in the Businesses on the date of execution of this Agreement and, based on the principles used in preparing this Agreement and the IP Agreement, should have been included in the Transferred Assets or in the “Veraz IP,” respectively, but inadvertently have not been transferred to Veraz pursuant to this Agreement or the IP Agreement, then Veraz may request in writing for the Sellers to provide the applicable asset to Veraz by way of an assignment of such asset, provided that any such intellectual property or intellectual property rights are related to the VoIP Business, excluding those related to the DCME Business. Upon receipt of such written request, the Sellers hereby agree to promptly evaluate such request. If such request is valid, the Sellers shall consent to such request, such consent not to be unreasonably withheld, delayed or conditioned, and use commercially reasonable efforts to obtain all necessary third-party consents, if any, and take all other reasonably necessary actions for such assets to be assigned to Veraz, provided that, at the request of ECI with respect to any such intellectual property or intellectual property rights, Veraz shall grant a license back to ECI (or any of its affiliates) pursuant to a license agreement substantially in the form of Appendix 2.4(a) to the License Agreement, subject to reasonable and lawful non-competition protection for Veraz. Within two (2) days after receipt, the Sellers shall provide Veraz with each such third-party consents that the Sellers obtain. Immediately upon any assignment of any asset pursuant to this Section 7.12(b), such asset shall be deemed to be a Transferred Asset for purposes of this Agreement or, in the case of intellectual property or intellectual property rights, “Veraz IP” for purposes of the IP Agreement. Until such assignment, the Parties shall cooperate with respect to such agreement pursuant to the provisions of Section 7.3 hereof.

     7.13 Parent Guaranties. (a) Veraz Networks hereby irrevocably agrees to unconditionally guaranty all the obligations of Veraz under this Agreement.

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

8. Closing Conditions

     The Closing shall be subject to the simultaneous closing of the Share Exchange.

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9. Post-Closing Adjustment

     9.1 Preparation of Balance Sheets. Attached hereto as Schedule 9 is a pro-forma balance sheet with respect to the Businesses, as of September 30, 2002 (the “September 30 Veraz Balance Sheet”). As soon as practicable, but in any event not later than November 15, 2002, Veraz, together with its auditors, shall prepare a balance sheet with respect to the Businesses, as of the Effective Date (the “Effective Date Balance Sheet”), using the same principles and accounting policies under which the September 30 Veraz Balance Sheet was prepared. Such balance sheets shall include an entry for Software Capitalization relating to the VoIP Business recorded on the books of the Sellers as of the respective dates thereof.

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

          (b) As soon as practicable after Closing, but in any event not later than January 30, Veraz, together with its auditors, shall prepare a balance sheet with respect to the Businesses, as of December 31, 2002 (the “Closing Date Balance Sheet”), using the same principles and accounting policies under which the September 30 and Effective Date Balance Sheets were prepared, and related profit and loss and cash flow statements (the “Closing Date Income Statement” and the “Closing Date Cash Flow Statement”, respectively, and together with the Closing Date Balance Sheet, the “Closing Date Financial Statements”) for the period between the Effective Date and December 31, 2002 (the “Interim Period”). The Closing Date Income Statement and Closing Date Cash Flow Statement shall each be prepared on the basis of income and expenses which would have been incurred by Veraz had the Closing occurred on the Effective Date. In preparing the Closing Date Financial Statements, any inter-company financial transfers from Veraz Networks to Veraz during the period between the Closing Date and December 31^st, 2002 shall be disregarded.

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

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

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

     10. Non-Solicitation.

     For a period of eighteen (18) months from the Closing Date, (a) Veraz shall not directly solicit any person (other than Business Employees) who is employed by ECI Telecom, a Sister Newco or an Affiliate thereof until three months have passed since such person has last been employed by such other company and (b) ECI Telecom shall not directly solicit and, until closing of a separation agreement of any Sister Newco, shall ensure that such Sister Newco and its respective Affiliates shall not directly solicit, any person who is employed by Veraz or an Affiliate thereof until three months have passed since such person has last been employed by such company. This prohibition on solicitation does not apply to actions taken by a person (i) as a result of a general recruitment effort carried out through a public or general solicitation or (ii) as a result of an employee’s initiative. ECI Telecom hereby undertakes to include in the separation agreement of each Sister Newco a provision similar to this section 10 that protects Veraz. If ECI Telecom fails to do so with respect to a Sister Newco, such failure shall not be deemed a breach of this Agreement, but Veraz shall be released of any restriction under this Section 10 with respect to such Sister Newco.

11. General Provisions

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

     11.2 Entire Agreement; Assignment. This Agreement and Exhibits and Schedules hereto and the other agreements among the Parties referenced herein (a) constitute the entire agreement among the Parties with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, between the Parties with respect to the subject matter hereof; (b) shall be binding upon successors and assigns of any Party; and (c) shall not be assigned by any Party without the prior written consent of the other Parties, including any assignment by operation of law pursuant to a merger or sale of such Party, provided that the Sellers shall not unreasonably withhold such consent. Notwithstanding anything to the contrary herein, Veraz shall have the right to assign or transfer any of the Transferred Assets to any party after the Closing, provided, however, that, following any such assignment or transfer, the Sellers shall have no further obligations with respect to such Transferred Assets and provided further that the Transferred Assets identified in Section 2.1.7 above may only be assigned to Israeli entities with any requisite governmental approvals.

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

13.

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

     11.5 Governing Law, Dispute Resolution. This Agreement shall be governed by and construed in accordance with the laws of the State of Israel, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. In the event of any controversy or claim arising out of or in connection with this Agreement, including without limitation, disputes among ECI Telecom, Veraz and any Sister Newcos with respect to the future allocation of assets or liabilities of ECI Telecom, the first level of escalation shall be limited to seven business days of discussion between, if ECI Telecom, its Chief Financial Officer and/or Chief Technology Officer, and if Veraz, its Chief Executive Officer and/or Chief Financial Officer, and the second and final level of escalation shall be limited to seven business days of discussion between each of the presidents of ECI Telecom and Veraz Networks. Any such controversy or claim not so resolved shall be finally settled by arbitration in accordance with the Israel Arbitration Law — 1968, before a single arbitrator experienced in VoIP and DCME technology, who shall issue his reasoned opinion in writing. The arbitrator shall give his reasoned decision in writing and his decision shall be binding and conclusive on the parties. In the event that the Parties do not agree on the identity of the arbitrator within an additional seven business days, the arbitrator shall be selected by the chairman of the Israeli Society of Certified Public Accountants. Nothing in this Agreement shall prevent either party from applying to a court of competent jurisdiction for injunctive or other equitable relief. ECI Telecom hereby undertakes to include in the separation agreement of each Sister Newco a provision similar to this section 11.5 that protects Veraz. If ECI Telecom fails to do so with respect to a Sister Newco, such failure shall not be deemed a breach of this Agreement, but Veraz shall be released from any arbitration requirement or agreement under this Section 11.5 with respect to such Sister Newco.

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

     11.7 No Third Party Beneficiaries. Except as set forth in Sections 7.9 (other than Business Employees), 10, 11.3 and 11.5, this Agreement is for the sole benefit of the Parties and their permitted assigns, and nothing herein expressed or implied shall give or be construed to give to any other Person any legal or equitable rights hereunder.

     11.8 Limitation of Liability. EXCEPT AS SET FORTH IN THE SHARE EXCHANGE OR ANY AGREEMENTS ENTERED INTO IN CONNECTION THEREWITH,

14.

IN NO EVENT SHALL ECI OR VERAZ OR ANY OF THEIR RESPECTIVE AFFILIATES, EMPLOYEES, DIRECTORS, AGENTS OR ADVISORS, BE LIABLE TO ANY OTHER SUCH PERSON FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT, INCIDENTAL OR PUNITIVE DAMAGES OR LOST PROFITS, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE) ARISING IN ANY WAY OUT OF THIS AGREEMENT OR THE IP AGREEMENT, WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

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

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

     11.11 Conflicting Agreements. In the event of conflict between this Agreement and any ancillary agreement identified in Section 3, the provisions of such ancillary agreement shall prevail.

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

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

If to VERAZ:	If to ECI TELECOM or NGTS:
43 Hasivim Street	30 Hasivim Street,
Petach Tikvah 49133	Petach Tikvah 49133
Israel	Israel
Tel: 03-926-8844	Tel: 03-926-6885
Fax: 03-926-6355	Fax: 03-926-6070
Attn: Tal Simchony	Attn: General Counsel

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

[SIGNATURES APPEAR ON NEXT PAGE]

15.

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

ECI TELECOM LTD.

By:	/s/ Illegible
	Name: Title:

ECI TELECOM – NGTS LTD.

By:	/s/ Giora Bitan
	Name: Giora Bitan Title:

VERAZ NETWORKS LTD.

By:	/s/ Zamir Segev
	Name: Zamir Segev
	Title:

With respect to Section 7.13(a):

VERAZ NETWORKS, INC.

By:	/s/ Amit Chawla
	Name: Amit Chawla
	Title:

[Signature page to Israeli Separation and Asset Purchase Agreement]

16.

Schedule 2.1.1
Veraz Business Assets

Schedule 2.1.2
Assigned Contracts

Schedule 2.1.5
Permits and Licenses

Schedule 2.1.9
Inventories

Schedule 2.2
Assumed Liabilities

Schedule 6.1
Business Employees

Schedule 6.3(a)
Employee Termination Agreement

Schedule 6.3(b)
Employee Letter to Veraz

Schedule 7.4
Insurance Policies

Schedule 7.12
Assets Not Identified On Time

Schedule 9
Pro Forma Balance Sheet of Veraz as of September 30, 2002

17.

EX-10.4

Exhibit 10.4

DCME
MASTER MANUFACTURING AND DISTRIBUTION AGREEMENT

     This DCME MASTER MANUFACTURING AND DISTRIBUTION AGREEMENT (this “Agreement”), dated as of December 31, 2002, by and between ECI Telecom Ltd., a public company organized under the laws of the State of Israel (“ECI”) having its principal place of business at 30 Hasivim Street, Petah Tikva 49133, Israel and Veraz Networks Ltd. [formerly Chorale Networks Ltd.], a private company organized under the laws of the State of Israel (“Veraz Israel”) having its principal place of business at 43 Hasivim Street, Petah Tikva 49133, Israel, and Veraz Networks, Inc. [formerly Chorale Networks, Inc.], a Delaware corporation (“Veraz U.S.”) having its principal place of business at 926 Rock Avenue, San Jose, CA 95131. Veraz Israel and Veraz U.S. are collectively referred to as “Veraz”.

WITNESSETH:

     WHEREAS, ECI manufactures and sells Digital Circuit Multiplication Equipment (“DCME”) worldwide; and

     WHEREAS, within the framework of the transfer by ECI of certain assets and rights relating to the DCME product line to Veraz the parties hereto are prepared to enter into this Agreement whereby ECI will manufacture and sell to Veraz DCME to be marketed by Veraz, as more fully set forth below;

     NOW, THEREFORE, in consideration for their mutual promises and undertakings and other valuable consideration, the sufficiency of which is acknowledged by the parties, the parties hereby agree as follows:

1. Manufacture and Sale, Purchase and Distribution

     1.1 During the term of this Agreement and subject to the terms and conditions set forth herein, ECI shall manufacture and sell to Veraz and Veraz shall purchase from ECI and may distribute worldwide and provide service and support for the DCME integrated systems and equipment listed in Exhibit 1.1 attached hereto, together with DCME spare parts, components and accessories that are manufactured by ECI and intended by Veraz for use in DCME integrated systems and equipment (individually, a “Product,” and collectively the “Products”).

     1.2 The terms and conditions of this Agreement shall govern the manufacture, sale and distribution of any Product provided by ECI to Veraz pursuant to every purchase order which shall be submitted in accordance with and which otherwise complies with the conditions for acceptance by ECI as set forth in Section 6.1 below (“Purchase Order”), each of which shall be deemed a part of this Agreement.

1.3 Supply and Service Obligations

          (a) During the term of this Agreement and subject to the exclusions and conditions and exceptions set forth below within Sections 1.3(c) and 1.3(d), ECI shall sell and distribute Products only to Veraz, and not to any other person or entity.

1.

          (b) During the term of this Agreement, and if and to the extent permitted under law, only Veraz shall be entitled to provide maintenance services and support for Products.

          (c) The parties acknowledge and agree that ECI’s obligations set forth in Sections 1.3(a) and 1.3(b) do not apply to:

               (i) ECI’s sale of DCME sub-assemblies to ECtel Ltd., the sale of subassemblies for the Celtro product line and the sale of components for the Hi-TV product line, solely to the extent that such DCME sub-assemblies and components are intended for use and incorporation by them into final products that are not the same or similar in any material respect with the DCME integrated systems and equipment listed in Exhibit 1.1 attached hereto; or

               (ii) ECI’s provision of service and support to ECtel Ltd. for the Celtro product line and for the Hi-TV product line for those DCME sub-assemblies and components solely to the extent that such service and support is provided by ECI in connection with the use of DCME components in final products that are not the same or similar in any material respect with the DCME integrated systems and equipment listed in Exhibit 1.1 attached hereto.

          (d) ECI’s obligations in Sections 1.3(a) and 1.3(b) are also conditioned upon the requirements set forth below;

               (i) Veraz is not in material breach of Section 5.11 of this Agreement that continues for a period of thirty (30) days after Veraz’s receipt of written notice from ECI of such breach; and

               (ii) Veraz is not the subject of a petition for relief under any bankruptcy, insolvency or debtor’s relief law (which petition is not dismissed within ninety (90) days after the filing thereof), and is not liquidated or dissolved, and does not make an assignment for the benefit of creditors, and does not have a receiver appointed for all or a substantial portion of Veraz’s assets.

     If Veraz fails to meet any of these requirements, then ECI shall have no further obligations under Sections 1.3(a) and 1.3(b) for the remainder of the term of this Agreement.

     1.4 Purchase Obligations

          (a) During the term of this Agreement and .subject to the exclusions and conditions set forth below within this Section 1.4(b), Veraz shall purchase all of its requirements for Products only from ECI, and not from any other person or entity.

          (b) Veraz’s obligations in Section 1.4(a) are also conditioned upon the requirements set forth below. If ECI fails to meet any of these requirements, Veraz shall have no further obligations under Section 1.4(a) for the remainder of the term of this Agreement.

               (i) ECI is not in material breach of any material obligation under this Agreement that continues for a period of thirty (30) days after ECI’ s receipt of written notice from Veraz of such breach;

2.

          (ii) ECI is not the subject of a petition for relief under any bankruptcy, insolvency or debtor’s relief law (which petition is not dismissed within ninety (90) days after the filing thereof), and is not liquidated or dissolved, and does not make an assignment for the benefit of creditors, and does not have a ‘receiver appointed for all or a substantial portion of ECI’s assets; and

          (iii) ECI is not the subject of a force majeure event, as described in Section 16.1, which continues in effect for a period of ninety (90) days and adversely affects the ability of Veraz to obtain Products from ECI.

2. Product Forecast

     At the beginning of each month during this Agreement, Veraz will provide ECI with a six (6)-month rolling Product forecast (each a “Forecast”), describing Veraz’s good faith expectations of the number of Products it intends to purchase from ECI and the expected sales value in the following six (6) months for which Purchase Orders have not yet been issued by Veraz, in the form attached as Exhibit 2. Subject to the provisions of Section 3 below, all commitments made by Veraz for the purchase of Products hereunder shall be made only upon submission by Veraz of Purchase Orders to ECI pursuant to Section 6. Each Forecast shall be deemed to be accepted by ECI unless ECI reasonably objects in writing within five (5) days of the date of Veraz’s submission of the Forecast. If ECI objects to any Forecast, it will provide all relevant details to Veraz regarding its objection, and the parties will work in good faith to resolve such objection in a prompt and reasonable manner to meet the potential needs of Veraz to its customers with respect to the supply of Products.

3. Materials Procurement

     3.1 ECI shall purchase sufficient components and raw materials required to provide the Products (“Materials”) using ECI’s standard purchasing practices, to meet the requirements of (i) the outstanding Purchase Orders and (ii) the Forecast; provided, however, that if the number of forecasted Products specified in the Forecast together with the number of Products required pursuant to outstanding Purchase Orders exceeds by more than ten percent (10%) the number of forecasted Products for the same period as specified in the Veraz business plan attached hereto as Exhibit 3.1, as the same may be amended from time to time by the parties upon their mutual consent (the “Business Plan”) (such excess hereinafter referred to as the “Excess Products”), ECI may, but shall not be required to, purchase Materials for the Excess Products.

     3.2 ECI recognizes its financial responsibility and shall bear all costs for the Materials purchased by it for inclusion in the Products.

     3.3 In the event ECI does not elect to purchase Materials for Excess Products in accordance with Section 3.1 above, then VEraz may deliver to ECI a Purchase Order for said Excess Products, and in such case ECI shall purchase the Materials for these Excess Products. The price to Veraz for such Excess Products shall be equal to the applicable price for such Products that is determined under the provisions in Exhibit 9.1, and the provisions of Sections 9.1 and 9.2 below shall not apply to any such Excess Products. Payment from Veraz to

3.

ECI for such Excess Products shall be due thirty (30) days after Veraz’s receipt and acceptance of any such applicable Excess Products. ECI acknowledges and agrees that Veraz may use Excess Products in place of any corresponding Products to be supplied under a future Forecast, in which case the provision of Sections 9.1 and 9.2 below shall apply to Customer Revenue generated from sales made by Veraz of such Excess Products or Products containing Excess Products, provided, however, that Veraz shall be entitled deduct from amounts which are due ECI for such sales those amounts previously paid by Veraz to ECI for such Excess Products so used or sold.

     3.4 If a supplier of Materials notifies ECI that any such Materials will be discontinued, ECI shall immediately notify Veraz of such discontinuance in writing. Veraz shall use commercially reasonable efforts to locate substitute Materials and failing that shall within fourteen (14) business days notify ECI, in writing, specifying the amount of such Materials ECI is requested to purchase before the discontinuance comes into effect. ECI shall then use commercially reasonable efforts to purchase the amount of such Materials which are specified by Veraz.

4. ECI’s Obligations

     ECI shall, at its expense, unless expressly provided otherwise below:

     4.1 Manufacture, assemble, repair, investigate production problems, test, and deliver in accordance with the delivery date specified in any Purchase Order and in accordance with this Agreement, the Products duly ordered by Veraz under each Purchase Order, provided, that ECI is expressly permitted to outsource or subcontract to subcontractors who are one of ECI’s qualified vendors for parts, processes or completed or substantially completed Products supplied to Veraz and ECI shall otherwise be completely independent in determining the manner in which it shall perform its obligations hereunder without prior written approval from Veraz. Consent of Veraz to the use of any components manufactured by third parties shall not derogate from ECI’s obligations under this Agreement, including, without limitation, ECI’s warranty obligations under Section 8 of this Agreement;

     4.2 Make available to Veraz, upon its reasonable request, Products and Product test equipment, if any, that may be located in the regional units of ECI, as is necessary for Veraz to perform its obligations under Section 5.1 below in such regions, provided that the manufacture of the Products and Product test equipment does not disrupt ECI’s manufacturing process.

     4.3 Prepare the Products described in any Purchase Order, to be ready in its final packaging for shipping within two (2) business days after Veraz notifies ECI of final packaging and delivery instructions for any Purchase Order, provided that ECI shall have at least ten (10) business days after receipt of any Purchase Order to deliver the Products described in such Purchase Order (other than Products that may be tested using the “highly accelerated screening system”, for which Products ECI shall have five (5)-business days after receipt of a Purchase Order to deliver such Products to Veraz);

4.

     4.4 Supply, at Veraz’s reasonable request, Product manufacturing data that is required for obtaining necessary governmental approvals, licenses, permits and consents as required pursuant to Section 5.4 hereof;

     4.5 Maintain all necessary process design technology, labor, material, tooling, facilities and other resources for the timely and satisfactory completion and delivery of the Product under this Agreement;

     4.6 Commit and use sufficient and qualified personnel to support the requirements of this Agreement;

     4.7 Reimburse Veraz for expenses of third parties approved in advance by ECI in connection with the development of features to satisfy customer requests;

     4.8 Provide Veraz with Product demonstration equipment as reasonably requested by Veraz, provided, that Veraz shall reimburse ECI for ECI’s depreciated cost of production of any demonstration equipment not returned to ECI within one (1) year of delivery to Veraz;

     4.9 Obtain and pay for any bank guarantees, performance bonds or other like instruments to the extent related to production and performance of the Products, and necessary for the sale by Veraz of the Products;

     4.10 Provide Veraz with Products for field trials free of charge, provided that Veraz shall return such Products within a reasonable timeframe upon ECI’s written request subject, however, to those contractual obligations that may exist between Veraz and its customers that may affect the required return of such Products;

     4.11 Provide Veraz with Products for homologation; provided that Veraz shall return such Products within a reasonable timeframe upon ECI’s written request unless Veraz decides to retain such Products which in such event Veraz shall so promptly notify ECI and will pay to ECI an amount equal to ECI’s actual cost of manufacture for such Products that will be invoiced by ECI to Veraz at the time such decision is made by Veraz;

     4.12 (a) Obtain and maintain all governmental and other permits, licenses and approvals that Veraz notifies ECI in writing are necessary for the performance of ECI’s undertakings hereunder and the distribution and sale of Products for intended use by customers within countries that Veraz plans to distribute such Products, including an ISO certification for ECI’s processes to be performed under this Agreement (of at least ISO 9001 or higher), (b) pay the annual fees associated with obtaining the CE, TUV and UL marks (to be obtained by Veraz as specified in Section 5.4 below), and (c) use commercially reasonable efforts to insure that each subcontractor complies with any requirements to obtain and maintain such permits, licenses, approvals and certifications;

     4.13 Provide on a weekly basis to Veraz detailed production and planned delivery schedules for all Products that are to be manufactured and/or delivered by ECI for Veraz under this Agreement;

5.

     4.14 Manufacture Products in accordance with the quality requirements, including reliability testing and inspection methods and procedures, that are set forth in Exhibit 4.13 to this Agreement or otherwise agreed to in writing by Veraz and ECI;

     4.15 Assist Veraz in obtaining services of Celtro engineers on an as needed basis to solve engineering problems in Products, which assistance received, if any, will be compensated by Veraz to Celtro on commercially reasonable terms, for so long as Celtro is a wholly-owned division or a wholly owned subsidiary of ECI.

     4.16 Provide Veraz with quality data and reports that Veraz may reasonably request or is otherwise required by Veraz to satisfy its obligations to ECI under this Agreement; provided, however, that ECI shall not have any obligation under this Section 4.16 to provide Veraz with any quality data and reports that are not currently being generated by ECI for the Products as of the date of execution of this Agreement unless such data and reports are otherwise required by law, regulation or other legal requirement;

     4.17 Maintain, a business continuity plan for the Products to the extent that ECI generally has, and that contains protections that are no less protective than, a business continuity plan for other products that ECI uses generally to protect its business from disruption; and

     4.18 Appoint, and hereby does appoint, Veraz as its agent to collect all DCME-related accounts receivable balances (including both current and delinquent) pursuant to the provisions of Section 5.10.

5. Veraz’s Obligations

     Veraz shall, at its expense, unless expressly provided otherwise below:

     5.1 Use commercially reasonable efforts to seek out and identify prospective customers, either through its own actions or actions of its agents, and otherwise promote and expand the sale of the Products worldwide and follow up inquiries, leads and correspondence furnished to it by ECI;

     5.2 Use commercially reasonable efforts to provide and maintain an adequate place of business and sales organization to promote and effect sales of the Products worldwide;

     5.3 Use commercially reasonable efforts to Conduct promotional campaigns including advertising campaigns and participation in trade shows;

     5.4 Use commercially reasonable efforts to obtain all necessary governmental approvals, licenses, permits and consents in connection with the import into, distribution, sale and use of the Products worldwide and comply with all applicable laws and regulations in connection with the performance of its obligations hereunder. Veraz (or its agents or distributors) shall qualify and act as importer of all Products sold, to the extent that such is required under the laws of any jurisdiction where the Products are sold;

     5.5 Pay any and all sales and use taxes, duties, fees, expenses and such other similar charges, including interest and penalties thereon, levied under any applicable law or regulation

6.

arising out of or in connection with Veraz’s sale of Products to customers, provided that nothing in this Section shall be interpreted to mitigate ECI’s obligations under Sections 8 (Warranty, Epidemic Failure, Warranty Service and Post-Warranty Support) and 13 (Indemnification);

     5.6 Use commercially reasonable efforts to obtain bank and performance guarantees related to maintenance service and support that Veraz is required to provide hereunder, solely to the extent required to sell the Products to Veraz’s customers, and to use commercially reasonable efforts to cancel existing guarantees and take commercially reasonable actions to ensure that such ECI-obtained guarantees are not called or otherwise materialized;

     5.7 Adopt reasonable credit procedures with respect to the sale of Products to third parties that take into account ECI’s credit procedures and revenue recognition policies, as such procedures and policies may be amended from time to time, with the cost of any such procedures (such as, letters of credit or credit insurance premiums) to be shared equally by ECI and Veraz;

     5.8 Other than the warranty contained in Section 8 hereof and the representations and warranties contained in the standard agreement with Veraz’s customers attached hereto as Exhibit 5.8, make no representations and warranties that are different in any material respect to the Products without the prior written consent of ECI;

     5.9 Provide ECI with (i) engineering data that is reasonably requested by ECI for maintenance of bill of materials, including replacements, drawings, quality requirements, technical specifications, standard operation and test procedures; proposed test equipment, and approved vendors list; (ii) (a) engineering support that is reasonably necessary to help enable the manufacture of the Products, to solve problems on all levels (i.e., component, card, system), to develop replacement parts together with ECI, provided that the parties agree that such development is commercially reasonable and provided further that such parts cannot be procured by ECI in accordance with Section 3.4 above and to share the research and development labor costs of such development in the same ratio of the Percentage of Customers Revenue for the relevant year as set forth in Column A in Section 9.1 below, to treat rejected parts, and to improve test functions, (b) engineering services that is reasonably necessary to improve Product manufacturability, and (c) support that is reasonably necessary to help ECI comply with customer engineering requests, such as fixing hardware and software bugs; and (iii) sales order data, packing list accompanied with BPCS order, specific instructions, customer name, date of delivery, payment terms, and data required to calculate amounts to be paid to the OCS (for both products and services), and (iv) the additional information and support that ECI shall reasonably request and require in order to manufacture the Products and otherwise comply with ECI’s obligations to Veraz under this Agreement, provided that, with respect to each of the foregoing, ECI shall bear the costs incurred by Veraz for materials or third party subcontractors directly related to the design or manufacture of the Products;

     5.10 Use commercially reasonable efforts as ECI’s agent to collect ECI’s DCME Receivables identified in Exhibit 5.10 attached hereto and to provide ECI monthly with a projected cash flow collection report, all in coordination with ECI, such as use of collection agencies, if reasonably required, for which Veraz shall be entitled to a commission in the amount of ten percent (10%) of the amounts it actually collects (with such commission to be increased to twenty percent (20%) in respect of those DCME Receivables identified in Exhibit 5.10 as being

7.

     “Doubtful Debts”), with Veraz to either arrange for the direct payment to ECI by the debtor of the receivables or for the transfer by Veraz to ECI of the receivables within ninety (90) days after its receipt thereof;

     5.11 Use commercially reasonable efforts to successfully meet the overall sales projections for all Products taken as a group, as set forth in the Business Plan;

     5.12 (a) Any distribution of the Products through ECI’s regional business units in the United Kingdom, Germany and France (each a “RBU”) and any required reimbursement of expenses by Veraz to any such RBU will be pursuant solely to those terms and conditions in Exhibits 5.12-Al, 5.12-A2, 5.12-A3, respectively. Additional terms (if any) with regard to the execution of the respective RBU agreements are set forth in Exhibits 5.12-Al(a), 5.12-A2(a), 5.12-A3(a).

          (b) In connection with the distribution of Products through ECI’s country business units (each a “CBU”) that Veraz chooses to use, unless otherwise agreed in a separate written agreement executed by and between Veraz and an applicable CBU, Veraz will (i) advance to each such CBU, on a monthly basis, the amount of its estimated monthly DCME sales and marketing budget as set forth in the CBU DCME Sales and Marketing Budget attached hereto as Exhibit 5.12-B, which will be reviewed and adjusted by mutual agreement of the parties on a semi-annual basis, (ii) reimburse each such CBU on a monthly basis for its fully-loaded actual costs as agreed in advance by the parties, and reasonably incurred in connection with Veraz’s Product sale and marketing expenses, as calculated in accordance with ECI’s customary cost allocation method, within thirty (30) days of receiving an invoice therefor, less the applicable monthly advance, provided that Veraz shall not be liable for any expenses related to excess space, any depreciation or excessive rent costs or any past or historical liabilities of the CBUs; (iii) pay all termination costs that are attributable to the employment of Veraz approved CBU employees dedicated to sales and marketing of the Products after the date of execution of this Agreement and attributable to the period after the date hereof, excluding in all cases any such costs relating to employees whose actual or planned termination was made or determined by ECI prior to the date of execution of this Agreement and any such costs relating to Israeli expatriate Products dedicated CBU employees; and (iv) be responsible for all taxes and corresponding withholding payments arising from Veraz’s receipt of local service revenues that Veraz retains without any payment therefore to ECI hereunder; and

          (c) Veraz shall have the right to inspect the relevant parts of the books and records of any CBU or RBU, as the case may be, upon reasonable prior notice to such applicable CBU or RBU, during working hours and in the presence of an ECI representative, all subject to the confidentiality provisions contained in Section 16.8 below. In the sale and marketing of Products, all dedicated employees of CBUs, other than those of the Russian and Baltic CBU, shall act in accordance with instructions from Veraz and such CBU employees, to the extent fully dedicated to Veraz, shall receive sales incentives solely from Veraz. Dedicated employees of the Russian and Baltic CBU shall act in accordance with the provisions of Exhibit 5.12-C. Unless otherwise agreed in a written agreement between the parties, Veraz may terminate its relationship with any CBU or RBU at any time upon prior written notice of ninety (90) days and shall be liable upon termination solely for reasonable termination costs incurred with respect to those costs borne by Veraz as set forth above;

8.

     5.13 Maintain and provide to ECI, within ten (10) business days of the end of each calendar quarter, a detailed inventory of Products used in field trials, demonstrations or sale or return transactions (“SOR”) and of sales of Products which have not been recognized under its revenue recognition policy;

     5.14 Provide to ECI on a monthly basis a customer default report detailing customer defaults of more than 60 days including the reasons for such defaults, and a projected collection report for the next ninety (90) days; and

     5.15 Promptly notify ECI in writing in the event that its sales projections for the sales of any one of the DCME Product Lines (as hereinafter defined), during any rolling calendar twelve (12)-month period fall below Five Hundred Thousand U.S. Dollars (US $500,000), and upon mutual agreement of the parties after taking into consideration market conditions and other factors, issue a notice of discontinuance to its customers for such DCME integrated systems and equipment with a six (6) month period within which to make a final purchase thereof. In this Agreement the term “Product Lines”, shall mean either one of the following: (a) DTX 240, (b) DTX 360, (c) QC 300, (d) DTX 60, or (e) DTX 600.

6. Purchase Orders

     6.1 Veraz will provide ECI from time to time during the term hereof with Purchase Orders in the form attached hereto as Exhibit 6.1 for each Product covered by a Forecast that Veraz chooses to order, for ECI’s acceptance. Any Purchase Order may be submitted either by Veraz U.S. or Veraz Israel, at Veraz’s sole discretion. Each Purchase Order shall specify the quantity of Products to be provided in the relevant period, the relevant price and the requested delivery schedules, and shall be accompanied with a copy of the customer’s purchase order. ECI shall accept any Purchase Order that is for a number of products that does not exceed the amount of such Product in the then most recent Forecast, provided, however, that in no event shall ECI be required to accept a Purchase Order, if such Purchase Order calls for the manufacture within a period of seven (7) days or less, of a number of Products that is 20% or more of the amount in the most recent Forecast accepted or deemed accepted by ECI in accordance with the provisions of Section 2 above, divided by four (4).

     6.2 The parties agree to attempt to develop a commercially reasonable mechanism to record Products in ECI’s inventory if, at the end of any quarter, such Products have been shipped but have not been recognized as a sale on the financial records of ECI or Veraz due to “Staff Accounting Bulletin 101” accounting requirements.

     6.3 Veraz may, at any time and without charge, cancel any Purchase Order or reschedule the delivery of Products ordered under any Purchase Order which it can substantiate as having been cancelled or rescheduled in response to a cancellation or request for reschedule received from a customer of Veraz. Any such request for reschedule that is initiated by Veraz shall take into consideration the new requested delivery date received from a customer of Veraz.

     6.4 In the event of a failure by ECI to supply Products specified in any Purchase Order pursuant to their requested delivery dates therein, and provided further that such failure does not arise out of or result from the fault of Veraz, then the amount due from Veraz to ECI

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under this Agreement with respect to such Products shall be reduced by any reasonable price reduction or financial concession that Veraz is contractually obligated to provide to any affected customer of Veraz as the result of such delay in delivery. If Veraz anticipates that it will be required to reduce its price or provide a financial concession to a customer due to any such delay, it will inform ECI promptly of such potential reduction in price or financial concession. As to such matter, if ECI delivers Products to Veraz after their requested delivery dates, but before their scheduled date of delivery by Veraz to the affected customers, Veraz will use a reasonable expedited delivery service to attempt to avoid any such reduction in price or financial concession that it would otherwise be required to pay to its affected customers. In such event, ECI will reimburse Veraz for reasonable expedited charges that Veraz incurs to expedite the delivery of Products to meet their scheduled delivery dates with Veraz’s customers.

     6.5 ECI will make a good faith effort to notify Veraz in the event that ECI reasonably believes that there is or may be a materials or capacity constraint that could negatively affect ECI’s ability to meet any forecasted needs of Veraz under this Agreement (“Supply Constraint”). During any period of Supply Constraint, ECI shall allocate the supply and delivery of Products to Veraz that are affected by any such Supply Constraint ahead of any subassemblies that ECI may provide to ECtel Ltd., components for the Celtro product line, or components for the Hi-TV product line.

7. Packaging and Delivery

     All Products shall be packaged at no additional charge by ECI in accordance with product packaging and labeling specifications reasonably issued by Veraz and shall be delivered EX WORKS (INCOTERMS 2000) ECI’s relevant Israel factory. Risk of loss and title shall pass from ECI to Veraz upon delivery.

8. Warranty, Epidemic Failure, Warranty Service and Post-Warranty Support

     8.1 Warranty. ECI warrants to Veraz that, (i) during and for a period of time equal to the same period of time for which Veraz provides a warranty for Products to its customers, but in no event shall such warranty provided by ECI to Veraz hereunder exceed a date that ends twenty-four (24) months after the date of delivery of a Product to Veraz (herein the “Warranty Period”), such Product will be free from material defects in material and workmanship, subject to normal use and service, and (ii) each Product will conform in all material respects to the specifications applicable to such Product at the time of its manufacture. If Veraz promptly reports to ECI in writing, prior to the end of the Warranty Period, the failure of a Product delivered by ECI to meet the warranty as aforesaid, then ECI shall, at its cost, make available at its factory in Petah Tikva, Israel, the parts which are reasonably required to repair the Product. In addition, Veraz shall provide ECI on commercially reasonable terms with all engineering support which is reasonably required by ECI to meet its warranty obligations in respect of the Products in connection with sales made during the twelve (12) month period prior to the date of this Agreement as well as warranty extensions in respect of such sales.

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     8.2 Epidemic Failure.

          8.2.1 For purpose of this Agreement, “Epidemic Failures” shall mean identical, reproducible Product failures (including any ECI part failures) due to the same or substantially similar cause, which occur in the same series of Products and impair the use of the Products, and are a result of a defect in materials or workmanship of ECI or its affiliates occurring within twenty-four (24) months after the date of delivery of the Products, and are equal to or in excess of ten percent (10%) of the total number of a Product or any ECI part from any production lot or ten percent (10%) ‘of the total number of Products or any ECI parts included in Products which are delivered to Veraz during any ninety (90)-day period (the “Epidemic Failure Rate”).

          8.2.2 In the event of a suspected Epidemic Failure, Veraz shall notify ECI and provide the following information, if known and as may then exist: a description of the defect, and the suspected lot numbers, serial numbers or other identifiers, and delivery dates of the defective Products (including any defective ECI parts). Veraz shall also deliver or make available to ECI, samples of the defective Products or defective ECI parts for testing and analysis.

          8.2.3 Within five (5) business days of receipt of notice from Veraz, ECI shall provide its preliminary findings regarding the cause of the failures. Thereafter, ECI shall promptly provide the results of its root cause corrective analysis, its proposed plan for the identification of and the repair and/or replacement of the affected Products (including any affected ECI parts), and such other appropriate or desirable information. The parties shall also cooperate and work together to expeditiously devise and implement a corrective action program which identifies the defective units for repair or replacement, and which minimizes disruption to the end users and Veraz’s direct and indirect distribution channels.

          8.2.4 In the event of an Epidemic Failure, ECI shall be responsible for (a) repair and/or replacement of the defective Products (including any defective ECI parts) or at ECI’s option, a credit or payment to Veraz in an amount equal to the cost to Veraz for qualified, nondefective replacement Products (including any defective ECI parts) reasonably acceptable to Veraz; (b) reasonable labor costs (and associated lodging and travel costs) to repair and/or replace the defective Products (including any defective ECI parts); and (c) reasonable freight and transportation costs incurred in connection with the repair and/or replacement of the defective Products (and the larger product in which the Product or the ECI Part is incorporated if the Product or ECI Part cannot be separated without undue inconvenience or disruption to the end user).

     8.3 Warranty Service. Veraz shall be responsible, at its own cost and expense, to provide the necessary labor to retrieve and deliver components to ECI for repair.

     8.4 Post-Warranty Support. Veraz shall offer to the extent feasible post-warranty service to customers for all the Products on commercially reasonable terms that it determines. With respect to service and maintenance required on the Products (other than pursuant to the aforesaid Product warranties) under service agreements and on a “time and material” basis, Veraz shall perform such services under contractual arrangements that it has with customers and

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shall, subject to the other terms and conditions of this Agreement and on an as needed basis, purchase the parts and related repair services from ECI on commercially reasonable terms, including pricing. ECI shall only be obligated to make such parts and services available at its factory in Petah Tikva. Veraz shall be entitled to keep all revenues that it generates from such services. Veraz shall be responsible for one hundred percent (100%) of all royalty payments to the Office of the Chief Scientist of the Israel Ministry of Industry and Trade (“OCS”) required to be made with respect to all service revenues related to installation, repair, maintenance service and support, commissioning, and training services for the Products performed as permitted under this Section 8.4 (“OCS Service Revenue”), which it shall forward to ECI on a calendar semi—annual basis as necessary for the timely payment thereof by ECI to the OCS, together with a detailed report as to the calculation thereof as reasonably requested by ECI. ECI shall be responsible for remitting payment of royalties on the OCS Service Revenue to the OCS. Each party (the “Responsible Party”) shall indemnify and hold the other party harmless in respect of all loss, cost, liability and expense incurred by such other party as a result of any breach by the Responsible Party of its obligations hereunder in respect of the obligations pertaining to royalty payments required to be paid to OCS based on OCS Service Revenue.

     8.5 Warranty Exclusions. ECI shall not be obligated under any of the above warranty provisions if any such warranty service is necessitated in whole or in part by normal wear’ and tear, catastrophe, accident, fault or negligence of Veraz or any third party, improper use, alteration or modification, unusual stress, installation, service or repair performed other than pursuant to this Agreement (other than installation, service or repair performed by ECI pursuant to this Agreement), engineering or design as aforesaid, or any other cause other than ordinary use. THE WARRANTY IN THIS SECTION 8 IS EXCLUSIVE AND IN LIEU OF ANY AND ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR PURPOSE. THE REMEDY PROVIDED IN SECTION 8.1 ABOVE SHALL BE THE SOLE REMEDY OF VERAZ FOR ANY FAILURE OF ECI TO CONFORM WITH SUCH WARRANTY IN SECTION 8.1, AND PROVIDED THAT ECI HAS FULLY AND SATISFACTORILY PERFORMED ITS WARRANTIES OBLIGATIONS THEREUNDER VERAZ SHALL HAVE NO CLAIM, EXCEPT AS AFORESAID, WHETHER BASED ON CONTRACT, NEGLIGENCE, PRODUCTS LIABILITY OR OTHERWISE THEREFORE.

     8.6 Additional Services. Veraz may purchase on a monthly basis additional services from ECI as listed in Exhibit 8.6 attached hereto at commercially reasonable terms to be negotiated by the parties.

     8.7 Spare Parts. At all times during the term of this Agreement and a reasonable period thereafter during which Veraz may provide post-warranty support to customers identified to ECI, ECI shall maintain, at ECI’s sole cost and expense and for the benefit of Veraz, a mutually agreed supply of replacement parts and components at ECI’s manufacturing facility, which agreed supply shall be equal to a quantity that is necessary to support at least one (1) month of service and support activity of Veraz based on prior service and support history. ECI shall maintain a supply of replacement parts and components to support each of the Products for at least ten (10) years following the date of final delivery of the Products to Veraz’s customers.

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     8.8 RMA Process. Each party will follow the RMA Process set forth in Exhibit 8.8 with respect to the return and delivery of Products that are subject to in-warranty or out-of—warranty repair by ECI. ECI will promptly repair or replace Products returned for repair or rework to their most current version within thirty (30) days after their receipt and will redeliver to Veraz such repaired or reworked products prior to the expiration of such period. In the event of any conflict or inconsistency between the provisions of Exhibit 8.8 and the provisions within Section 8, the provisions within Section 8 shall govern and control such conflict or inconsistency.

9. Payment Terms

     9.1 As and for the purchase price for the Products Veraz purchases from ECI hereunder (the “Purchase Price”), Veraz shall pay ECI in connection with Veraz’s sale of each such Product, a percentage of the Customer Revenue (defined below) received from the sale of such Product in accordance with the following table:

	Column “A”	Column “B”
		Percentage of Customer Revenue
	Percentage of	on RBU Sales (i.e., Germany,
Period	Customer Revenue	France and United Kingdom)
Y2002	50.0%	48.0%
Y2003	44.4%	42.4%
Y2004	40.0%	38.0%
Y2005	36.4%	34.4%
Y2006 – thereafter	Compensation shall be as negotiated between the parties, but will not exceed 36.4%	Compensation shall be as negotiated between the parties, but will not exceed 34.4%

For purposes of this Section 9.1, the term “Customer Revenue” shall mean the aggregate of all amounts invoiced to and actually received by Veraz from a Veraz customer or, if an affiliate of ECI, from the affiliate’s customer in connection with the sale of a Product, but excluding (1) any and all sales taxes or duties, paid directly or indirectly by Veraz, and (2) any fees for installation, service, extended warranty, training, maintenance or similar service either expressly identified in the invoice or purchase order or are otherwise customarily attributable to the provision of such services based on a percentage of revenue that Veraz receives (but in any event, the fee for installation, services, extended warranty, training, maintenance or similar service shall be, in the aggregate, not more than seven percent (7%) of the customer invoiced purchase price); provided, however, that the minimum Purchase Price for any such applicable Product that is sold by Veraz shall be as set forth in Exhibit 9.1 hereto, as the same may be modified in accordance with the provisions of Exhibit 9.1. Except as provided in the following sentence, all amounts required to be paid by Veraz to ECI hereunder for those Products that it purchases for sale to customers shall be computed in accordance with the Percentage of the Customer Revenue specified in Column “A” in the above table, unless otherwise agreed in writing by Veraz and Ea. For those Products that are sold by Veraz through an RBU, Veraz shall pay to ECI the Percentage of the Customer Revenue Specified in Column “B” in the above table that Veraz receives from such sales.

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     9.2 Veraz shall pay the Purchase Price for a sale of Product promptly following its receipt of the proceeds of its disposition of the Products and in any event within thirty (30) days thereafter, except that for the period ended December 31, 2003, payment shall be due within ninety (90) days following receipt thereof, but in any event no later than March 31, 2004.

     9.3 All payments hereunder shall be made by wire transfer of immediately available U.S. dollars to ECI’s bank account as instructed by ECI. Payments, when overdue, shall bear an interest at the rate of LIBOR plus two percent (2%) per annum. Payments hereunder shall be made net of any local, state, or federal sales, use, excise, personal property or other similar taxes (other than income taxes) or duties, and any such taxes or duties shall be assumed and paid for by Veraz. If Veraz receives Customer Revenue in a currency other than U.S. dollars, Veraz will pay ECI its percentage in U.S. dollars based on the exchange rate that Veraz actually obtains on the date of receipt of funds or, if not converted on that date, that Veraz could have obtained on the date of receipt of funds based on the New York closing bid rate for such currency. The parties will cooperate to facilitate refunds, if any, of such payments to the applicable party.

     9.4 Within fourteen (14) days following every fiscal quarter, Veraz shall submit to ECI a preliminary revenue statement and within one week thereafter a final revenue statement (“Revenue Statement”) in a form reasonably satisfactory to ECI, certified by the Chief Financial Officer of Veraz and reporting, inter alia, the quantity of each Product sold, the date of each sale, the identity of the end user, the price paid to Veraz or, if the customer is an affiliate of ECI, the price paid to the affiliate by its customer, payments of commissions, if any, to RBUs pursuant to Section 5.12 above, and such other information as requested in such form or which is reasonably necessary to enable ECI to understand Veraz’s calculation of the amounts payable during such period. Within five (5) business days following the beginning of each month, Veraz shall submit to ECI a collection forecast and an accounts receivable aging report in a form reasonably satisfactory to ECI, certified by the Chief Financial Officer of Veraz.

     9.5 Each party agrees to keep true and accurate books of account with regard to the manufacture, delivery and sale of the Products for the term of this Agreement and for any legally required period thereafter.

     9.6 ECI, through an accounting representative nominated by ECI, will have the right to inspect the books of account referred to in Section 9.5 above during Veraz’s normal working hours, upon advance notice to Veraz. The accounting representative will only disclose to ECI such information as is necessary to verify the truth and accuracy of such books of account and, if an error is discovered, to verify such sum as is properly due to ECI or Veraz. The cost of the accounting representative will be borne by ECI unless an error in the amounts due in excess of 5% is discovered which has resulted in under-payment to ECI, in which event Veraz shall bear the cost. Veraz agrees to allow all reasonable access, accommodation, facilities and assistance to said accounting representative in his task and to bear its own costs incurred in doing this.

     9.7 The parties acknowledge that the amounts paid to ECI and Veraz in respect of sales of the Products may be subject to royalties payable to the OCS (“OCS Product Sales Royalties”). ECI shall be responsible for payments of all OCS Product Sales Royalties. The parties shall cooperate in providing all necessary documentation to the OCS and/or in any dispute with the OCS with respect to the OCS Product Sales Royalties payable. Veraz shall be

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responsible for transferring to ECI on a timely basis all amounts required to be paid to the OCS for the royalties on OCS Service Revenue in connection with the service revenues pursuant to Section 9.4 above, as aforesaid.

10. Engineering Changes

     ECI shall not make any engineering changes to the Products to be supplied to Veraz hereunder that may impact the form, fit or function of such Products, or may cause the Products to deviate from their specifications, without first obtaining the prior written consent of Veraz to such engineering changes, which will not be unreasonably withheld, delayed or conditioned. Additionally, Veraz may submit engineering changes for incorporation into any Product, which shall be subject to ECI’s approval, which shall not be unreasonably withheld, delayed or conditioned. ECI will make a reasonable effort to review the engineering change and report to Veraz within ten (10)-business days of any implications of the proposed changes. The report shall include all possible implications on material, delivery schedule, manufacturing process, quality and product cost. Such changes will be reflected in revised Purchase Orders. ECI shall bear all costs associated with the development and implementation of engineering changes if such changes are made or implemented in order to make the Product (i) comply with the specification that was agreed to by Veraz and Ea, (ii) meet any agreed upon quality requirements of Veraz, or (iii) comply with or conform to any safety or legal requirements to the extent not necessitated by a change in design of the Products. ECI shall use commercially reasonable efforts to quickly implement all of the foregoing engineering changes and any other agreed engineering changes.

11. Term; Termination

     11.1 This Agreement shall commence on the date hereof and shall continue until December 31, 2005, unless earlier terminated pursuant to this Section 11. Subject to the provisions set forth below in this Section 11.2, this Agreement will automatically renew for successive one (1)-year periods.

     11.2 At least ninety (90) days before the expiration of the then-current term of this Agreement, Veraz will inform in writing ECI of its good faith expectation of Customer Revenue for sales of Products in the upcoming one (1)-year period. If Veraz informs ECI in writing of expected Customer Revenue of at least One Million U.S. Dollars (U.S. $1,000,000) for any such upcoming one (1)-year period, then this Agreement shall automatically renew for such period. If Veraz informs ECI in writing of expected Customer Revenue less than One Million U.S. Dollars (U.S. $1,000,000) for any such period, then Veraz will issue a notice of discontinuance to its customers for the DCME integrated systems and equipment available to Veraz under this Agreement and this Agreement will expire at the end of the then-current term of this Agreement. If Veraz fails to inform ECI as aforesaid, even after written request by ECI, then this Agreement will expire at the end of its then-current term.

     11.3 If a party fails to meet one or more of any material terms and conditions hereof (a “default”), ECI and Veraz agree to negotiate in good faith to resolve such default. If the defaulting party fails to cure such default or submit an acceptable written plan to resolve such default within thirty (30) days following notice of default, the non-defaulting party shall have the

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right to terminate this Agreement by furnishing the defaulting party with thirty (30) days written notice of termination.

     11.4 Reserved.

     11.5 Notwithstanding anything in this Agreement to the contrary, the parties acknowledge and agree that a breach by Veraz of the terms of Section 5.11 shall only permit ECI to convert ECI’s obligation to sell Products exclusively to Veraz to a non-exclusive status, and shall not otherwise be grounds for the termination of this Agreement.

     11.6 A party shall have a right to terminate this Agreement immediately should the other party become insolvent; enter into or file on its own a petition, arraignment or proceeding seeking an order for relief under the bankruptcy laws of its respective jurisdiction; have filed against it an involuntary petition, arraignment or proceeding seeking an order for relief under the bankruptcy laws of its respective jurisdiction, which is not dismissed within ninety (90) days after filing; enter into a receivership of any of its assets; or enter into a dissolution or liquidation of its assets or an assignment for the benefit of its creditors.

     11.7 Veraz shall have the right to terminate this Agreement in the event of a force majeure event that continues in effect for a period of ninety (90) days and affects the ability of Veraz to obtain Products from ECI.

     11.8 In the event of the expiration of this Agreement pursuant to the provisions of Section 11.2, then, notwithstanding anything to the contrary, Veraz shall have the right to request and ECI shall supply to Veraz Products to fulfill any Purchase Orders that Veraz places with ECI after the expiration of this Agreement that are based on purchase orders or other written commitments received by Veraz from its customers at any time within six (6) months after the expiration of this Agreement. Products ordered under such Purchase Orders will be fulfilled by ECI in accordance with their reasonable requested delivery dates in such Purchase Orders in a manner consistent with the delivery requirements of Veraz’s customers.

     11.9 The provisions of Sections 8 (Warranty, Epidemic Failure, Warranty Service and Post-Warranty Support), 9 (Payment Terms), 11 (Term; Termination), 12 (Effect of Termination), 13 (Indemnification), 14 (Dispute Resolution) and 16 (General) shall survive the expiration or earlier termination of this Agreement for as long as Veraz provides maintenance service and support for the Products, but in any event not for a period of more than seven (7) years after such expiration or earlier termination.

12. Effect of Termination

          12.1 In the event of termination (other than termination by Veraz due to a default by ECI, a force majeure event involving ECI, or a court declaration of bankruptcy or insolvency of ECI):

          12.1.1 Veraz shall compensate ECI for unused Forecast Excess Materials as stipulated in Section 3.3.

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          12.1.2 Each party will promptly return to the other party, all Proprietary Information of the other party (as defined below).

          12.1.3 Veraz shall provide a list of all of its current customers to the Products and the contact information therefor and shall advise ECI by notice of all existing indications of interest by, and discussions with, potential customers for Products.

          12.1.4 In the event that Veraz has failed in any material respect to satisfy its payment obligations to ECI under Section 9 of the Agreement and has not cured any such failure within thirty (30) days after receipt of written notice from ECI, Veraz shall assign to ECI all of Vreaz’s receivables due and owing to Veraz in connection with the disposition of the Products, both prior to and after the termination date.

          12.1.5 Veraz shall submit to ECI a listing of its then current inventory of Products and the condition of each such Product, specifying types and quantities. Within 30 days from the date of receipt of such listing, ECI may instruct Veraz to deliver all or part of the Products, free of charge, to ECI or to such other destination as ECI shall direct in writing, F.O.B. ECI’s place of business; provided, however, Veraz may choose not to return those spare parts that may be required for Veraz to draw upon in connection with the furnishing of service and support to customers. In addition, Veraz shall promptly return to ECI all equipment used by Veraz to meet Veraz’s obligations hereunder, as well as all equipment in Veraz’s possession or under Veraz’s control as is reasonably requested by ECI to enable ECI to continue manufacturing the Products.

     12.2 In the event of termination by Veraz due to a default by ECI, or a court declaration of bankruptcy or insolvency of ECI:

          12.2.1 Veraz shall be entitled to find a replacement manufacturer for the Products reasonably acceptable to ECI and to continue selling the Products.

          12.2.2 ECI shall transfer the manufacturing of such Product to such replacement manufacturer, have relevant representatives meet with representatives of such replacement, sharing know-how about the manufacturing process, and providing all necessary tools and tooling for the Product, at Veraz’s cost, to such replacement manufacturer, and providing reasonable technical assistance and support to such manufacturer for the Products.

          12.2.3 Upon request by Veraz, ECI shall grant to such replacement manufacturer a worldwide, non-exclusive, non-transferable, non-sublicensable and royalty-free license to all technology and intellectual property within ECI’s possession or control solely to the extent necessary and for a period necessary to manufacture the Product for supply to Veraz.

          12.2.4 ECI shall immediately transfer to Veraz all Material, work in process, finished goods, tools, tooling and test equipment then in its inventory at a price to be agreed upon by the parties, but no higher than value at which recorded in the financial records of ECI.

          12.2.5 If Veraz is unable to find a replacement manufacturer on commercially reasonable terms, Veraz may, at its option, purchase ECI’s manufacturing equipment and any

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other resources that are necessary to manufacture the Products at a price to be agreed by the parties.

     12.3 Neither party shall be liable to the other party for any expenses incurred by the other party or any of its employees, distributors or agents and which arise out of or in connection with the termination of this Agreement or relate to the development of goodwill for the Product. Furthermore, neither party shall have any obligation whatsoever to the other party by reason of the expiration or termination hereof, for loss of profits or anticipated profits, reimbursement of expenditures or otherwise.

     12.4 Neither party shall be obligated to compensate the other party for any loss, cost or expense incurred by the latter by virtue of any investments in buildings, stock, machinery, transport equipment or other property which may be undertaken by the other party in connection with this Agreement. Each party agrees that all such investments shall be for its own account and at its own risk.

13. Indemnification

     13.1 ECI shall defend, indemnify and hold harmless Veraz and its affiliates, and each of their respective officers, directors, employees, and assigns and successors permitted hereunder, from and against any direct loss, damage, expense, cost (including, but not limited to, reasonable attorneys’ fees and costs incurred in the enforcement of this indemnity) or liability solely to the extent that it is based upon a claim that (a) ECI’s design (provided such design was implemented prior to the date hereof) and/or manufacturing process, process technology or methodology, and/or any component that is purchased by ECI and included in the Products: (1) infringes or misappropriates any patent, copyright, trade secret or other intellectual property right of a third party, or (2) has caused personal injury (including death) or damage to property or (b) any failure to comply by ECI of its obligations to use commercially reasonable efforts to obtain all necessary governmental approvals, licenses, permits and consents as set forth in Section 4.22; provided that Veraz (i) gives ECI prompt written notice of any such claim made to Veraz in writing, (ii) cooperates with ECI, at ECI’s expense, in the defense of such claim, and (iii) gives ECI the right to control the defense and settlement of any such claim to the extent covered by the indemnification provided herein. ECI will: (x) defend or settle, at its own expense, any such claim; (y) keep Veraz advised of the status of any such claim and of its defense and/or negotiation efforts; and (z) afford Veraz reasonable opportunity to review and comment on significant actions planned to be taken by ECI on behalf of Veraz. ECI shall not enter into any settlement that adversely affects Veraz’s rights or interests, without Veraz’s prior written approval, which approval will not be unreasonably withheld, delayed or conditioned. Further, ECI shall pass through to Veraz all indemnification coverage provided by the applicable component vendor. Veraz shall have no authority to settle any claim on behalf of ECI.

     13.2 Should the manufacture, use, distribution or sale of a Product, or any part thereof, or ECI’s manufacturing process, process technology or methodology be enjoined or become the subject of a claim of infringement for which indemnity is provided under Section 13.1, ECI shall at its option, and at no expense to Veraz (a) by license or other release, procure for Veraz the right to continue to use and distribute the same, or (b) replace or modify the same to make it non-

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infringing, in a manner acceptable to Veraz, without materially changing the form, fit, and function of the Product.

     13.3 Veraz shall defend, indemnify and hold harmless ECI and affiliates, and each of their respective officers, directors, employees, and assigns and successors permitted hereunder, from and against any direct loss, damage, expense, cost (including, but not limited to, reasonable attorneys’ fees and costs incurred in the enforcement of this indemnity) or liability solely to the extent that it is based upon a failure to comply by Veraz of its obligations to use commercially reasonable efforts to obtain all necessary governmental approvals, licenses, permits and consents as set forth in Section 5.4, provided that ECI (i) gives Veraz prompt written notice of any such claim made to ECI in writing, (ii) cooperates with Veraz, at Veraz’s expense, in the defense of such claim, and (iii) gives Veraz the right to control the defense and settlement of any such claim to the extent covered by the indemnification provided herein. Veraz will: (x) defend or settle, at its own expense, any such claim; (y) keep ECI advised of the status of any such claim and of its defense and/or negotiation efforts; and (z) afford ECI reasonable opportunity to review and comment on significant actions planned to be taken by Veraz on behalf of ECI. Veraz shall not enter into any settlement that adversely affects Veraz’s rights or interest, without Veraz’s prior written approval, which approval will not be unreasonably withheld, delayed or conditioned. ECI shall have no authority to settle any claim on behalf of Veraz.

14. Dispute Resolution

     14.1 In the spirit of continued cooperation, the parties intend to and hereby establish the following dispute resolution procedure to be utilized in the unlikely event any controversy should arise out of or concerning the performance of this Agreement.

     14.2 It is the intent of the parties that any dispute be resolved informally and promptly through good faith negotiation between ECI and Veraz. Either party may initiate negotiation proceedings by written notice to the other party setting forth the particulars of the dispute. The parties agree to meet in good faith to jointly define the scope and a method to remedy the dispute. If these proceedings are not productive of a resolution within twenty-five (25) days, then senior management of ECI (Position: CFO) and Veraz (Position: CEO) are authorized to and will meet personally within five (5) days to confer in a bona fide attempt to resolve the matter. If senior management is not able to resolve the dispute within fifteen (15) days thereafter, either party may seek remedy from a court of competent jurisdiction.

     14.3 Notwithstanding anything to the contrary, the dispute resolution process set forth in this Agreement shall not affect or limit the ability of a party to seek immediate injunctive or equitable relief as permitted under this Agreement.

15. Reserved

16. General

     16.1 Force Majeure. Neither of the parties shall be liable for any failure or delay in its performance under this Agreement (except for payment of money) due to acts of God, acts of civil or military authority, fires, floods, earthquakes, riots, wars, sabotage, labor shortages or disputes, destruction of production facilities, material unavailability or any other cause beyond

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the reasonable control of the delayed party, provided that the delayed party (i) gives the other party written notice of such cause; and (ii) uses its reasonable efforts to remedy such delay in its performance. Each party will reasonably cooperate with the other party to mitigate harm caused as a result of a force majeure event in a manner that is reasonably acceptable to the party to whose cooperation is sought.

     16.2 Severability. If any provision of this Agreement is held by a court of competent jurisdiction to be unenforceable, such provision shall be deemed null and void, and the remainder of the Agreement shall continue to be in full force and effect, while the parties shall negotiate in good faith to replace the provision with another enforceable one reflecting as closely as possible the parties initial intention.

     16.3 Relationship of the Parties. Each of the parties shall at all times during the term of this Agreement act as, and shall represent itself to be, an independent contractor. Neither party shall have any right or authority to assume or create any obligations or to make any representations or warranties on behalf of the other party whether express or implied, or to bind the other party in a respect whatsoever. Neither party shall be liable to any third party in any way for any engagement, obligation, contract, representation or transaction or for any act or omission to an act of the other, and each party shall indemnify the other and hold it harmless against and from any liabilities as aforesaid.

     16.4 Governing Law. The construction, interpretation and performance of this Agreement and all transactions under it shall be governed by the laws of the State of Israel (without giving effect to conflict of laws provisions), and both parties consent to non-exclusive jurisdiction by the competent courts of the Tel Aviv district. This Agreement shall not be governed by the provisions of the 1980 United Nations Convention on Contracts for the International Sale of Goods.

     16.5 Choice of Language. The original of this Agreement has been written in English. Each party waives any right it may have under the laws of either party’s country to have this Agreement written in the language of either party’s country. Further any notices given to either party as required by this Agreement shall be written in the English language.

     16.6 Entire Agreement. No amendment of this Agreement will be valid unless made in writing signed by a duly authorized representative of both parties. No provision of this Agreement will be deemed waived and breach or default excused unless the waiver or excuse is in writing and signed by the party issuing it. The terms and conditions contained in this Agreement supersede all prior oral or written understandings between the parties and shall constitute the entire agreement between them concerning the subject matter of this Agreement.

     16.7 Assignment. This Agreement shall be binding upon and inure to the benefit of each party’s successors and assigns. Notwithstanding the foregoing, neither party shall assign, by operation of law or otherwise, any of its rights or obligations hereunder nor permit the same to be assigned by operation of law, except with the other party’s prior written consent; provided, however, nothing contained herein shall restrict the ability of each party to assign by operation of law or otherwise, this Agreement or any of its rights or obligations hereunder, nor prohibit the same to be assigned by operation of law or otherwise, to a successor-in-interest to it or to an

20.

affiliate that agrees to be bound by all of the terms and conditions in this Agreement, and, in the case of assignment to an affiliate, provided that ECI guarantees the performance of all undertakings and obligations of any such affiliate hereunder.

     16.8 Confidentiality. Proprietary information disclosed by either party to the other in connection with this Agreement must be used only for the purpose of this Agreement and for no other purpose, and shall not be utilized by the recipient party in competition with the other party and shall be protected by the recipient party from divulgement to others with the degree of care given to its own proprietary information that is intended to be protected from disclosure. The obligations in this Section 16.8 shall continue for both parties for a period of three (3) years after the termination of this Agreement or any renewal thereof. In this Agreement “Proprietary Information” shall mean all non-public schematics, drawings, specifications and manuals, and all other technical and business information provided by a party to the other party during the term of, or in connection with the negotiation, performance or enforcement of this Agreement, other than that DCME Know-How of a party that is provided under and governed by the DCME License Agreement by and between the parties. Notwithstanding the foregoing, “Proprietary Information” shall not include any information which the receiving party can show: (i) is now or subsequently becomes legally and publicly available without breach of this Agreement by the receiving party, (ii) was rightfully in the possession of the receiving party without any obligation of confidentiality prior to receiving it from the disclosing party, (iii) was rightfully obtained by the receiving party from a source other than the disclosing party without any obligation of confidentiality, or (iv) was developed by or for the receiving party independently and without reference to such information that can be shown by documentary evidence. The receiving party agrees to take appropriate measures by instruction and written agreement prior to disclosure of Proprietary Information to its employees and contractors to prevent unauthorized use or disclosure. Proprietary Information must be returned by the receiving party upon termination or expiration of this Agreement. Proprietary Information may be disclosed to the extent necessary to comply with an order of an administrative agency or court of competent jurisdiction; provided, however, that, if legally possible, the party so required to disclose Proprietary Information shall provide prior written notice thereof to the other party in sufficient time to enable that party to seek a protective order or otherwise prevent such disclosure.

     16.9 Injunctive Relief. In the event of a breach of any of the provisions in Sections 1.3, 1.4 or 16.8, each party hereby agrees that the harm suffered by the affected party would not be compensable by monetary damages alone and, accordingly, that the affected party shall, in addition to any other available legal or equitable remedies, be entitled to seek an injunction or other equitable relief against the other party in connection with any breach or violation of any such provisions.

     16.10 Notices. Any notice or other communication required or which may be given hereunder shall be in writing and either delivered personally to an officer of the addressee or mailed, certified or registered mail, postage prepaid, or by facsimile transmission (with a confirming copy sent by registered mail) and shall be deemed given (i) when so delivered personally; (ii) if mailed, five (5) days after the time of mailing; (iii) if faxed, when the copy sent by the mail was deemed delivered. Notices may be sent through an email, but shall be deemed given only if the recipient approves the receipt of such email by a return email.

21.

Addresses for notice are as follows:

ECI Telecom Ltd.
30 Hasivim Street
Petah Tikva 49133, Israel
Attention: Chief Operating Officer
Fax: 972-3-926-6330

Veraz Networks Ltd.
43 Hasivim Street
Petah Tikva 49133, Israel
Attention: Chief Operating Officer
Fax: : 972-3-928-7010

Veraz Networks, Inc.
926 Rock Avenue
San Jose, California 95131
Attention: Chief Financial Officer
Fax: _______________

     16.11 Limitation of Liability. EXCEPT WITH RESPECT TO DAMAGES IN RESPECT OF BREACHES OF CONFIDENTIALITY OBLIGATIONS UNDER THIS AGREEMENT, NEITHER PARTY SHALL BE LIABLE TO THE OTHER UNDER ANY CONTRACT, STRICT LIABILITY, NEGLIGENCE OR OTHER THEORY FOR ANY INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES INCLUDING WITHOUT LIMITATION LOST PROFITS IN CONNECTION WITH THE SUBJECT MATTER OF THIS AGREEMENT OR ANY PURCHASE ORDER IRRESPECTIVE OF WHETHER SUCH PARTY HAD ADVANCE NOTICE OR KNOWLEDGE OF THE POSSIBILITY OF SUCH DAMAGES. NOTWITHSTANDING THE FOREGOING, THIS SECTION SHALL NOT LIMIT EITHER PARTY’S LIABILITY FOR INJURY TO A PERSON OR RELIEVE VERAZ’S LIABILITY TO PAY ECI WHEN DUE ANY UNDISPUTED AMOUNTS DUE FOR THE PRODUCTS SOLD. FOR THE AVOIDANCE OF DOUBT, DAMAGES INCURRED BY VERAZ FOR LOSS OF ITS PERCENTAGE OF “CUSTOMER REVENUE” WHICH LOSS RESULTS FROM ECI’S BREACH OF SECTION 1.3 OF THIS AGREEMENT ARE DIRECT DAMAGES TO WHICH THIS LIMITATION OF LIABILITY PROVISION SHALL NOT APPLY.

     16.12 Counterparts. This Agreement may be executed in two or more counterparts, each of which will be an original and together which will constitute one and the same instrument.

     16.13 Reserved Rights. ECI retains all rights, title and interest in and to any ECI intellectual property that is provided by ECI to Veraz under this Agreement. Except for the limited license rights provided to Veraz through a separate written license agreement that is entered into by and between Veraz Israel, ECI Telecom — NGTS Ltd. and ECI, ECI does not grant to Veraz any rights in or to any of ECI’s intellectual property. All such rights in and to any such intellectual property are expressly reserved by ECI.

     16.14 Order of Precedence. In the event of a contradiction between any of the provisions of this Agreement and the provisions of any of the Exhibits attached hereto, the provisions of this Agreement shall prevail.

[SIGNATURE PAGE FOLLOWS]

22.

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

Veraz Networks Ltd.

By:

Name:

Title:

Veraz Networks, Inc.

By:	/s/ Illegible
Name:
Title:

ECI Telecom Lt

By:

Name:

Title:

[Signature Page to DCME Master Manufacturing and Distribution Agreement]

23.

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

Veraz Networks Ltd.

By:	/s/ Zamir Segev
Name:	Zamir Segev
Title:

Veraz Networks, Inc.

By:

Name:

Title:

ECI Telecom Lt

By:	/s/ Giora Bitan
Name:	Giora Bitan
Title:

[Signature Page to DCME Master Manufacturing and Distribution Agreement]

24.

Exhibit 1.1 — Products

DTX-240E

DTX-240F

240 E/F

DTX-240T

DTX-360B:

DTX360 A

DTX360 A/B

QC300

DTX360 C

QC300E

DTX-60D

DTX-60^E

DTX-600H

DTX-600 (Old)

Software license for the above Products

1.

Exhibit 2 — Product Forecast

	Q1/02		Q2/02
	Quantity	Value	Quantity	Value
	U.W.                                                 W	U.W.          W	U.W.                                                 W	U.W.           W
DTX-240E	MPS:		MPS:
	Forecasts:		Forecasts:
	Total Forecast amount (E):		Total Forecast amount (E):
DTX-240F	MPS:		MPS:
	Forecasts:		Forecasts:
	Total Forecast amount (E):		Total Forecast amount (E):
240 E/F	MPS:		MPS:
	Forecasts:		Forecasts:
	Total Forecast amount (E):		Total Forecast amount (E):
DTX-240T	MPS:		MPS:
	Forecasts:		Forecasts:
	Total Forecast amount (E):		Total Forecast amount (E):
DTX-360B:	MPS:		MPS:
	Forecasts:		Forecasts:
	Total Forecast amount (E):		Total Forecast amount (E):
DTX360 A	MPS:		MPS:
	Forecasts:		Forecasts:
	Total Forecast amount (E):		Total Forecast amount (E):
DTX360 A/B	MPS:		MPS:
	Forecasts:		Forecasts:
	Total Forecast amount (E):		Total Forecast amount (E):
DTX360 C	MPS:		MPS:
	Forecasts:		Forecasts:
	Total Forecast amount (E):		Total Forecast amount (E):
QC300E	MPS:		MPS:
	Forecasts:		Forecasts:
	Total Forecast amount (E):		Total Forecast amount (E):
DTX-60D	MPS:		MPS:
	Forecasts:		Forecasts:
	Total Forecast amount (E):		Total Forecast amount (E):
DTX-60E	MPS:		MPS:
	Forecasts:		Forecasts:
	Total Forecast amount (E):		Total Forecast amount (E):
DTX-600H	MPS:		MPS:
	Forecasts:		Forecasts:
	Total Forecast amount (E):		Total Forecast amount (E):
DTX-600 (Old)	MPS:		MPS:
	Forecasts:		Forecasts:
	Total Forecast amount (E):		Total Forecast amount (E):
Software / Upgrades	MPS:		MPS:
for the above	Forecasts:		Forecasts:
Products	Total Forecast amount (E):		Total Forecast amount (E):

2.

Exhibit 3.1 – DCME Forecasted Sales in Business Plan

Exhibit 4.13 – Quality Requirements

Exhibit 5.8 – Standard Veraz Warranty Terms

Exhibit 5.10 — DCME Receivables

Exhibit 5.12-Al — UK RBU Agreement

Exhibit 5.12-A2 — Germany RBU Agreement

Exhibit 5.12-A3 — France RBU Agreement

Exhibit 5.12-A1(a) — UK RBU Additional Terms

Exhibit 5.12-A2(a) — Germany RBU Additional Terms

Exhibit 5.12-A3(a) — France RBU Additional Terms

Exhibit 5.12-B CBU DCME Sales and Marketing Budget

Exhibit 5.12-C — Russian and Baltic CBU

Exhibit 6.1 — Purchase Order Form

Exhibit 8.6 — Additional Services

Exhibit 8.8 – RMA Process

Exhibit 9.1 – Minimum Purchase Price

3.

EX-10.5

Exhibit 10.5

TRADEMARK LICENSE AGREEMENT

          This Trademark License Agreement (this “Agreement”), effective as of the 31st day of December, 2002 (the “Effective Date”), is made and entered into by and between Veraz Networks, Inc. (formerly NexVerse Networks, Inc.), a Delaware corporation (“Company”) and ECI Telecom Ltd., an Israeli corporation (“ECI”).

          WHEREAS, Company, ECI and ECI Telecom — NGTS, Inc., a Delaware corporation and an indirect wholly owned subsidiary of ECI, are parties to that certain Share Exchange Agreement dated as of October 30, 2002 (the “Share Exchange Agreement”); and

          WHEREAS, in furtherance of the Share Exchange Agreement, ECI desires to grant a license to Company under the trademarks and service marks identified in Schedule A (the “Licensed Marks”) and the “ECI” trade name as specified in Schedule A (the “Licensed Name”), and Company desires to receive such rights from ECI.

          NOW, THEREFORE, in consideration of the foregoing premises and the agreements and covenants set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties do hereby agree as follows:

1. License Provisions.

1.1 Licensed Marks and Name. Subject to all of the terms and conditions of this Agreement, ECI hereby grants to Company a limited, nonexclusive, royalty-free, non-transferable (except as specifically set forth in Section 7), non-sublicensable (except as specifically set forth below) right and license during the Term to use the Licensed Marks and the Licensed Name anywhere in the world solely in connection with the Company Business and in the form and for the purpose specified in Schedule A (the “License Purpose”), and solely in accordance with trademark usage guidelines attached hereto as Schedule B, as may be amended and provided to Company by ECI in ECI’s reasonable discretion from time to time. Company shall have the limited right to sublicense the rights above to the Licensed Marks and the Licensed Name for the License Purpose to a wholly owned subsidiary of Company (a “Subsidiary”); provided, however, that (i) each Subsidiary be bound by the terms and conditions of this Agreement (including, without limitation, the license restrictions and indemnification obligations), (ii) Company shall remain liable for the actions or inactions of each Subsidiary with respect to the Licensed Marks and the Licensed Name, and (iii) each such sublicense shall automatically terminate if the Subsidiary at any time ceases to be a wholly-owned subsidiary of Company. As used in this Agreement, the term “Company Business” shall mean the marketing, sales, distribution and service of the DCME product line, VoIP media gateway, and end-to-end IP telephony.

1.2 Ownership and Restrictions.

     1.2.1 Ownership. The Licensed Marks and the Licensed Name, and all goodwill pertaining thereto, are owned and shall be retained solely and exclusively by ECI. Except for the limited license expressly set forth in Section 1.1, Company shall have no right, title or interest in or to the Licensed Marks or Licensed Name and all rights not specifically granted to Company in

1.

Section 1.1 are expressly reserved to ECI. All use of the Licensed Marks and Licensed Name by Company shall inure to the benefit of ECI for all purposes, including, without limitation, for purposes of trademark registration and domain name registration, and nothing herein shall confer any such rights to Company. Nothing in this Agreement shall in any way limit or restrict ECI’s right, either by itself of through third parties, to use, promote, license or otherwise exploit the Licensed Marks, the Licensed Name, or any portion thereof.

     1.2.2 General Restrictions. Company will not use the Licensed Marks in any manner which is not specifically authorized by this Agreement. Without limiting the generality of the foregoing, (a) Company shall not use any marks, trade names or Internet domain names confusingly similar to the Licensed Marks and Licensed Name, (b) Company shall not use any Licensed Mark, the Licensed Name, or portion thereof in conjunction with any Company trademark, trade name or logo in a manner that suggests that such marks are a composite or singular mark, and (c) Company shall use the Licensed Marks and Licensed Name in compliance with all applicable laws and regulations (including, without limitation, all laws and regulations relating to the maintenance of the validity and enforceability of a Licensed Mark or Licensed Name), and shall at all times conduct its activities under this Agreement in a lawful manner. Company agrees that it shall cooperate to avoid confusion or conflict arising out of Company’s and ECI’s (including any licensees of ECI) use of the Licensed Marks and Licensed Name, and to resolve any such conflicts to the satisfaction of ECI. Company shall not challenge the validity of the Licensed Marks or the Licensed Name, any registrations or applications for registration thereof or ECI’s ownership thereof, or register or attempt to register any Licensed Mark or the Licensed Name or any confusingly similar intellectual property, including, without limitation, Internet domain names and any phrase in which a Licensed Mark or the Licensed Name is used.

     1.2.3 Conflicting Uses. Company understands and agrees that it does not have the right to use any of the Licensed Marks or the Licensed Name in any manner that might conflict with the rights of any third party or tarnish, disparage, weaken or otherwise be reasonably expected to adversely affect ECI’s rights in any of the Licensed Marks or the Licensed Name. If ECI determines in its discretion that Company’s use of a Licensed Mark or the Licensed Name may or does infringe the rights of any third party or adversely affect ECI’s rights in such Licensed Mark or Licensed Name, Company will terminate or modify such use immediately in accordance with ECI’s instructions. If Company fails to terminate or modify such use as reasonably directed by ECI, ECI shall have the right to terminate this Agreement for breach as set forth in Section 4.2. If ECI identifies conflicting uses requiring treatment under this Section, ECI agrees to work with Company in good faith to identify alternatives under this Section permitting modification of conflicting uses, prior to exercising its right of termination under this Section. Company shall notify ECI promptly of any infringement or adverse affect which comes to Company’s attention, and ECI shall have the sole right and authority to take action in any such case.

     1.2.4 Further Assurances. Company shall cooperate and assist ECI in securing, perfecting, preserving and enforcing ECI’s rights in the Licensed Marks and the Licensed Name. Without limitation, Company shall, at ECI’s sole expense, (a) execute and deliver to ECI, upon ECI’s request, all documents which are necessary or desirable to secure, prefect or preserve ECI’s rights in and to the Licensed Marks and the Licensed Name, to record Company as a registered user of the Licensed Marks and the Licensed Name or to cancel such registered user

2.

recordation when appropriate and (b) cooperate and assist ECI in registering, and prosecuting claims against infringers of, the Licensed Marks and the Licensed Name.

1.3 No Warranty. The grant of rights hereunder by ECI to the Licensed Marks and the Licensed Name is made only to the extent of the rights actually held by ECI in such Licensed Marks and Licensed Name. ECI makes no warranty, express or implied, and hereby disclaims all warranties, with respect thereto or with respect to the rights of any third parties that may conflict with the rights granted hereunder.

2. Quality Control.

2.1 Quality Standards. ECI shall have the right to exercise quality control over Company’s use of the Licensed Marks and the Licensed Name, including over the materials, products and services which are actually or planned to be offered, sold, marketed, distributed or provided (“Offered”) by Company under or in connection with any of the Licensed Marks or the Licensed Name, and to the degree deemed necessary by ECI to maintain the validity and enforceability of the Licensed Marks and the Licensed Name and to protect the goodwill associated therewith. ECI acknowledges that the quality of the materials, products and services Offered by ECI through ECI’s business as of the Effective Date is adequate for this purpose. Accordingly, Company acknowledges and is familiar with the high standards, quality, style and image of ECI, and Company shall at all times during the Term use the Licensed Marks and the Licensed Name in a manner that is consistent therewith; and Company shall ensure that the materials, products and services Offered by it under or in connection with the Licensed Marks or the Licensed Name adhere to at least this level of quality and shall not reflect adversely upon ECI, the Licensed Marks or the Licensed Name. Company shall not use or display the Licensed Marks or the Licensed Name in any manner that might be deceptive or misleading or that might bring ECI or the Licensed Marks of the Licensed Name into disrepute. Each of the provisions of this Agreement relating to the proper use and protection of the Licensed Marks and the Licensed Name, and of the goodwill associated therewith, is a material provision of this Agreement.

2.2 Right to Sample and Inspect. To permit ECI to determine whether ECI’s standards of quality are met by Company’s use of the Licensed Marks, the Licensed Name and the materials, products and services which are actually or planned to be Offered by Company under or in connection with any Licensed Mark or the Licensed Name, Company shall, upon ECI’s request, and at no cost to ECI, during Company’s normal business hours (i) provide to ECI reasonably representative samples of all such materials and products and the use of the Licensed Marks and the Licensed Name thereon or in connection therewith, and (ii) permit ECI to review all such services at Company’s premises, in the manner in which they are performed, and the use of the Licensed Marks and the Licensed Name in connection therewith; provided, however, that ECI shall provide reasonable prior written notice of any such review and any such review shall not interfere with the normal operation of Company’s business.

2.3 Changes and Corrections. ECI shall have the right at any time to require Company to make any changes and/or corrections with regard to such materials, products and/or services as may be required in ECI’s reasonable judgment to maintain the quality standards prescribed by ECI, and Company agrees to make and incorporate such changes or corrections at Company’s sole cost and expense.

3.

3. Proprietary Notices.

3.1 Licensed Marks and Licensed Name. All advertising and promotional materials and all other electronic, printed and written materials using a Licensed Mark or the Licensed Name shall state that such Licensed Mark or Licensed Name is owned by ECI Telecom Ltd. Company agrees to use one of the following forms of such notice, which ECI may change from time to time:

[LICENSED MARK OR LICENSED NAME]* is a [trademark][service mark][trade name] of ECI Telecom Ltd. and is used by Veraz Networks, Inc. under license from ECI Telecom Ltd.

Where “*” indicates the symbol “^®” where the applicable Licensed Mark is the subject of a registration issued by the United States Patent and Trademark Office, and indicates the symbol “^TM” or “^SM”, as appropriate, where the applicable Licensed Mark is not the subject of such a registration.

4. Term; Termination; Effects of Termination.

4.1 Term. The term of the is Agreement (the “Term”) shall commence on the Effective Date and end upon the last to occur of (a) three (3) years thereafter, (b) the date, if ever, upon which ECI and its affiliates no longer own at least twenty percent (20%) of the outstanding shares of Veraz Common Stock (as defined in the Share Exchange Agreement), on an as-converted basis, and (c) the termination of this Agreement in accordance with Section 4.2.

4.2 Termination. Company may terminate this Agreement and the licenses granted hereunder at any time upon written notice to ECI. ECI may terminate this Agreement and the licenses granted hereunder upon written notice to Company if Company (i) materially fails to perform or comply with the terms and conditions of this Agreement and fails to cure such breach within thirty (30) days following receipt of written notice thereof, (ii) (a) makes a general assignment for the benefit of its creditors, (b) institutes proceedings to be adjudicated a voluntary bankrupt, or consents to the filing of a petition of bankruptcy against it, (c) seeks reorganization under any bankruptcy act, or consents to the filing of a petition seeking such reorganization, or (d) has a decree entered against it by a court of competent jurisdiction appointing a receiver, liquidator, trustee or assignee in bankruptcy or in insolvency covering all or substantially all of its property or providing for the liquidation of its property or business affairs, and such decree is not vacated within thirty (30) days.

4.3 Effects of Termination. Upon any termination of this Agreement, Company shall have twenty (20) days from the effective date of termination within which to cease all usage of all Licensed Marks and the Licensed Name. Also upon the termination or expiration of this Agreement, all equities, goodwill, title or other rights in and to the Licensed Marks and the Licensed Name shall immediately and automatically revert to ECI, and Company shall be deemed to have assigned, transferred and conveyed any equities, goodwill, title or other rights which may have accrued through its use of the Licensed Marks or the Licensed Name to ECI. Licensee and its Affiliates shall cease all further use of the Licensed Marks and the Licensed Name, or of any similar mark or name, including, but not limited to, any mark or name consisting of or incorporating “An ECI Telecom Company”. Company shall take all actions reasonably necessary to prevent further use by Company of the Licensed Marks and the Licensed

4.

Name. In the event Company is deemed to hold any interest in any trademark, service mark, trade name or domain name in which the Licensed Marks or the Licensed Name appear, Company shall promptly execute all papers and take all actions reasonably necessary to transfer all right, title and interest in and to such mark or name to ECI.

5. Indemnification. Company agrees to defend, indemnify and hold ECI and its officers, directors, employees, subsidiaries, affiliates, agents, servants, representatives, successors, transferees, heirs, assigns, and attorneys harmless from any and all costs and expenses (including reasonable attorneys’ fees), liabilities, damages or other losses incurred in connection with a claim by any third party, or regulatory or government body (collectively, “Losses”), arising out of a breach of this Agreement by Company, or otherwise out of any use by Company of the Licensed Marks or the Licensed Name. The foregoing indemnification obligations shall be in addition to, and not exclusive of, the indemnification obligations, if any, set forth in the Share Exchange Agreement.

6. Independent Contractors. For purposes of this Agreement, the parties hereto are independent contractors and are not partners or joint venturers, and neither party has any right or authority to bind the other in any way.

7. Assignment. Other than as set forth in subsection 1.1 above, the rights granted to and obligations undertaken by the parties under this Agreement may not be assigned, sublicensed or otherwise transferred (whether by stock or asset sale, share exchange, reorganization or otherwise) without the prior written consent of the other party; provided, however, that ECI may assign this Agreement to an Affiliate, or to a third party that purchases all or substantially all of its business or assets, provided that such Affiliate or third party undertakes all of ECI’ s obligations set forth in this Agreement. Any attempted assignment or transfer of rights or obligations under this Agreement except as expressly permitted hereunder shall be deemed null and void. For purposes of this Agreement, an “Affiliate” shall mean, with respect to any person, any other person that controls, is controlled by or is under common control with the first person.

8. Notices. All notices, requests, demands and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given only if personally delivered, delivered by confirmed facsimile transmission, delivered by a major commercial rapid delivery courier service or mailed by certified or registered mail, return receipt requested, postage prepaid, to a party at the address set forth below or such other address as a party last provided to the other by written notice:

If to ECI, to:

ECI Telecom Ltd.
30 Hasivim Street
Petah Tikva 49133, Israel
Attn: Martin Ossad
Fax: 972 (3) 926-6070

5.

with a copy to:

Brobeck, Phleger & Harrison LLP
1633 Broadway, 47th Floor
New York, New York 10019
Attn: Richard Gilden
Fax: (212) 586-7878

If to the Company, to:

Veraz Networks, Inc.
926 Rock Avenue
San Jose, California 95131
Attn: Amit Chawla
Fax: (408) 750-9409

with a copy to:

Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, California 94306-2155
Attn: James Fulton
Fax: (650) 849-7400

9. General.

9.1 Binding Effect. This Agreement shall be binding on the parties, their permitted successors and assigns, and the parties hereby warrant that the undersigned are authorized to execute this Agreement on behalf of the respective parties.

9.2 Entire Agreement. Upon execution by both parties, this Agreement, together with the Share Exchange Agreement, shall constitute the entire agreement between the parties with respect to the subject matter hereof and shall supersede all proposals, oral or written, all negotiations, conversations, discussions and past dealings between or among the parties relating to the subject matter of this Agreement. In the event of a conflict between the terms of this Agreement and the terms of the Share Exchange Agreement, the terms of this Agreement shall control.

9.3 Headings. Headings and captions are for convenience of reference only and shall not be deemed to interpret, supersede or modify any provisions of this Agreement.

9.4 Amendment, Modification and Waiver. The failure of either party to enforce its rights or to require performance by the other party of any term or condition of this Agreement shall not be construed as a waiver of such rights or of its right to require future performance of that term or condition. Any amendment or modification of this Agreement or any waiver of any breach of any term or condition of this Agreement must be in a writing signed by each of the parties in order to be effective and shall not be construed as a waiver of any continuing or succeeding

6.

breach of such term or condition, a waiver of the term or condition itself or a waiver of any right under this Agreement.

9.5 Representations and Warranties.

Each Party hereby represents and warrants to the other party that:

          (i) it is duly organized and validly existing under the laws of the jurisdiction of its formation and has full power and authority to enter into this Agreement and to carry out the provisions hereof;

          (ii) this Agreement is a legal and valid obligation binding upon such party and enforceable in accordance with its terms;

          (iii) the execution, delivery and performance of the Agreement by such party does not conflict with any agreement, instrument or understanding, oral or written, to which it is a party or by which it is bound, nor violate any law or regulation of any court, governmental body or administrative or other agency having jurisdiction over it; and

          (iv) it is duly authorized to execute and deliver this Agreement and to perform its obligations hereunder.

9.6 Severability. To the maximum extent permissible under applicable law, if one or more provisions of this Agreement are held to be illegal, invalid or unenforceable under applicable law, such provision shall be modified or excluded from this Agreement to the minimum extent necessary so that the balance of the Agreement shall remain in full force and effect and enforceable. The parties further agree to use reasonable efforts to amend the Agreement so that its effect remains as close as possible to the original intent of the parties.

9.7 Governing Law and Venue. This Agreement shall be governed by the laws of the State of New York, without regard to the choice of law rules thereof, and the sole jurisdiction and venue for actions related to the subject matter hereof shall be conducted in the state or federal courts of the State and County of New York.

9.8 Nonexclusive Remedies. The rights and remedies of a party set forth herein with respect to the failure of the other party to comply with the terms of this Agreement (including, without limitation, rights of termination of this Agreement) are not exclusive, the exercise thereof shall not constitute an election of remedies and the aggrieved party shall in all events be entitled to seek whatever additional remedies may be available at law or in equity. The parties acknowledge and agree that nothing contained in this Agreement is intended to affect or limit the rights and obligations of the parties set forth in the Share Exchange Agreement.

9.9 Survival. The provisions of Sections 1.2.4 (Further Assurances) and 4.3 (Effects of Termination), and any other provision which by its nature should survive, shall survive any expiration or termination of this Agreement for any reason.

7.

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

[Remainder of this page intentionally left blank]

8.

          IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to be executed by their authorized representatives as of the date first above written.

ECI TELECOM LTD.		VERAZ NETWORKS, INC.
Signatory:	/s/ Giora Bitan	Signatory:	/s/ Amit Chawla
Name: Giora Bitan		Name: Amit Chawla
Title: Executive VP and CFO		Title:

SCHEDULE A — LICENSED MARKS, LICENSED NAME & LICENSE PURPOSE

SCHEDULE B — TRADEMARK USAGE GUIDELINES

EX-10.6

Exhibit 10.6

EXHIBIT D TO SEPARATION AGREEMENT

INTELLECTUAL PROPERTY LICENSE AGREEMENT

     This Intellectual Property License Agreement (this “Agreement"), is entered into as of October ___, 2002 (the “Effective Date") by and among ECI TELECOM LTD. (“ECI TELECOM”), ECI TELECOM-NGTS LTD. (“NGTS”), and VERAZ NETWORKS LTD. [formerly Chorale Networks Ltd.] (“Veraz"). ECI TELECOM and NGTS are collectively referred to in this Agreement as “ECI.” ECI, on the one hand, and Veraz, on the other, may each individually be referred to in this Agreement as a “Party”, and collectively referred to in this Agreement as the “Parties”.

WITNESSETH:

     WHEREAS, ECI and Veraz have entered into a Separation and Asset Purchase Agreement dated as of                      ___, 2002 (the “APA”); and

     WHEREAS, it is a condition to closing of the APA that this Agreement be entered into between the Parties;

     NOW, THEREFORE, it is hereby agreed by and between the Parties as follows:

ARTICLE 1

DEFINITIONS

As used herein, the following terms have the following meanings:

     1.1 “Assignment Agreement” shall mean the Intellectual Property Assignment Agreement by and between the Parties of even date herewith.

     1.2 “Veraz Know-How” shall have the meaning ascribed to it in the Assignment Agreement.

     1.3 “Veraz Patents” shall have the meaning ascribed to it in the Assignment Agreement.

     1.4 “Closing Date” and “Closing” shall have the respective meanings ascribed to them in the APA.

     1.5 “DCME Distribution Business” shall have the meaning ascribed to it in the APA.

     1.6 “DCME Know-How” shall mean all Know-How that pertains to DCME products and services or is required for the conduct of the DCME Distribution Business that exists on the Closing Date as listed in Appendix 1.6 attached hereto.

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     1.7 “DCME Patents” shall mean the Patents listed in Appendix 1.7 attached hereto.

     1.8 “DCME Trademarks” shall mean the trademarks, service marks, trade names and service marks listed in Appendix 1.8 attached hereto.

     1.9 “DCME Manufacturing and Distribution Agreement” shall mean the DCME Manufacturing and Distribution agreement signed between the Parties as of the date hereof.

     1.10 “ECI IP” shall mean all ECI Know-How and ECI Patents.

     1.11 “ECI Know-How” shall mean the Know-How owned, licensed, or used by ECI listed in Appendix 1.11 attached hereto.

     1.12 “ECI Patents” shall mean the Patents owned or sublicenseable by ECI, excluding all Veraz Patents and DCME Patents, and listed in Appendix 1.12 attached hereto.

     1.13 “Intellectual Property Rights” shall mean all rights under the laws of any jurisdiction in the world with respect to: (i) rights associated with works of authorship, including exclusive exploitation rights, copyrights, moral rights, and mask works; (ii) trade secret rights; (iii) contract rights in intellectual property of every kind and nature; and (iv) rights in or relating to registrations, renewals, extensions, combinations, divisions, and reissues of, and applications for, any of the rights referred to in subclauses (i) through (iii) above; but excluding all Patents, trademarks, service marks, trade names, and service names.

     1.14 “Know-How” shall mean all technology, software (whether in source code or in executable code), ideas, concepts, know-how, techniques, technical and commercial information, data and documents of whatever kind, including drawings, specifications, photographs, samples, models, processes, procedures, reports and correspondence, including works of authorship embodying the foregoing, as well as information incorporated in formal or informal databases, correspondence, email, proprietary methods and processes of conducting business as well as know-how and show-how, customer lists, marketing plans, business plans, strategies, workflows and other information of value, and maintained in secrecy.

     1.15 “Patents” shall mean all patents, utility model applications, pending patent applications and industrial property rights, including any and all divisionals, continuations, reexaminations, renewals, provisionals, continuations-in-part, re-issues, and foreign equivalents thereof.

     1.16 “VoIP” shall mean Voice over Internet Protocol.

     1.17 “Veraz Business” shall mean the development manufacturing, marketing sale distribution and service of products and solutions for gateways and/or soft-switches for point-to-point, point to multipoint and/or switching and non-switching applications for connecting end to end telephony or telephony over packet networks. Said gateways include classification and/or compression of telephony signals such as voice, modem, fax and/or other signals such as video conference, and conversion of the classified and/or compressed signals into packets in format suitable for media such as Ethernet, IP ATM or MPLS.

2.

ARTICLE 2

LICENSE GRANTS

     2.1 Exclusive License for DCME Patents and DCME Know-How for Veraz Business. ECI hereby grants to Veraz an exclusive (with respect to both ECI and all other parties with respect to activities conducted within the Veraz Business), worldwide, irrevocable, perpetual, fully paid, royalty-free, transferable in accordance with Section 6.2, sublicensable license:

          (a) under the DCME Patents to use, develop, design, integrate, make, have made, market, sell, offer to sell, lease, offer to lease, import and transfer products and services with respect to activities conducted within the Veraz Business, and to use any apparatus and practice any method in the manufacture or use thereof; and

          (b) under ECI’s Intellectual Property Rights to use, develop, design, integrate, reproduce, display, perform, import, modify, create derivative works of, adapt, further develop, distribute directly or indirectly, and otherwise exploit the DCME Know-How with respect to any activities conducted within the Veraz Business.

     2.2 Nonexclusive License for ECI Patents and ECI Know-How for Veraz Business. ECI hereby grants to Veraz a nonexclusive, worldwide, irrevocable, perpetual, fully paid, royalty-free, transferable in accordance with Section 6.2, sublicensable license:

          (a) under the ECI Patents to use, develop, design, integrate, market, sell, offer to sell, lease, offer to lease, import and transfer products and services with respect to activities conducted within the Veraz Business, and to use any apparatus and practice any method in the manufacturer or use thereof; and

          (b) under ECI’s Intellectual Property Rights to use, develop, design, integrate, reproduce, display, perform, import, modify, create derivative works of, adapt, further develop, distribute directly or indirectly, and otherwise exploit the ECI Know-How with respect to activities conducted within the Veraz Business.

     2.3 Nonexclusive License for the DCME Distribution Business. ECI hereby grants to Veraz a nonexclusive, worldwide, perpetual and revocable in accordance with the termination rights set forth in the immediately following sentence, fully paid, royalty-free, transferable in accordance with Section 6.2, license:

          (a) under the DCME Patents and ECI Patents to use, develop, design, integrate, market, sell, offer to sell, lease, offer to lease, import and otherwise transfer any products and services with respect to activities conducted within the DCME Distribution Business; and

          (b) under ECI’s Intellectual Property Rights to use, develop, design, integrate, reproduce, display, perform, import, modify, create derivative works of, adapt, further develop, distribute directly or indirectly, and otherwise exploit the ECI Know-How and DCME Know-How with respect to activities conducted within the DCME Distribution Business; and

3.

          (c) to have applied the DCME Trademarks on DCME products obtained from ECI, and use the DCME Trademarks in connection with marketing, sales, distribution, service and support activities, anywhere in the world, for DCME products obtained from ECI; subject to the guidelines and restrictions set forth in Appendix 2.3(c) hereto.

Veraz may sublicense the rights granted in this Section 2.3 to the extent necessary to develop, market, sell, offer to sell, lease, offer to lease, import, distribute, service and support products or services with respect to activities conducted in connection with the DCME Distribution Business. Additionally, ECI may, at its discretion, terminate prospectively the license rights granted in this Section 2.3 with respect to Veraz’s ability to perform licensed activities hereunder if Veraz no longer provides service and support for the DCME products or services made available to Veraz under the DCME Manufacturing and Distribution Agreement.

     2.4 Additional Obligations of ECI.

          (a) ECI hereby agrees not to license, use or otherwise exploit in any manner the DCME Patents, DCME Know-How, or ECI IP in connection with any activities contained within the Veraz Business, except:

               (i) to manufacture and supply exclusively to Veraz VoIP products and services under the VoIP Manufacturing and Distribution Agreement; or

               (ii) as permitted in accordance with the terms and conditions of the License Agreement referred to in Section 2.5(a) below and attached hereto as Appendix 2.4(a) and as shall be permitted under the licenses which may be granted pursuant to Section 2.5(b), if any.

          (b) In the event that ECI shall desire to assign or otherwise transfer, to any third party, all or part of ECI’s interest in (i) the DCME Know-How, (ii) the DCME Patents, or (iii) any ECI IP, ECI shall, subject to ECI’s compliance with confidentiality obligations (if any and only to the extent thereunder) made to the proposed assignee and applicable securities laws, inform Veraz in writing within a reasonable period of time prior to entering into an agreement for any planned assignment. The notice shall include the general terms of the proposed assignment or transfer. In the event any assignment or transfer is made by ECI of any of the DCME Know-How, DCME Patents or ECI IP such assignment or transfer shall be made subject to the license grants, covenants and license restrictions granted or undertaken by ECI in and to any such DCME Know-How, DCME Patents or ECI IP under this Agreement.

          (c) Should ECI decide to abandon the prosecution or maintenance of any DCME Patents or ECI Patents, ECI shall provide promptly to Veraz written notice of any such planned abandonment and, upon Veraz’s written request and at Veraz’s expense, and provided that Veraz has requested in writing for ECI to assign and transfer ECI’s ownership rights in and to any such DCME Patents or ECI Patents within thirty (30) days of such notice, ECI shall unconditionally and irrevocably assign and transfer complete and exclusive ownership in and to any such DCME Patents or ECI Patents to Veraz upon reasonable terms that are to be agreed upon by the Parties. Upon the making of any such assignment or transfer to Veraz, Veraz

4.

covenants to grant to ECI a royalty-free and fully paid license under such assigned DCME Patents or ECI Patents of the same scope and duration and with the same restrictions as provided for other similar patents for which Veraz grants a license to ECI under the License Agreement attached as Appendix 2.4(a) hereto. Any assignment or transfer that is made by ECI of any DCME Patents or ECI Patents pursuant to the provisions of this Section 2.4(c) shall be made subject to any underlying license grants, covenants and license restrictions granted or undertaken by ECI in and to any such DCME Patents or ECI Patents. Upon written request by Veraz, ECI shall assist in the completion of such assignment at the sole cost of Veraz.

          (d) If Veraz determines that there are any items that are being used by ECI in the Veraz Business or DCME Distribution Business on the date of execution of this Agreement, but have not been specifically listed or identified on Appendices 1.6, 1.7, 1.8, 1.11 or 1.12, then Veraz may request in writing for ECI to license the applicable item to Veraz in accordance with the respective terms under this Agreement which relate to the license of the items appearing in the Appendix in which such item should have been listed. Upon delivery of such notice to ECI and subject to ECI’s written agreement, which agreement shall not be unreasonably withheld, delayed or conditioned by ECI, ECI will be deemed, without any further action necessary, to have licensed to Veraz such items in accordance with the respective terms under this Agreement which relate to the license of other items appearing in the Appendix in which such item should have been listed.

          (e) For a period of two (2) years after the date of execution of this Agreement by the Parties, at Veraz’s written request and subject to the availability and agreement by the Parties upon the amounts, including the rates for support, to be paid by Veraz for technical support to be provided by ECI, ECI (through its Celtro division) will provide at mutually agreed dates and times technical support to the extent required for Veraz to resolve technical problems encountered with Veraz’s use of the DCME Know-How in connection with the Veraz Business. Any amount that is agreed upon between the Parties to be paid by Veraz for technical support to be provided hereunder shall be paid within ten (10) days after services are performed by ECI. ECI will invoice Veraz for technical support services on at least a monthly basis after services are rendered. Any technical support that will be provided to Veraz by ECI hereunder, at Veraz’s written request, will be further limited solely to the permitted use by Veraz of the DCME Know-How that is existing as of Closing and generally available at the time of Veraz’s written request in accordance with the license rights granted in this Section 2.

     2.5 Additional Obligations of Veraz.

          (a) License Back. Concurrently with the execution of this Agreement, Veraz shall enter into a license agreement with NGTS to provide it rights in Veraz Patents and Veraz Know-How in respect of its Celtro product line, all as set forth in the license agreement attached as Appendix 2.4(a) hereto (the “License Agreement”).

          (b) Other License Backs. If Veraz elects to grant any license under the Veraz Patents or to use the Veraz Know-How (the “VoIP License”), it shall so notify in writing to ECI and upon ECI’s request, Veraz shall grant ECI a nonexclusive license under the Veraz Patents or

5.

to use the Veraz Know-How on terms and conditions that are consistent with and no less favorable in any material respect than those terms and conditions of the VoIP License.

          (c) Third Party Patents and Know-How. The attached Appendix 2.5(c) sets forth DCME Know-How and ECI Know-How that is licensed to ECI from third parties, and licensed hereunder by ECI to Veraz, and for which the license in respect of such is subject to the terms and conditions of a third party license by which ECI is bound in respect thereof. ECI shall use its reasonable commercial efforts to obtain and provide to Veraz prior to Closing all third-party consents with regard to the license to Veraz hereunder of the items of DCME Know-How and ECI Know-How listed in Appendix 2.5(c) which are marked as material in such schedule. Prior to exercising its rights hereunder in respect to the remaining DCME Know-How and ECI-Know listed in Appendix 2.5(c), ECI shall provide to Veraz, and Veraz shall review, said terms and conditions to ensure Veraz’s compliance therewith. ECI shall use commercially reasonable efforts to obtain properly all third-party consents, if any, that are necessary for the exercise by Veraz of the licenses hereunder.

ARTICLE 3

INTELLECTUAL PROPERTY MATTERS

     3.1 Each Party shall promptly notify the other Party of any and all infringements, imitations, simulations or other illegal use or misuse of the licensed DCME Know-How, DCME Patents or DCME Trademarks which come to its attention. ECI shall determine whether to take any action to prevent the infringement, imitation, simulation or other illegal use or misuse of the DCME Know-How, DCME Patents or DCME Trademarks. If ECI elects not to take such action, Veraz may take such action if it has received ECI’s prior written approval to take such action. In this event, ECI shall, at Veraz’s expense, cooperate in such action with Veraz including, without limitation, joining as a party. Any money recovered by way of damages or otherwise with respect to such action shall be kept by the Party which bore the costs of such action; or, in any case where the Parties have shared the costs, such money shall be shared in proportion to the costs borne by each Party. Each Party shall, at the request of the other, render all reasonable assistance in connection with any matter pertaining to the protection, enforcement or infringement of the licensed DCME Know-How, DCME Patents or DCME Trademarks, whether in the courts, administrative or quasi-judicial agencies, or otherwise, at the cost of the requesting party.

     3.2 In the event that, Veraz decides to defend itself against patent claims or other illegal use or misuse relating to the DCME Patents and DCME Know-How, ECI shall, at the request of Veraz, provide reasonable assistance to enable Veraz to defend such claims and immediately initiate a limited assignment of joint ownership rights in specified DCME Patents and DCME Know-How for the period of time, if and to the extent required for the defense (including counter-claims) of such claims, and to the extent not sufficient for such defense, ECI shall, upon Veraz’s reasonable request, join Veraz in any action to defend such claims and consent to the granting to third parties by Veraz, without any financial accounting to ECI or the making of any payment to ECI, of any necessary licenses to specified DCME Patents and DCME Know-How.

6.

     3.3 Any and all ECI Know-How is provided by ECI to Veraz “AS IS,” and ECI shall have no liability whatsoever to Veraz in connection with Veraz’s use thereof in any manner whatsoever. Additionally, ECI makes no representations or warranties regarding whether any of the DCME or ECI Patents are valid or useful to Veraz. ECI makes no representation, extends no warranties or indemnification of any kind, expressed or implied, nor assumes any responsibilities whatsoever with respect to the commercial utility or quality of any of the licensed Patents, Know-How, Trademarks or other Intellectual Property Rights licensed hereunder (the “Licensed IPR”). ECI DISCLAIMS ALL WARRANTIES, INCLUDING, WITHOUT LIMITATION, ALL IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE AND NONINFRINGEMENT OF THIRD PARTY RIGHTS. ECI SHALL HAVE NO OBLIGATIONS OR LIABILITIES UNDER THIS AGREEMENT RELATING TO THE USE BY VERAZ OF ANY SUCH LICENSED IPR.

     3.4 EXCEPT FOR BREACHES AND VIOLATIONS OF CONFIDENTIALITY OBLIGATIONS, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY INCIDENTAL, SPECIAL, CONSEQUENTIAL, EXEMPLARY, OR OTHER INDIRECT DAMAGES, INCLUDING LOST PROFITS, RESULTING FROM OR ARISING OUT OF THIS AGREEMENT OR THE PERFORMANCE BY SUCH PARTY OF ANY OBLIGATIONS HEREUNDER, OR FOR THE COST OF THE PROCUREMENT OF SUBSTITUTE GOODS, TECHNOLOGY OR SERVICES. FOR THE AVOIDANCE OF DOUBT, DAMAGES INCURRED BY VERAZ FROM ECI’S BREACHES OR VIOLATIONS OF THE LICENSE GRANTS OR EXCLUSIVITY OBLIGATIONS IN SECTION 2.4(A) OF THIS AGREEMENT SHALL BE DEEMED DIRECT DAMAGES TO WHICH THIS LIMITATION OF LIABILITY PROVISION SHALL NOT APPLY.

     3.5 Veraz hereby acknowledges and agrees that ECI owns the Licensed IPR that is licensed by ECI hereunder and all rights therein and that nothing in this Agreement shall give Veraz any right, title or interest in or to such Licensed IPR, other than the limited and restricted licenses and rights granted in Section 2 of this Agreement and the rights of a limited assignment of joint ownership rights which may be granted in Section 3.2 of this Agreement.

ARTICLE 4

GOVERNING LAW; DISPUTE RESOLUTION

     4.1 This Agreement shall be governed by and construed in accordance with the laws of the State of Israel, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof.

     4.2 In the event of any controversy or claim arising out of or in connection with this Agreement, Section 11.5 of the APA shall govern, mutatis mutandis.

7.

ARTICLE 5

CONFIDENTIALITY

     5.1 Veraz acknowledges and agrees that all Confidential Information of ECI that it receives or obtains prior to Closing or receives or obtains in the context of this Agreement is the valuable proprietary information of ECI. Except as expressly allowed herein, Veraz will hold in confidence and not use or disclose any Confidential Information of ECI for any purpose other than for the purposes contemplated under this Agreement, and shall similarly bind its employees. Veraz will exercise the same level of care to prevent unauthorized disclosure or compromise of the Confidential Information of ECI as it uses to safeguard its own Confidential Information, but in no event will Veraz use less than reasonable care. Veraz shall not be obligated under this Section 5 with respect to information it can document:

          (a) is or has become readily publicly available without restriction through no fault of Veraz or its employees or agents; or

          (b) is required to be disclosed by legal process, court order or governmental regulations, provided that Veraz, subject to any such process, order or regulations, shall furnish notice of any required disclosure and reasonably assists ECI in any effort of ECI to limit or restrict any such disclosure.

     5.2 For purposes hereof, “Confidential Information” means, without limitation, the DCME Know-How, ECI Know-How and any informative technical material, technical information, know-how, software and firmware (including all copies derived from material furnished hereunder) of ECI, whether written or oral, furnished to or obtained by Veraz that is marked as, or otherwise reasonably understood by Veraz to be, confidential to ECI.

ARTICLE 6

ASSIGNMENT

     6.1 This Agreement and the rights, duties and liabilities of the Parties under this Agreement will bind and inure to the benefit of their successors and assigns, respectively, as permitted pursuant to Section 6.2.

     6.2 Neither Party may assign, transfer or delegate its rights and obligations under this Agreement, either in whole or in part, except with the prior written consent of the other Party; provided, however, that a Party may assign this Agreement without obtaining such prior written consent to a successor-in-interest to it that agrees to be bound by all of the terms and conditions in this Agreement, in connection with (i) the sale of all or substantially all of the assets of such Party, (ii) the purchase of all or a majority of such Party’s outstanding voting shares, or (iii) a consolidation, merger or reorganization of such Party. Notwithstanding the foregoing, Veraz may assign or transfer the non-exclusive license for the DCME Distribution Business that is granted by ECI under Section 2.3 above only in connection with an assignment or transfer of the DCME Manufacturing and Distribution Agreement or any of Veraz’s rights thereunder to the

8.

extent permitted under the DCME Manufacturing and Distribution Agreement. Any such attempted assignment, transfer or delegation in derogation of the foregoing shall be null and void and without any legal effect.

ARTICLE 7

MISCELLANEOUS

     7.1 The term of this Agreement shall commence upon the Effective Date and will continue indefinitely.

     7.2 All notices, requests and other communications hereunder shall be in writing and shall be governed by Section 11.13 of the APA, mutatis mutandis.

     7.3 The headings of this Agreement are included for convenience only, and the articles or sections shall not be construed in accordance with their headings.

     7.4 The Parties hereto agree that the invalidity or unenforceability of any of the provisions hereof shall not in any way affect the validity or enforceability of any other provisions of this Agreement except those from which the invalidated or unenforceable provisions comprise an integral part or are otherwise clearly inseparable.

     7.5 Nothing contained in this Agreement shall be deemed or construed to constitute or create among the Parties hereto a partnership, association, joint venture franchise or other agency.

     7.6 This Agreement is the entire agreement by and among the parties with respect to this subject matter, and supersedes all prior discussions, negotiations, communications and agreements with respect thereto. This Agreement may be modified only in writing signed by all Parties hereto. Any purported oral modification of this Agreement shall be without any effect whatsoever.

     7.7 The failure of any party to enforce at any time any of the provisions of this Agreement shall not be deemed to be a waiver of the right of such Party thereafter to enforce such provision.

     7.8 Each Party hereto shall execute and cause to be delivered to the other Party hereto such instruments and other documents, and shall take such other actions, as such other Party may reasonably request for the purpose of carrying out or evidencing any of the transactions contemplated in this Agreement.

     7.9 In the event of any breach of any of the confidentiality obligations, license grants, license restrictions or additional obligations of ECI in Section 2.4(a), each party hereby agrees that the harm suffered by the affected party would not be compensable by monetary damages alone and, accordingly, that the affected party shall, in addition to any other available legal or equitable remedies, be entitled to seek an injunction or other equitable relief against the other party in connection with any breach or violation of any such provisions.

9.

     7.10 This Agreement establishes the rights, duties and obligations of ECI and Veraz with respect to the subject matter hereof.

     7.11 The obligations of any Party shall be excused to the extent, and for the period during which, that performance is rendered impossible by strike, fire, flood, earthquake, other natural disasters, governmental acts, orders or restrictions, or any other reason beyond the reasonable control of such Party.

     7.12 Each Party’s performance of this Agreement, including without limitation Veraz’s use of the Licensed IPR, shall at all times comply with all requirements, rules, laws and regulations of all governmental bodies having proper jurisdiction, and including without limitation any requirements to obtain any licenses under the export or similar laws applicable jurisdiction, and including without limitation any requirements to obtain any licenses under the export or similar laws of the United States.

     [SIGNATURE PAGE FOLLOWS]

10.

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the Effective Date.

VERAZ NETWORKS LTD.
By:	/s/ Zamir Segev
Printed Name: Zamir Segev
Title:
Date:
ECI TELECOM LTD.
By:	/s/ Illegible
Printed Name:
Title:
Date:
ECI TELECOM-NGTS LTD.
By:	/s/ Giora Bitan
Printed Name: Giora Bitan
Title:
Date:

11.

LIST OF APPENDICES:

Appendix 1.6	“DCME Know-How”
Appendix 1.7	“DCME Patents”
Appendix 1.8	“DCME Trademarks”
Appendix 1.11	“ECI Know-How”
Appendix 1.12	“ECI Patents”
Appendix 2.3(c)	“Guidelines and restrictions to the use of the DCME Trademarks”
Appendix 2.4(a)	“License Agreement”
Appendix 2.5(c)	“DCME Know-How which may be licensed to ECI from third parties”

12.

EX-10.7

Exhibit 10.7

EXHIBIT C TO SEPARATION AGREEMENT

INTELLECTUAL PROPERTY ASSIGNMENT AGREEMENT

     This Intellectual Property Assignment Agreement (the “Agreement”), entered into as of December 31, 2002 among ECI TELECOM LTD. (“ECI TELECOM”), ECI TELECOM NGTS LTD. (“NGTS”) and VERAZ NETWORKS, LTD. (formerly Chorale Networks Ltd.) (“Veraz”). ECI TELECOM and NGTS are referred to collectively as “ECI.” Veraz and ECI are referred to collectively as the “Parties.”

WITNESSETH:

     WHEREAS, ECI and Veraz have entered into a Separation and Asset Purchase Agreement dated as of even date herewith (the “APA”); and

     WHEREAS, it is a condition to closing of the APA that this Agreement be entered into between the Parties to effect the assignment of the intellectual property rights related to the VoIP Business to Veraz, as set forth herein.

     NOW, THEREFORE, it is hereby agreed by and between the Parties as follows:

ARTICLE 1

DEFINITIONS

As used herein, the following terms have the following meanings:

1.1	“Businesses” shall have the meaning ascribed to it in the APA.
1.2	“Closing Date” and “Closing” shall have the respective meanings assigned to them in the APA.
1.3	“Veraz Know-How” shall mean all Know-How relating to the VoIP Business, including without limitation the Know-How incorporated into or used solely in the development, manufacturing, marketing, sale, distribution, service and support of the products and services listed in Appendix 1.3 attached hereto.
1.4	“Veraz Patents” shall mean the Patents listed in Appendix 1.4 attached hereto.
1.5	“Veraz Trademarks” shall mean the Trademarks listed in Appendix 1.5 attached hereto.
1.6	“Veraz IP” shall mean Veraz Know-How, Veraz Patents and Veraz Trademarks.
1.7	“Intellectual Property Rights” shall mean all past, present, and future rights which may exist or be created under the laws of any jurisdiction in the world with respect to all: (i) rights associated with works of authorship, including exclusive exploitation rights, copyrights, moral rights, and mask works; (ii) trademark and trade name rights and similar rights; (iii) trade secret rights; (iv) patents, patent applications, and industrial

1.

	property rights; (v) other proprietary rights in intellectual property of every kind and nature; and (vi) rights in or relating to registrations, renewals, extensions, combinations, divisions, and reissues of, and applications for, any of the rights referred to in subclauses (i) through (v) above.
1.8	“Know-How” shall mean technology, software (whether in source code or in executable code form), ideas, concepts, know-how, techniques, technical and commercial information, data and documents of whatever kind, including drawings, specifications, photographs, samples, models, processes, procedures, reports and correspondence, including works of authorship embodying the foregoing, as well as information incorporated in formal or informal databases, correspondence, email, proprietary methods and processes of conducting business as well as know-how and show-how, customer lists, marketing plans, business plans, strategies, workflows and other information of value maintained in secrecy, in existence as of the Closing Date.
1.9	“License Agreement” shall mean that certain Intellectual Property License Agreement by and between the Parties as of even date herewith, which, among other things, grants ECI a license to use the Veraz IP as set forth in the License Agreement.
1.10	“Patents” shall mean patents and patent applications (including utility model applications), including any and all divisionals, continuations, re-examinations, renewals, provisionals, continuations-in-part, re-issues, and foreign equivalents thereof.
1.11	“Trademarks” shall mean registered trademarks and pending trademark applications in existence as of the Closing Date, including any and all renewals and foreign equivalents thereof.
1.12	“VoIP Business” shall have the meaning ascribed to it in the APA.

ARTICLE 2

ASSIGNMENT OF VERAZ IP TO VERAZ

2.1 Effective as of the Closing, ECI hereby irrevocably and unconditionally assigns, contributes, transfers, conveys and delivers to Veraz and its successors and assigns, all of its rights, title and interests in and to the Veraz IP and all Intellectual Property Rights therein, and the right to recover and take all proceedings as may be necessary for the recovery of damages or otherwise in respect of past, present and future infringement or misappropriation of the Veraz IP. At Closing ECI shall deliver or cause to be delivered to Veraz the following; (i) possession of any tangible embodiments of the Veraz IP; and (ii) duly signed deeds of assignments for all Veraz IP effecting the assignment described in the immediately preceding sentence and (iii) any duly signed consents to the assignments thereof that have been obtained. ECI hereby acknowledges and agrees that it retains no right to use the Veraz IP, except as provided in Sections 2.5(a) and (b) of the License Agreement, and agrees not to challenge the validity of Veraz’s ownership of the Veraz IP.

2.2 In the event that any assignment under Section 2.1 above may be ineffective or incomplete as a result of any moral rights, artists’ rights, or any other similar rights worldwide (“Moral Rights”), ECI hereby irrevocably and unconditionally transfers and assigns to Veraz any

2

and all Moral Rights that ECI may have in or with respect to the Veraz IP. To the extent that ECI cannot transfer and assign such Moral Rights to Veraz, ECI hereby waives and agrees never to assert such Moral Rights against Veraz or any of Veraz’s licensees. If ECI has any rights to the Veraz IP that cannot be assigned to Veraz or waived by ECI, then ECI unconditionally and irrevocably grants to Veraz, during the term of such rights, an exclusive (including with respect to ECI, except as provided in Sections 2.5(a) and (b) of the License Agreement), irrevocable, perpetual, worldwide, fully-paid and royalty-free license, with rights to sublicense throughout multiple tiers of sublicensees, to use, reproduce, modify, create derivative works of, distribute, perform, display, distribute directly and indirectly, and otherwise exploit the Veraz IP by all means now known or later developed, and to make, have made, sell, offer to sell, lease, offer to lease and import products and services that contain or embody such Veraz IP.

2.3 All reasonable administrative, governmental and other necessary costs that are actually incurred to assign the Veraz IP from ECI to Veraz pursuant to Section 2.1 above shall be allocated as follows: (a) Veraz shall bear the first Ten Thousand U.S. Dollars (U.S. $10,000) of actually and reasonably incurred costs; and (b) any additional actually and reasonably incurred costs shall be allocated equally between ECI and Veraz, provided that ECI shall manage the process of such assignment. ECI shall execute and deliver at or prior to the Closing all documents and perform promptly all acts which are reasonably necessary or desirable to procure, maintain, perfect, and enforce the full benefits, enjoyment, rights, title, and interests on a worldwide basis of the Veraz IP assigned to Veraz under this Agreement, and shall render promptly all reasonably necessary assistance in making application for and obtaining for Veraz the assignment of original, divisional, renewal, provisional, continuation, continuation-in-part, re-examinations or reissued patents and patent applications and foreign equivalents thereof, copyrights, mask works, trademarks, trade secrets, and all other Intellectual Property Rights constituting part of the Veraz IP, in Veraz’s name and sole benefit. ECI shall provide promptly to Veraz a copy of any assignment documents, and provide Veraz with a reasonable opportunity to comment thereon, prior to the filing thereof, but in no event later than the Closing. In the event Veraz fails, after commercially reasonable efforts, to secure ECI’s signature on any document needed in connection with the actions specified in this Section 2.3, ECI hereby irrevocably and unconditionally designates and appoints Veraz and its duly authorized officers and agents as its agent and attorney in fact, which appointment is coupled with an interest, to act for and in its behalf to execute, verify and file any documents and to do all other lawfully permitted acts to further the purposes of this Section 2.3 with the same legal force and effect as if executed by ECI. ECI hereby waives and quitclaims to Veraz any and all claims, of any nature whatsoever, which ECI now or may hereafter have for infringement of any Veraz IP assigned hereunder. Veraz shall bear all costs of prosecution and maintenance of the Veraz Patents and Veraz Trademarks after the Closing Date to the extent that Veraz, in its sole discretion, chooses to so prosecute or maintain.

2.4 ECI further agrees to deliver to Veraz upon the Closing any and all tangible manifestations of the Veraz IP, including, without limitation, all notes, records, files and tangible items of any sort in its possession or under its control relating solely to the Veraz IP. Such delivery shall include all present and predecessor versions. In addition, in the event that, from time to time, Veraz lacks the relevant knowledge and expertise and ECI has the relevant knowledge and expertise, ECI agrees to provide to Veraz from and after the Closing and at the expense of Veraz competent and knowledgeable assistance to facilitate the transfer of all

3

information, know-how, techniques, processes and the like related to such tangible manifestations and otherwise comprising the intangible aspects of the Veraz IP.

2.5 Should Veraz decide to abandon the prosecution or maintenance of any Veraz Patents, Veraz shall provide promptly to ECI written notice of any such planned abandonment and, upon ECI’s request and at ECI’s expense, and provided that ECI has requested in writing for Veraz to assign and transfer Veraz’s ownership rights in and to any such Veraz Patents within thirty (30) days of such notice, Veraz shall unconditionally and irrevocably assign and transfer complete and exclusive ownership in and to any such Veraz Patents to ECI upon reasonable terms that are to be agreed upon by the parties. Upon the making of any such assignment or transfer to ECI, ECI covenants to grant to Veraz a royalty-free and fully paid license under such assigned Veraz Patents of the same scope and duration and with the same restrictions as provided for other similar patents for which ECI grants a license to Veraz under the License Agreement. Any assignment or transfer that is made by Veraz of any Veraz Patents pursuant to the provisions of this Section 2.5 shall be made subject to any underlying license grants, covenants and license restrictions granted or undertaken by Veraz in and to any such Veraz Patents. Upon written request by ECI, Veraz shall assist in the completion of such assignment at the sole cost of ECI.

ARTICLE 3

ECI’S REPRESENTATIONS

ECI hereby represents and warrants to Veraz that the following representations and warranties are true and accurate in all respects, and acknowledges that Veraz is entering into this Agreement in reliance thereon:

3.1 As of the date of the execution of this Agreement by the Parties and as of the Closing Date, ECI is duly incorporated and validly existing under the laws of Israel. ECI has the corporate power and authority to execute, deliver and perform this Agreement.

3.2 As of the date of the execution of this Agreement by the Parties and as of the Closing Date, the execution and delivery by ECI of this Agreement and the agreements attached as exhibits hereto and the performance by ECI of its obligations hereunder have been (or, as of the Closing Date, will be) duly authorized by all requisite corporate action.

ARTICLE 4

VERAZ’S REPRESENTATIONS

Veraz hereby represents and warrants to ECI that the following representations and warranties are true and accurate in all respects, and acknowledges that ECI is entering into this Agreement in reliance thereon:

4.1 As of the date of the execution of this Agreement by the Parties and as of the Closing Date, Veraz is duly incorporated and validly existing under the laws of Israel. Veraz has the corporate power and authority to execute, deliver and perform this Agreement.

4.2 As of the date of the execution of this Agreement by the Parties and as of the Closing Date, the execution and delivery by Veraz of this Agreement and the agreements attached as

4

exhibits hereto and the performance by Veraz of its obligations hereunder have been (or, as of the Closing Date, will be) duly authorized by all requisite corporate action.

ARTICLE 5

GOVERNING LAW; DISPUTE RESOLUTION

5.1 This Agreement shall be governed by and construed in accordance with the laws of the State of Israel, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof.

5.2 In the event of any controversy or claim arising out of or in connection with this Agreement, Section 11.5 of the APA shall govern, mutatis mutandis.

ARTICLE 6

MISCELLANEOUS

6.1 All notices, requests and other communications hereunder shall be in writing and shall be governed by Section 11.13 of the APA, mutatis mutandis.

6.2 The headings of this Agreement are included for convenience only, and the articles or sections shall not be construed in accordance with their headings.

6.3 The Parties hereto agree that the invalidity or unenforceability of any of the provisions hereof shall not in any way affect the validity or enforceability of any other provisions of this Agreement except those from which the invalidated or unenforceable provisions comprise an integral part or are otherwise clearly inseparable.

6.4 Nothing contained in this Agreement shall be deemed or construed to constitute or create among the Parties hereto a partnership, association, joint venture franchise or other agency.

6.5 This Agreement and the License Agreement is the entire agreement by and among the Parties with respect to this subject matter, and supersedes all prior discussions, negotiations, communications and agreements with respect thereto. This Agreement may be modified only in writing signed by all Parties hereto. Any purported oral modification of this Agreement shall be without any effect whatsoever.

6.6 The failure of any party to enforce any of the provisions of this Agreement shall not be deemed to be a waiver of the right of such party thereafter to enforce such provision.

ARTICLE 7

ASSIGNMENT

After the Closing Date, Veraz may freely assign or transfer this Agreement or any of its rights hereunder to any third party without seeking consent from ECI, subject to the licenses granted pursuant to, and Veraz’s covenants set forth in, Sections 2.5(a) and (b) of the License Agreement. Following any such assignment or transfer, ECI shall have no further obligations

5

hereunder. ECI may not assign or transfer this Agreement, or assign any rights or delegate any obligations hereunder, to any third party without the prior written consent of Veraz (which consent may be withheld in Veraz’s sole discretion), except to a successor-in-interest to all or substantially all of ECI’s business. Subject to the foregoing, the rights, duties and liabilities of the Parties under this Agreement will bind and inure to the benefit of their successors, respectively. This Agreement shall survive and remain in full force and effect upon any change of control event of any of the Parties, including without limitation, if either party is merged, consolidated or sells all or substantially all of its assets.

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

VERAZ NETWORKS LTD.
By:	/s/ Zamir Segev
Printed Name: Zamir Segev
Title:
Date:
ECI TELECOM LTD.
By:	/s/ Illegible
Printed Name:
Title:
Date:
ECI TELECOM-NGTS LTD.
By:	/s/ Giora Bitan
Printed Name: Giora Bitan
Title:
Date:

6

LIST OF APPENDICES:

Appendix 1.3	“Veraz Know-How”
Appendix 1.4	“Veraz Patents”
Appendix 1.5	“Veraz Trademarks”

7

EX-10.8

Exhibit 10.8

Appendix 2.4(a) to Intellectual Property License Agreement

LICENSE AGREEMENT

THIS LICENSE AGREEMENT (this “License Agreement”) is entered as of October ___, 2002, by and between ECI TELECOM LTD. (“ECI” or “Licensee”) and VERAZ NETWORKS LTD. [formerly Chorale Networks Ltd.](“Veraz” or “Licensor”); ECI or Licensee, on the one hand, and Veraz or Licensor, on the other, may each individually be referred to in this License Agreement as a “Party”, and collectively referred to in this License Agreement as the “Parties”.

WITNESSETH: THAT

WHEREAS, Licensee and Licensor are parties to that certain Separation and Asset Purchase Agreement dated as of October ___, 2002 (the “APA”); and

WHEREAS, Licensee and Licensor are parties to that certain Intellectual Property License Agreement dated as of October ___, 2002 (the “Intellectual Property License Agreement”); and

WHEREAS, as part of the Intellectual Property License Agreement, Licensor and Licensee have agreed to enter into this License Agreement; and

WHEREAS; Licensee is desirous of obtaining from Licensor, and Licensor is willing to grant to Licensee, subject to the terms and conditions set forth herein, a license to use Licensor IPR (as defined below) for certain prescribed purposes; and

NOW, THEREFORE, in consideration of the mutual covenants and provisions herein contained, it is hereby agreed by and between the Parties as follows:

ARTICLE 1

DEFINITIONS

As used herein, the following terms have the following meanings unless otherwise defined herein. Additionally, all capitalized terms used herein shall have the meanings as set forth in the Intellectual Property License Agreement:

1.1 “Assignment Agreement” shall mean that certain Intellectual Property Assignment Agreement of even date herewith for which the Parties have entered into.

1.2 “Intellectual Property Rights” shall mean all rights under the laws of any jurisdiction in the world with respect to: (i) rights associated with works of authorship, including exclusive exploitation rights, copyrights, moral rights, and mask works; (ii) trade secret rights; (iii) contract rights in intellectual property of every kind and nature; and (iv) rights in or relating to registrations, renewals, extensions, combinations, divisions, and reissues of, and applications for, any of the rights referred to in subclauses (i) through (iii) above; but excluding all Patents, trademarks, service marks, trade names, and service names.

1.

1.3 “Licensor Know-How” shall mean the Know-How of Licensor listed on Appendix 1.3 attached hereto that has been assigned to Licensor under the Assignment Agreement, which is the Know-How licensed to Licensee hereunder.

1.4 “Licensor Patents” shall mean the Patents of Licensor listed on Appendix 1.4 attached hereto that have been assigned to Licensor under the Assignment Agreement, which are those Patents that are licensed to Licensee hereunder.

1.5 “Licensor IPR” shall mean the Licensor Know-How and Licensor Patents.

1.6 “Licensee Business” shall mean the development, manufacturing, distribution, sale, service and support solely of Licensee Products.

1.7 “Licensee Products” shall mean those products of Licensee listed on Appendix 1.7 attached hereto that contain and are used substantially to perform bandwidth optimization functions and features for mobile radio cellular networks only.

1.8 “Term” shall have the meaning set forth in Article 9 hereof.

ARTICLE 2

LICENSE TO ECI

2.1 Grant of License. Effective as of Closing and subject to the terms and conditions of this License Agreement, including the license restrictions set forth in Section 2.2 below, Licensor grants to Licensee an irrevocable, perpetual, nonexclusive, worldwide, fully paid, royalty-free, non-transferable (except as provided in Section 8.2) license:

     (a) under the Licensor Patents to use, develop, design, integrate, make, have made, market, sell, offer to sell, lease, offer to lease, import and otherwise transfer any products and services with respect to activities conducted within the Licensee Business, and to use any apparatus and practice any method in the manufacture or use thereof; and

     (b) under the Licensor’s Intellectual Property Rights, to use, develop, market, sell, offer to sell, lease, offer to lease, import, service, reproduce, display, perform, design, integrate, import, modify, create derivative works of, adapt, further develop, distribute directly or indirectly, and otherwise exploit the Licensor Know-How with respect to activities conducted within the Licensee Business.

Licensee may, at its discretion, sublicense the foregoing rights solely to the extent necessary for Licensee to develop, market, sell, offer to sell, lease, offer to lease, import, distribute, service and support the Licensee Products with respect to activities conducted by Licensee within the Licensee Business.

2.2 Limitations on Use. Licensee shall not under any circumstances use, or encourage any third party to use, any of the Licensor IPR to perform any activities within the Veraz Business (as that term is defined in the Intellectual Property License Agreement). Notwithstanding the above, Licensee shall not be restricted in any way from pursuing any joint venture that involves independent development or making any financial investment in any company whatsoever provided, however, that Licensee does not breach or

2.

	otherwise violate any license grant, license restriction or other obligation in this License Agreement.
2.3	Grant Back Right. Licensor and ECI hereby acknowledge that Licensor has agreed to grant certain limited licenses under the specified Licensor Patents listed in Appendix 2.3 attached hereto to the respective parties set forth therein, upon their written request to Licensor, to permit them to use, develop, design, integrate, make, have made, market, sell, offer to sell, lease, offer to lease, import and otherwise transfer certain products that are not competitive to Veraz’s products, with respect to activities conducted within the fields of use identified in Appendix 2.3 for such products, and to use any apparatus and practice any method in the manufacture or use thereof. Should any of the respective parties set forth in Appendix 2.3 request in writing for Licensor to grant such license thereto to them, Licensor shall grant a license under the ownership rights that Licensor has in such applicable specified Licensor Patents at such time to such respective party of the same scope and duration and with appropriate field of use, product line and other similar restrictions as those provided in this License Agreement with regard to such specified Licensor Patents.
2.4	Technical Support. For a period of two (2) years after the date of execution of this License Agreement by the Parties, at Licensee’s written request and subject to the availability and agreement by the Parties upon the amounts, including the rates for support, to be paid by Licensee for technical support to be provided by Licensor, Licensor will provide at mutually agreed dates and times technical support to the extent required for Licensee to resolve technical problems encountered with the Licensee’s use of the Licensor Know-How in connection with the Licensee Business. Any amount that is agreed upon between the Parties to be paid by Licensee for technical support to be provided hereunder shall be paid within ten (10) days after services are performed by Licensor. Licensor will invoice Licensee for technical support services on at least a monthly basis after services are rendered. Any technical support that will be provided to Licensee by Licensor hereunder, at Licensee’s written request, will be further limited solely to the permitted use by Licensee of the Licensor Know-How that is existing as of Closing and generally available at the time of Licensee’s written request in accordance with the license rights granted in Section 2.1.

ARTICLE 3

INTELLECTUAL PROPERTY MATTERS

3.1 Intellectual Property Protection. Licensee shall promptly notify Licensor of any and all infringements, imitations, simulations or other illegal use or misuse of the licensed Licensor IPR which come to its attention. Licensor shall determine whether to take any action to prevent the infringement, imitation, simulation or other illegal use or misuse of the IPR. If it elects not to take such action, Licensee may take such action if it has received Licensor’s prior written approval to take such action. In this event, Licensor shall, at Licensee’s expense, cooperate in such action with Licensee including, without limitation, joining as a party. Any money recovered by way of damages or otherwise with respect to such action shall be kept by the Party which bore the costs of such action; or, in any case where the Parties have shared the costs, such money shall be shared in proportion to the costs borne by each Party. Licensee shall render Licensor all reasonable

3.

	assistance in connection with any matter pertaining to the protection, enforcement or infringement of the licensed Licensor IPR, whether in the courts, administrative or quasi-judicial agencies, or otherwise.
3.2	No Warranty. ANY AND ALL LICENSOR KNOW-HOW AND TECHNICAL SUPPORT IS PROVIDED BY LICENSOR TO LICENSEE “AS IS,” AND LICENSOR SHALL HAVE NO LIABILITY WHATSOEVER TO LICENSEE IN CONNECTION WITH LICENSEE’S USE THEREOF IN ANY MANNER WHATSOEVER. ADDITIONALLY, LICENSOR MAKES NO REPRESENTATIONS OR WARRANTIES REGARDING WHETHER ANY OF THE LICENSOR PATENTS ARE VALID OR USEFUL TO LICENSEE.LICENSOR MAKES NO REPRESENTATION, EXTENDS NO WARRANTIES OR INDEMNIFICATION OF ANY KIND, EXPRESSED OR IMPLIED, NOR ASSUMES ANY RESPONSIBILITIES WHATSOEVER WITH RESPECT TO THE COMMERCIAL UTILITY OR QUALITY OF ANY OF THE LICENSOR IPR OR TECHNICAL SUPPORT. LICENSOR DISCLAIMS ALL WARRANTIES, INCLUDING, WITHOUT LIMITATION, ALL IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE AND NONINFRINGEMENT OF THIRD PARTY RIGHTS. LICENSOR SHALL HAVE NO OBLIGATIONS OR LIABILITIES UNDER THIS LICENSE AGREEMENT RELATING TO THE USE BY LICENSEE OF ANY SUCH LICENSOR IPR OR ANY TECHNICAL SUPPORT.
3.3	Limitation of Liability. EXCEPT FOR ALL BREACHES AND VIOLATIONS OF CONFIDENTIALITY OBLIGATIONS, IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR (I) ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING LOST PROFITS OR SAVINGS, RESULTING FROM, ARISING OUT OF OR CONNECTED WITH THIS LICENSE AGREEMENT OR THE PERFORMANCE OR BREACH THEREOF OR (H) COST OF PROCUREMENT OF SUBSTITUTE GOODS, TECHNOLOGY OR SERVICES, AND EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. FOR THE AVOIDANCE OF DOUBT, DAMAGES INCURRED BY VERAZ FROM ECI’S BREACHES OR VIOLATIONS OF THE LICENSE GRANTS OR EXCLUSIVITY OBLIGATIONS IN SECTION 2.2 OF THIS AGREEMENT SHALL BE DEEMED DIRECT DAMAGES TO WHICH THIS LIMITATION OF LIABILITY PROVISION SHALL NOT APPLY.

ARTICLE 4

OWNERSHIP ACKNOWLEDGEMENT

Licensee hereby acknowledges and agrees that Licensor owns the Licensor IPR that is licensed by Licensor to Licensee hereunder and all rights therein and that nothing in this License Agreement shall give Licensee any right, title or interest in or to such Licensor IPR, other than the limited and restricted license granted in Section 2.1 of this License Agreement.

4.

ARTICLE 5

GOVERNING LAW; DISPUTE RESOLUTION

5.1 This License Agreement shall be governed by and construed in accordance with the laws of the State of Israel, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof.

5.2 In the event of any controversy or claim arising out of or in connection with this License Agreement, Section 11.5 of the APA shall govern, mutatis mutandis.

ARTICLE 6

MISCELLANEOUS

6.1 The term of this License Agreement shall commence upon the Effective Date and will continue indefinitely.

6.2 All notices, requests and other communications hereunder shall be in writing and shall be governed by Section 11.13 of the APA, mutatis mutandis.

6.3 The headings of this License Agreement are included for convenience only, and the articles or sections shall not be construed in accordance with their headings.

6.4 The Parties hereto agree that the invalidity or unenforceability of any of the provisions hereof shall not in any way affect the validity or enforceability of any other provisions of this License Agreement except those from which the invalidated or unenforceable provisions comprise an integral part or are otherwise clearly inseparable.

6.5 Nothing contained in this License Agreement shall be deemed or construed to constitute or create among the Parties hereto a partnership, association, joint venture franchise or other agency.

6.6 This License Agreement establishes the rights, duties and obligations of Licensor and Licensee with respect to the subject matter hereof.

6.7 This License Agreement is the entire agreement by and among the Parties with respect to this subject matter, and supersedes all prior discussions, negotiations, communications and agreements with respect thereto. This License Agreement may be modified only in writing signed by all Parties hereto. Any purported oral modification of this License Agreement shall be without any effect whatsoever.

6.8 The failure of any Party to enforce at any time any of the provisions of this License Agreement shall not be deemed to be a waiver of the right of such Party thereafter to enforce such provision.

6.9 The obligations of any Party shall be excused to the extent, and for the period during which, that performance is rendered impossible by strike, fire, flood, earthquake, other natural disasters, governmental acts, orders or restrictions, or any other reason beyond the reasonable control of such Party.

5.

6.10 Each Party’s performance of this License Agreement, including without limitation the Licensee’s use of the Licensor Patents and Licensor Know-How shall at all times comply with all requirements, rules, laws and regulations of all governmental bodies having proper jurisdiction, and including without limitation any requirements to obtain any licenses under the export or similar laws applicable jurisdiction, and including without limitation any requirements to obtain any licenses under the export or similar laws of the United States.

6.11 In the event of any breach or violation of any of the confidentiality obligations, license grants or license restrictions in Section 2.2, each Party hereby acknowledges and agrees that the harm suffered by the affected Party would not be compensable by monetary damages alone and, accordingly, that the affected Party shall, in addition to any other available legal or equitable remedies, be entitled to seek an injunction or other equitable relief against the other Party in connection with any breach or violation of any such provisions.

ARTICLE 7

CONFIDENTIALITY

7.1 Licensee acknowledges and agrees that all CONFIDENTIAL INFORMATION of Licensor that Licensee has obtained prior to Closing or Licensee receives or obtains in the context of this License Agreement is the confidential proprietary property of Licensor. Except as expressly allowed herein, the Licensor will hold in confidence and not use or disclose any CONFIDENTIAL INFORMATION of Licensor for any purpose other than for which it was disclosed and shall similarly bind all of Licensee’s employees and subcontractors in writing. The Licensee shall not be obligated under this Article 7 with respect to information that Licensee can document:

(i)	is or has become readily publicly available without restriction through no fault of the Licensee or its employees or agents;
(ii)	is required to be disclosed by legal process, court order or governmental regulations, provided that the Licensee , subject to any such process, order or regulations, shall furnish notice of any required disclosure and reasonably assists the Licensor in any effort of the Licensor to limit or restrict any such disclosure.

7.2 For purposes hereof, CONFIDENTIAL INFORMATION means, without limitation, the Licensor Know-How and any informative technical material, technical information, know-how, software and firmware (including all copies derived from material furnished hereunder) of Licensor, whether written or oral, furnished to or obtained by Licensee that is marked as, or otherwise reasonably understood by Licensee to be, confidential or proprietary to Licensor.

6.

ARTICLE 8

ASSIGNMENT

8.1 This License Agreement and the rights, duties and liabilities of the Parties under this License Agreement will bind and inure to the benefit of their successors and assigns, respectively, as permitted pursuant to this Article 8.

8.2 Neither Party may assign, transfer or delegate its rights and obligations under this License Agreement, either in whole or in part, without the prior written consent of the other Party, provided, however, that either Party may assign this License Agreement without obtaining such prior written consent to a successor-in-interest to it that agrees to be bound by all of the terms and conditions in this License Agreement, in connection with (i) the sale of all or substantially all of the assets of such Party, (ii) the purchase of all or a majority of such Party’s outstanding voting shares, or (iii) a consolidation, merger or reorganization of such Party. Any such attempted assignment or delegation in derogation of the foregoing shall be null and void and without any legal effect.

IN WITNESS WHEREOF, the undersigned have executed this License Agreement as of the date first above written in the introductory paragraph hereof.

ECI TELECOM LTD.
By:	/s/ Giora Bitan
Name: Giora Bitan
Title:
VERAZ NETWORKS LTD.
By:	/s/ Zamir Segev
Name: Zamir Segev
Title:

7.

LIST OF APPENDIXES:

Appendix 1.3: Licensor Know-How

Appendix 1.4: Licensor Patents

Appendix 1.7: Licensee Products

Appendix 2.3: Specified Patents

8.

EX-10.9

Exhibit 10.9

EXHIBIT B TO SEPARATION AGREEMENT

ASSIGNMENT AND ASSUMPTION AGREEMENT

     THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this “Agreement”), entered into as of December 31, 2002 by and among ECI TELECOM LTD. (“ECI TELECOM”), ECI TELECOM — NGTS LTD. (“NGTS”) and VERAZ NETWORKS LTD. (“Veraz”). ECI TELECOM and NGTS are referred to collectively as “ECI.” Veraz and ECI are referred to collectively as the “Parties.”

WITNESSETH:

     WHEREAS, ECI and Veraz have entered into a Separation and Asset Purchase Agreement dated as of December 31, 2002 (the “APA”);

     WHEREAS, it is a condition to closing of the APA that this Agreement be entered into between the Parties.

     NOW, THEREFORE, it is hereby agreed by and between the Parties as follows:

ARTICLE 1

DEFINITIONS

All capitalized terms used in this Agreement but not defined in it shall have the meanings set forth for such terms in the APA.

ARTICLE 2

ASSIGNMENT AND ASSUMPTION

At the Closing, effective as of the Effective Date, ECI hereby irrevocably and unconditionally assigns, grants, transfers, conveys and delivers to Veraz and its successors and assigns, all rights, title, interests, benefits, and privileges, under each Assigned Contract, subject to Section 7.3 of the APA.

Veraz does hereby irrevocably and unconditionally assume from ECI all liabilities and obligations that arise under the Assigned Contracts, but only to the extent such liabilities and obligations in each case relate to sales that are consummated (i.e., product delivered) on or after the Effective Date or the grounds for which arose (e.g., services or supplies delivered) on or after the Effective Date, subject to Section 7.3 of the APA.

1.

ARTICLE 3

MISCELLANEOUS

3.1 This Agreement shall be governed by and construed in accordance with the laws of the State of Israel, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof.

3.2 In the event of any controversy or claim arising out of or in connection with this Agreement, Section 11.5 of the APA shall govern, mutatis mutandis.

3.3 Nothing contained in this Agreement shall be deemed or construed to constitute or create among the Parties hereto a partnership, association, joint venture franchise or other agency.

3.4 This Agreement may be executed in any number of counterparts, each of which will be an original but all of which taken together shall constitute one instrument.

3.5 In the event of any conflict between the terms and conditions of this Agreement and the terms of the APA, the terms of the APA shall govern, supersede and prevail.

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

VERAZ NETWORKS, LTD.
By:	/s/ Zamir Segev
Printed Name: Zamir Segev
Title:
Date:
ECI TELECOM LTD.		ECI TELECOM-NGTS LTD.
By:	/s/ Giora Bitan	By:	/s/ Illegible
Printed Name: Giora Bitan		Printed Name:
Title:		Title:
Date		Date:

2.

EX-10.10

Exhibit 10.10

ASSIGNMENT AND ASSUMPTION AGREEMENT

     THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this “Agreement”), entered into as of December 31, 2002 by and between ECI TELECOM — NGTS INC. (“Seller”) and VERAZ NETWORKS INTERNATIONAL, INC. (“Veraz U.S.”). Seller and Veraz are referred to collectively as the “Parties.”

WITNESSETH:

     WHEREAS, Seller and Veraz have entered into the U.S. Separation and Asset Purchase Agreement dated as of the date hereof (as amended, the “U.S. APA”);

     WHEREAS, this Agreement, duly executed, is to be delivered by the Parties at the Closing, as defined in the U.S. APA.

     NOW, THEREFORE, it is hereby agreed by and between the Parties as follows:

ARTICLE 1

DEFINITIONS

All capitalized terms used in this Agreement but not defined in it shall have the meanings set forth for such terms in the U.S. APA.

ARTICLE 2

ASSIGNMENT AND ASSUMPTION

Effective as of the Closing, Seller hereby irrevocably and unconditionally assigns, grants, transfers, conveys and delivers to Veraz U.S. and its successors and assigns, all rights, title, interests, benefits, and privileges, under each Assigned Contract, subject to Section 7.3 of the U.S. APA.

Veraz U.S. does hereby irrevocably and unconditionally assume from Seller (i) all liabilities and obligations that arise under the Assigned Contracts, but only to the extent such liabilities and obligations in each case relate to sales that are consummated (i.e., product delivered) on or after the Effective Date or the grounds for which arose (e.g., services or supplies delivered) on or after the Effective Date, subject to Section 7.3 of the APA and (ii) all accrued vacation liabilities up to a maximum of $100,000 relating to the Business Employees, as such vacation liabilities are detailed on Schedule 2.2, as amended, to the U.S. APA.

1.

ARTICLE 3

MISCELLANEOUS

3.1 This Agreement shall be governed by and construed in accordance with the laws of the State of Israel, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof

3.2 In the event of any controversy or claim arising out of or in connection with this Agreement, Section 11.5 of the U.S. APA shall govern, mutatis mutandis.

3.3 Nothing contained in this Agreement shall be deemed or construed to constitute or create among the Parties hereto a partnership, association, joint venture franchise or other agency.

3.4 This Agreement may be executed in any number of counterparts, each of which will be an original but all of which taken together shall constitute one instrument.

3.5 In the event of any conflict between the terms and conditions of this Agreement and the terms of the U.S. APA, the terms of the U.S. APA shall govern, supersede and prevail.

[Remainder of page intentionally left blank]

2.

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

VERAZ NETWORKS INTERNATIONAL, INC.,
By:	/s/ Martin Ossad
Printed Name: Martin Ossad
Title: Vice President & Secretary
Date:
ECI TELECOM — NGTS INC.,
By:	/s/ J.R. Kennedy
Printed Name: J.R. Kennedy
Title:
Date:

3.

EX-10.11

Exhibit 10.11

NEXVERSE NETWORKS, INC.

SERIES C PREFERRED STOCK PURCHASE AGREEMENT

OCTOBER 30, 2002

Table Of Contents

		Page
1.	AGREEMENT TO SELL AND PURCHASE		2
	1.1 Authorization of Shares		2
	1.2 Sale and Purchase		2
2.	CLOSING, DELIVERY AND PAYMENT		2
	2.1 Closing		2
	2.2 Delivery		2
	2.3 Subsequent Sales of Shares		2
3.	REPRESENTATIONS AND WARRANTIES OF THE COMPANY		3
	3.1 Organization, Good Standing and Qualification		3
	3.2 Subsidiaries		3
	3.3 Capitalization; Voting Rights		3
	3.4 Authorization; Binding Obligations		5
	3.5 Financial Statements		5
	3.6 Liabilities		6
	3.7 Agreements; Action		6
	3.8 Obligations to Related Parties		6
	3.9 Changes		7
	3.10 Title to Properties and Assets; Liens, Etc.		8
	3.11 Intellectual Property		8
	3.12 Protection of Proprietary Rights		9
	3.13 Compliance with Other Instruments		9
	3.14 Litigation		9
	3.15 Employees		10
	3.16 Obligations of Management		10
	3.17 Registration Rights and Voting Rights		10
	3.18 Compliance with Laws; Permits		10
	3.19 Offering Valid		11
	3.20 Full Disclosure		11
	3.21 Minute Books		11
	3.22 Real Property Holding Corporation		11

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		Page
	3.23 Insurance		11
4.	REPRESENTATIONS AND WARRANTIES OF PURCHASERS		11
	4.1 Requisite Power and Authority		11
	4.2 Investment Representations		12
	4.3 Transfer Restrictions		13
5.	CONDITIONS TO EXECUTION OF THIS AGREEMENT		13
	5.1 Conditions to Purchasers' Execution of this Agreement		13
	5.2 Conditions to Execution of this Agreement by the Company		14
6.	CLOSING DELIVERABLES		15
	6.1 Filing of Restated Charter		15
	6.2 Corporate Documents		15
	6.3 Compliance Certificate		15
	6.4 Secretary’s Certificate		15
	6.5 Board of Directors		15
	6.6 Proceedings and Documents		16
7.	CONDITIONS TO CLOSING		16
	7.1 Conditions to Purchasers' Obligations at the Closing		16
	7.2 Conditions to Obligations of the Company		16
8.	TERMINATION PRIOR TO CLOSING		17
9.	MISCELLANEOUS		17
	9.1 Governing Law		17
	9.2 Survival		17
	9.3 Successors and Assigns		17
	9.4 Entire Agreement		17
	9.5 Severability		17
	9.6 Amendment and Waiver		17
	9.7 Delays or Omissions		18
	9.8 Waiver of Conflicts		18
	9.9 Notices		18
	9.10 Expenses		19
	9.11 Attorneys' Fees		19
	9.12 Titles and Subtitles		19
	9.13 Counterparts		19

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	Page
9.14 Broker’s Fees		19
9.15 Exculpation Among Purchasers		19
9.16 Pronouns		19
9.17 California Corporate Securities Law		20

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List Of Exhibits

Schedule of Purchasers	Exhibit A
Amended and Restated Certificate of Incorporation	Exhibit B
Schedule of Exceptions	Exhibit C
Investor Rights Agreement	Exhibit D
Voting Agreement	Exhibit E
Form of Legal Opinion	Exhibit F
Debt Obligations	Exhibit G
Form of Escrow Agreement	Exhibit H

NEXVERSE NETWORKS, INC.

SERIES C PREFERRED STOCK PURCHASE AGREEMENT

     This Series C Preferred Stock Purchase Agreement (the “Agreement”) is made and entered into as of October 30, 2002, by and among NexVerse Networks, Inc., a Delaware corporation (the “Company”), and each of those persons and entities, severally and not jointly, whose names are set forth on the Schedule of Purchasers attached hereto as Exhibit A (which persons and entities are hereinafter collectively referred to as “Purchasers” and each individually as a “Purchaser”).

Recitals

     Whereas, the Company is entering into that certain Share Exchange Agreement by and among the Company, ECI Telecom Ltd. (“ECI”), and ECI Telecom — NGTS, Inc. of even date herewith (the “Exchange Agreement”), pursuant to which the Company will acquire all of the outstanding capital stock of certain subsidiaries of ECI upon the Closing, as such term is defined in the Exchange Agreement (the “Exchange Closing”);

     Whereas, the Company has authorized the sale and issuance of an aggregate of one hundred seventy four million eight hundred twenty five thousand two hundred (174,825,200) shares of its Series C Preferred Stock (the “Shares”) simultaneously with the Exchange Closing;

     Whereas, upon execution hereof, the Company and the Purchasers are placing the purchase price for the Shares sold in the initial Closing and their respective signature pages to the Agreement and Related Agreements (as defined in Section 3.1 below) into escrow with the Bank of New York (the “Escrow Agent”) pursuant to that certain Escrow Agreement by and among the Escrow Agent, the Purchasers and the Company of even date herewith in the form attached hereto as Exhibit H (the “Escrow Agreement”);

     Whereas, Purchasers desire to purchase the Shares on the terms and conditions set forth herein; and

     Whereas, the Company desires to issue and sell the Shares to Purchasers on the terms and conditions set forth herein.

Agreement

     Now, Therefore, in consideration of the foregoing recitals and the mutual promises, representations, warranties, and covenants hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

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     1. Agreement To Sell And Purchase.

          1.1 Authorization of Shares. The Company has authorized (a) the sale and issuance of the Shares to the Purchasers and (b) the issuance of the shares of Common Stock to be issued upon conversion of the Shares (the “Conversion Shares”). The Shares and the Conversion Shares will have the rights, preferences, privileges and restrictions set forth in the Amended and Restated Certificate of Incorporation of the Company, in the form attached hereto as Exhibit B (the “Restated Charter”).

          1.2 Sale and Purchase. Subject to the terms and conditions hereof, at the Closing (as hereinafter defined) the Company hereby agrees to issue and sell to each Purchaser, severally and not jointly, and each Purchaser agrees to purchase from the Company, severally and not jointly, the number of Shares set forth opposite such Purchaser’s name on Exhibit A, at a purchase price of seventeen and sixteen hundredths cents ($0.1716) per share.

2. Closing, Delivery And Payment.

          2.1 Closing. The closing of the sale and purchase of the Shares under this Agreement (the "Closing”) shall take place at the offices of Cooley Godward llp, Five Palo Alto Square, 3000 El Camino Real, Palo Alto, CA, 94306-2155 upon delivery of the Release Instructions (as defined in the Escrow Agreement) or at such other time or place as the Company and Purchasers may mutually agree (such date is hereinafter referred to as the “Closing Date”).

          2.2 Delivery. At the Closing, subject to the terms and conditions hereof and of the Escrow Agreement, the Company will deliver to each Purchaser a certificate representing the number of Shares to be purchased at the Closing by such Purchaser, and the Escrow Agent will deliver the purchase price of the Shares to the Company.

          2.3 Subsequent Sales of Shares. At any time on or before the 120^th day after the Closing, the Company may sell up to the balance of the Shares not sold at the Closing to such persons as may be approved by the Board of Directors of the Company (the “Additional Purchasers”). At any additional closings (each an “Additional Closing”) (i) All such sales made shall be made on the terms and conditions set forth in this Agreement (other than terms relating to the Escrow Agreement), (ii) the representations and warranties of the Company set forth in Section 3 hereof (and the Schedule of Exceptions) shall speak as of the date of this Agreement and the Company shall have no obligation to update any such disclosure, and (iii) the representations and warranties of the Additional Purchasers in Section 4 hereof shall speak as of such Additional Closing. The Schedule of Purchasers may be amended by the Company without the consent of Purchasers to include any Additional Purchasers. Any shares of Series C Preferred Stock sold pursuant to this Section 2.3 shall be deemed to be “Shares” for all purposes under this Agreement and any Additional Purchasers thereof shall be deemed to be “Purchasers” for all purposes under this Agreement.

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     3. Representations And Warranties Of The Company.

          Except as set forth on a Schedule of Exceptions attached hereto as Exhibit C, delivered by the Company to Purchasers before the date of this Agreement, the Company hereby represents and warrants as of the date of this Agreement to each Purchaser as set forth below.

          3.1 Organization, Good Standing and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. The Company has all requisite corporate power and authority to own and operate its properties and assets, to execute and deliver this Agreement, the Amended and Restated Investor Rights Agreement in the form attached hereto as Exhibit D (the “Investor Rights Agreement”) and the Amended and Restated Voting Agreement in the form attached hereto as Exhibit E (the “Voting Agreement”) (collectively, the “Related Agreements”), to issue and sell the Shares and the Conversion Shares, and to carry out the provisions of this Agreement, the Related Agreements and the Restated Charter and to carry on its business as presently conducted and as presently proposed to be conducted. The Company is duly qualified and is authorized to do business and is in good standing as a foreign corporation in all jurisdictions in which the nature of its activities and of its properties (both owned and leased) makes such qualification necessary, except for those jurisdictions in which failure to do so would not have a material adverse effect on the Company or its business.

          3.2 Subsidiaries. The Company does not own or control any equity security or other interest of any other corporation, limited partnership or other business entity. The Company is not a participant in any joint venture, partnership or similar arrangement. Since its inception, the Company has not consolidated or merged with, acquired all or substantially all of the assets of, or acquired the stock or any interest in any corporation, partnership, association, or other business entity.

          3.3 Capitalization; Voting Rights

               (a) The authorized capital stock of the Company, of the date hereof, consists of (i) sixty-five million (65,000,000) shares of Common Stock, par value $0.001 per share, three million five hundred sixteen thousand three hundred seventy five (3,516,375) shares of which are issued and outstanding, and (ii) forty-six million four hundred seventy-four thousand seven hundred thirty-eight (46,474,738) shares of Preferred Stock, par value $0.001 per share, twelve million nine hundred seventy-four thousand seven hundred thirty-eight (12,974,738) shares of which are designated Series A Preferred Stock, all of which are issued and outstanding and thirty-three million five hundred thousand (33,500,000) shares of which are designated Series B Preferred Stock, thirty million (30,000,000) of which are issued and outstanding

               (b) The authorized capital stock of the Company, immediately prior to the Closing, will consist of (i) four hundred fifty million (450,000,000) shares of Common Stock, par value $0.001 per share, one hundred seventeen million two hundred sixty six thousand one hundred forty eight (117,266,148) shares of which will be issued and outstanding, and (ii) one hundred ninety four million four hundred forty six thousand five hundred one (194,446,501) shares of Preferred Stock, par value $0.001 per share, Five million four hundred forty six

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thousand five hundred (5,446,500) shares of which will be designated Series A-1 Preferred Stock, par value $0.001 per share, Five million four hundred twenty five thousand two hundred seven (5,425,207) of which will be issued and outstanding; one (1) share of which will be designated Series A-2 Preferred Stock, par value $0.001 per share, which will not be issued and outstanding; nine million (9,000,000) shares of which will be designated Series B-1 Preferred Stock, par value $0.001 per share, all of which will be issued and outstanding, and one hundred eighty million (180,000,000) shares of which will be designated Series C Preferred Stock, par value $0.001 per share, none of which will be issued and outstanding.

               (c) As of the date hereof, under the Company’s 2001 Equity Incentive Plan (the “Plan”), (i) twenty three thousand two hundred three (23,203) shares of Common Stock have been issued pursuant to restricted stock purchase agreements and/or the exercise of outstanding options, (ii) options to purchase four million six hundred sixty thousand thirty three (4,660,033) shares of Common Stock have been granted and are currently outstanding, and (iii) two million one hundred ninety thousand three hundred thirty six (2,190,336) shares of Common Stock remain available for future issuance to officers, directors, employees and consultants of the Company.

               (d) Other than one hundred forty seven thousand five hundred (147,500) shares of Series B Preferred Stock reserved for issuance pursuant to outstanding warrants (which will be converted into warrants to purchase one hundred sixty two thousand two hundred fifty (162,250) shares of Common Stock and twenty one thousand one hundred thirty seven (21,137) shares of Series A-1 Preferred Stock automatically upon filing of the New Charter), the shares reserved for issuance under the Plan, and except as may be granted pursuant to the Exchange Agreement, this Agreement and the Related Agreements, there are no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal), proxy or stockholder agreements, or agreements of any kind for the purchase or acquisition from the Company of any of its securities as of the date hereof.

               (e) Immediately prior to the Closing, other than one hundred sixty two thousand two hundred fifty (162,250) shares of Common Stock and twenty one thousand one hundred thirty seven (21,137) shares of Series A-1 Preferred Stock that will be reserved for issuance pursuant to outstanding warrants, the shares that will be reserved for issuance under the Plan, and except as may be granted pursuant to the Exchange Agreement, this Agreement and the Related Agreements, there will be no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal), proxy or stockholder agreements, or agreements of any kind for the purchase or acquisition from the Company of any of its securities. At the Closing, all such preemptive rights will have been properly waived or complied with respect to all prior issuances of capital stock and with respect to the issuance of the Shares and Conversion Shares.

               (f) All issued and outstanding shares of the Company’s Common Stock and Preferred Stock (i) have been duly authorized and validly issued and are fully paid and nonassessable, and (ii) were issued in compliance with all applicable state and federal laws concerning the issuance of securities.

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               (g) Effective as of the Closing, the debt obligations of the Company to Comdisco, Inc., Comerica Bank (California), GATX Ventures, Inc., and Dominion Venture Finance L.L.C. will be restructured as set forth on Exhibit G.

               (h) As of the Closing, the rights, preferences, privileges and restrictions of the Shares will be as stated in the Restated Charter. Each share of Series C Preferred Stock will be convertible into Common Stock on a one-for-one basis as of the Closing. The Conversion Shares have been duly and validly reserved for issuance. When issued in compliance with the provisions of this Agreement and the Restated Charter, the Shares and the Conversion Shares will be validly issued, fully paid and nonassessable, and will be free of any liens or encumbrances other than liens and encumbrances created by or imposed upon Purchasers; provided, however, that the Shares and the Conversion Shares may be subject to restrictions on transfer under state and/or federal securities laws as set forth herein or as otherwise required by such laws at the time a transfer is proposed.

          3.4 Authorization; Binding Obligations. All corporate action on the part of the Company, its officers, directors and stockholders necessary for the authorization of this Agreement and the Related Agreements, the performance of all obligations of the Company hereunder and thereunder and the authorization, sale, issuance and delivery of the Shares pursuant hereto and the Conversion Shares pursuant to the Restated Charter has been taken, including valid approval of the Restated Charter. This Agreement and the Related Agreements, when executed and delivered, will be valid and binding obligations of the Company enforceable in accordance with their terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights, (b) general principles of equity that restrict the availability of equitable remedies, and (c) to the extent that the enforceability of the indemnification provisions in the Investor Rights Agreement may be limited by applicable laws. The sale of the Shares and the subsequent conversion of the Shares into Conversion Shares are not and will not be subject to any preemptive rights or rights of first refusal that have not been properly waived or complied with.

          3.5 Financial Statements. The Company has made available to each Purchaser (a) its audited balance sheet as at June 30, 2002 and audited statement of income and cash flows for the period from the Company’s inception to June 30, 2002, and (b) its unaudited balance sheet as at September 30, 2002 (the “Statement Date”) and unaudited consolidated statement of income and cash flows for the three month period ending on the Statement Date (collectively, the “Financial Statements”). The Financial Statements, together with the notes thereto, have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated, except as disclosed therein, and present fairly the financial condition and position of the Company as of June 30, 2002 and the Statement Date; provided, however, that the unaudited financial statements are subject to normal recurring year-end audit adjustments (which are not expected to be material either individually or in the aggregate), and do not contain all footnotes required under generally accepted accounting principles.

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          3.6 Liabilities. Other than as set forth in the Financial Statements, the Company has no material liabilities and, to the best of its knowledge, has no material contingent liabilities, except current liabilities incurred in the ordinary course of business which have not been, either in any individual case or in the aggregate, materially adverse.

          3.7 Agreements; Action.

               (a) Except for agreements explicitly contemplated hereby and agreements between the Company and its employees with respect to the sale of the Company’s Common Stock pursuant to the Plan, there are no agreements, understandings or proposed transactions between the Company and any of its officers, directors, employees, affiliates or any affiliate thereof.

               (b) There are no agreements, understandings, instruments, contracts, proposed transactions, judgments, orders, writs or decrees to which the Company is a party or to its knowledge by which it is bound which may involve (i) future obligations (contingent or otherwise) of, or payments to, the Company in excess of $25,000 (other than obligations of, or payments to, the Company arising from purchase or sale agreements entered into in the ordinary course of business), or (ii) the transfer or license of any patent, copyright, trade secret or other proprietary right to or from the Company (other than licenses by the Company of “off the shelf” or other standard products), or (iii) indemnifications by the Company, including with respect to infringements of proprietary rights (other than indemnification obligations arising from purchase, sale or license agreements entered into in the ordinary course of business).

               (c) The Company has not (i) declared or paid any dividends, or authorized or made any distribution upon or with respect to any class or series of its capital stock, (ii) incurred or guaranteed any indebtedness for money borrowed or any other liabilities (other than with respect to dividend obligations, distributions, indebtedness and other obligations incurred in the ordinary course of business) individually in excess of $25,000 or, in the case of indebtedness and/or liabilities individually less than $25,000, in excess of $50,000 in the aggregate, (iii) made any loans or advances to any person, other than ordinary advances for travel expenses, or (iv) sold, exchanged or otherwise disposed of any of its assets or rights, other than the sale of its inventory in the ordinary course of business.

               (d) For the purposes of subsections (b) and (c) above, all indebtedness, liabilities, agreements, understandings, instruments, contracts and proposed transactions involving the same person or entity (including persons or entities the Company has reason to believe are affiliated therewith) shall be aggregated for the purpose of meeting the individual minimum dollar amounts of such subsections.

          3.8 Obligations to Related Parties. There are no obligations of the Company to officers, directors, stockholders, or employees of the Company other than (a) for payment of salary for services rendered, (b) reimbursement for reasonable expenses incurred on behalf of the Company and (c) for other standard employee benefits made generally available to all employees (including stock option agreements outstanding under any stock option plan approved by the Board of Directors of the Company). None of the officers, directors or, to the best of the Company’s knowledge, key employees or stockholders of the Company or any members of their

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immediate families, is indebted to the Company or has any direct or indirect ownership interest in any firm or corporation with which the Company is affiliated or with which the Company has a business relationship, or any firm or corporation which competes with the Company, other than passive investments in publicly traded companies (representing less than 1% of such company) which may compete with the Company. No officer, director or stockholder, or any member of their immediate families, is, directly or indirectly, interested in any material contract with the Company (other than such contracts as relate to any such person’s ownership of capital stock or other securities of the Company).

          3.9 Changes. Since the Statement Date, there has not been:

               (a) Any change in the assets, liabilities, financial condition or operations of the Company from that reflected in the Financial Statements, other than changes in the ordinary course of business, none of which individually or in the aggregate has had a material adverse effect on such assets, liabilities, financial condition or operations of the Company;

               (b) Any resignation or termination of any officer, key employee or group of employees of the Company;

               (c) Any material change in the contingent obligations of the Company by way of guaranty, endorsement, indemnity, warranty or otherwise;

               (d) Any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting the properties, business or prospects or financial condition of the Company;

               (e) Any waiver by the Company of a valuable right or of a material debt owed to it;

               (f) Any material change in any compensation arrangement or agreement with any employee, officer, director or stockholder;

               (g) Any labor organization activity related to the Company;

               (h) Any sale, assignment or transfer of any patents, trademarks, copyrights, trade secrets or other intangible assets;

               (i) Any change in any agreement to which the Company is a party or by which it is bound which materially and adversely affects the business, assets, liabilities, financial condition, operations or prospects of the Company;

               (j) Any other event or condition of any character that, either individually or cumulatively, has materially and adversely affected the business, assets, liabilities, financial condition or operations of the Company; or

               (k) Any arrangement or commitment by the Company to do any of the acts described in subsection (a) through (j) above.

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          3.10 Title to Properties and Assets; Liens, Etc. The Company has good and marketable title to its properties and assets, and good title to its leasehold estates, in each case subject to no mortgage, pledge, lien, lease, encumbrance or charge, other than (a) those resulting from taxes which have not yet become delinquent, (b) minor liens and encumbrances which do not materially detract from the value of the property subject thereto or materially impair the operations of the Company, and (c) those that have otherwise arisen in the ordinary course of business. The Company is in compliance with all material terms of each lease to which it is a party or is otherwise bound.

          3.11 Intellectual Property.

               (a) General. The Company owns or possesses sufficient legal rights to all patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information and other proprietary rights and processes (“Proprietary Rights”) necessary for its business as now conducted and as presently proposed to be conducted. Section 3.11(a) of the Schedule of Exceptions sets forth with respect to the Proprietary Rights of the Company: (i) each trademark, trade name or service mark, whether or not registered, (ii) each copyright for which registration has been sought, whether or not registered, including the number and date of registration for each country in which a copyright has been registered, (iii) for each patent which has been issued or invention for which a patent application has been filed, whether or not issued, the number and date of the application for each country in which a patent application has been made or a patent has been issued, and (iv) for each mask work (if any), whether or not registered, the date of first commercial exploitation and if registered, the registration number and date of registration. True and correct copies of all Proprietary Rights (including all pending applications, application related documents and materials and written materials relating to Trade Secrets) owned, controlled or used by or on behalf of the Company or in which the Company has any interest whatsoever have been provided to the Investors.

               (b) Adequacy. The Proprietary Rights of the Company are all those necessary for the normal conduct of the business of the Company as presently conducted and as presently contemplated, including the design, manufacture, development and sale of all products currently under development, planned for development or in production.

               (c) Royalties and Licenses. Except as set forth in Section 3.11(c) of the Schedule of Exceptions, the Company has no obligation to compensate any person for the use of any of its Proprietary Rights, the Company is not subject to any license of Proprietary Rights other than shrink-wrap licenses nor has the Company granted to any Person any license, option or other rights to use in any manner any of its Proprietary Rights, whether requiring the payment of royalties or not.

               (d) Ownership. The Company has a valid right to use or owns free and clear of any encumbrance its Proprietary Rights, and such Proprietary Rights will not cease to be valid rights of the Company by reason of the execution, delivery and performance of this Agreement or the Related Agreements or the consummation of the transactions contemplated hereby or thereby.

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               (e) Absence of Claims. The Company (A) has not received any notice alleging, or otherwise has knowledge of facts that might give rise to, invalidity with respect to any of the Proprietary Rights of the Company and (B) has not received any notice of alleged infringement of any rights of others due to any activity by the Company. To the knowledge of the Company, the Company’s use of its Proprietary Rights in its past, current and planned products do not and would not infringe upon or otherwise violate the valid rights of any third party anywhere in the world. No other Person (i) has notified the Company that it is claiming any ownership of or right to use any of the Company’s Proprietary Rights or (ii) to the knowledge of the Company, is infringing upon any such Proprietary Rights in any way.

          3.12 Protection of Proprietary Rights. All of the pending applications for the Company’s Proprietary Rights have been duly filed and all other customary actions to protect such Proprietary Rights have been taken. The Company has taken reasonable steps necessary or appropriate (including, entering into appropriate confidentiality and nondisclosure agreements with officers, directors, subcontractors, employees, licensees and customers) to safeguard and maintain the secrecy and confidentiality of, and the proprietary rights in, the Proprietary Rights. The Company is not aware of any breach of any such confidentiality or nondisclosure agreement by any party thereto.

          3.13 Compliance with Other Instruments. The Company is not in violation or default of any term of its certificate of incorporation or Bylaws, as currently in effect, or Restated Charter or of any provision of any mortgage, indenture, contract, agreement, instrument or contract to which it is party or by which it is bound or of any judgment, decree, order or writ. The execution, delivery, and performance of and compliance with this Agreement, and the Related Agreements, and the issuance and sale of the Shares pursuant hereto and of the Conversion Shares pursuant to the Restated Charter, will not, with or without the passage of time or giving of notice, result in any such violation, or be in conflict with or constitute a default under any such term, or result in the creation of any mortgage, pledge, lien, encumbrance or charge upon any of the properties or assets of the Company or the suspension, revocation, impairment, forfeiture or nonrenewal of any permit, license, authorization or approval applicable to the Company, its business or operations or any of its assets or properties. The Company has avoided every condition, and has not performed any act, the occurrence of which would result in the Company’s loss of any right granted under any license, distribution agreement or other agreement required to be disclosed on the Schedule of Exceptions.

          3.14 Litigation. There is no action, suit, proceeding or investigation pending or, to the Company’s knowledge, currently threatened against the Company, nor is the Company aware that there is any basis for any of the foregoing. The foregoing includes, without limitation, actions pending or, to the Company’s knowledge, threatened involving the prior employment of any of the Company’s employees, their use in connection with the Company’s business of any information or techniques allegedly proprietary to any of their former employers, or their obligations under any agreements with prior employers. The Company is not a party or to its knowledge subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality. There is no action, suit, proceeding or investigation by the Company currently pending or which the Company intends to initiate.

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          3.15 Employees. The Company has no collective bargaining agreements with any of its employees. There is no labor union organizing activity pending or, to the Company’s knowledge, threatened with respect to the Company. The Company is not a party to or bound by any currently effective employment contract, deferred compensation arrangement, bonus plan, incentive plan, profit sharing plan, retirement agreement or other employee compensation plan or agreement. To the Company’s knowledge, no employee of the Company, nor any consultant with whom the Company has contracted, is in violation of any term of any employment contract, proprietary information agreement or any other agreement relating to the right of any such individual to be employed by, or to contract with, the Company; and to the Company’s knowledge the continued employment by the Company of its present employees, and the performance of the Company’s contracts with its independent contractors, will not result in any such violation. The Company has not received any notice alleging that any such violation has occurred. No employee of the Company has been granted the right to continued employment by the Company or to any material compensation following termination of employment with the Company. The Company is not aware that any officer, key employee or group of employees intends to terminate his, her or their employment with the Company, nor does the Company have a present intention to terminate the employment of any officer, key employee or group of employees. Each former employee of the Company has entered into an agreement with the Company providing for the full release of any claims against the Company or any related party arising out of such employment. There are no actions pending, or to the Company’s knowledge, currently threatened, by any former or current employee concerning such person’s employment by the Company.

          3.16 Obligations of Management. Each officer and key employee of the Company is currently devoting substantially all of his or her business time to the conduct of the business of the Company. The Company is not aware that any officer or key employee of the Company is planning to work less than full time at the Company in the future. No officer or key employee is currently working or, to the Company’s knowledge, plans to work for a competitive enterprise, whether or not such officer or key employee is or will be compensated by such enterprise.

          3.17 Registration Rights and Voting Rights. Except as required pursuant to the Investor Rights Agreement by and among the Company and the Investors (as defined therein), dated November 27, 2001, the Company is presently not under any obligation, and has not granted any rights, to register (as defined in Section 1.1 of the Investor Rights Agreement) any of the Company’s presently outstanding securities or any of its securities that may hereafter be issued. To the Company’s knowledge, except as contemplated in the Voting Agreement by and among the Company, the Key Holders (as defined therein) and the Investors (as defined therein), dated November 27, 2001, no stockholder of the Company has entered into any agreement with respect to the voting of equity securities of the Company.

          3.18 Compliance with Laws; Permits. To its knowledge, the Company is not in violation of any applicable statute, rule, regulation, order or restriction of any domestic or foreign government or any instrumentality or agency thereof in respect of the conduct of its business or the ownership of its properties which violation would materially and adversely affect the business, assets, liabilities, financial condition, operations or prospects of the Company. No domestic governmental orders, permissions, consents, approvals or authorizations are required to

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be obtained and no registrations or declarations are required to be filed in connection with the execution and delivery of this Agreement or the issuance of the Shares or the Conversion Shares, except such as have been duly and validly obtained or filed, or with respect to any filings that must be made after the Closing, as will be filed in a timely manner. The Company has all franchises, permits, licenses and any similar authority necessary for the conduct of its business as now being conducted by it, the lack of which could materially and adversely affect the business, properties, prospects or financial condition of the Company and believes it can obtain, without undue burden or expense, any similar authority for the conduct of its business as planned to be conducted.

          3.19 Offering Valid. Assuming the accuracy of the representations and warranties of Purchasers contained in Section 4.2 hereof, the offer, sale and issuance of the Shares and the Conversion Shares will be exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), and will have been registered or qualified (or are exempt from registration and qualification) under the registration, permit or qualification requirements of all applicable state securities laws. Neither the Company nor any agent on its behalf has solicited or will solicit any offers to sell or has offered to sell or will offer to sell all or any part of the Shares to any person or persons so as to bring the sale of such Shares by the Company within the registration provisions of the Securities Act or any state securities laws.

          3.20 Full Disclosure. The Company has provided each Purchaser with all information requested by each Purchaser in connection with its decision to purchase the Shares. This Agreement, including the schedules and exhibits hereto, does not contain any untrue statement of a material fact nor omit to state a material fact necessary in order to make the statements contained herein not misleading.

          3.21 Minute Books. The minute books of the Company made available to Purchasers contain a complete summary of all meetings of directors and stockholders since the time of incorporation.

          3.22 Real Property Holding Corporation. The Company is not a real property holding corporation within the meaning of Code Section 897(c)(2) and any regulations promulgated thereunder.

          3.23 Insurance. The Company has general commercial, product liability, fire and casualty insurance policies with coverage customary for companies similarly situated to the Company.

     4. Representations And Warranties Of Purchasers.

     Each Purchaser hereby represents and warrants to the Company, severally and not jointly, as follows (provided that such representations and warranties do not lessen or obviate the representations and warranties of the Company set forth in this Agreement):

          4.1 Requisite Power and Authority. Purchaser has all necessary power and authority to execute and deliver this Agreement and the Related Agreements and to carry out their provisions. All action on Purchaser’s part required for the lawful execution and delivery of

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this Agreement and the Related Agreements has been taken. Upon their execution and delivery, this Agreement and the Related Agreements will be valid and binding obligations of Purchaser, enforceable in accordance with their terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights, (b) as limited by general principles of equity that restrict the availability of equitable remedies, and (c) to the extent that the enforceability of the indemnification provisions of the Investor Rights Agreement may be limited by applicable laws.

          4.2 Investment Representations. Purchaser understands that neither the Shares nor the Conversion Shares have been registered under the Securities Act. Purchaser also understands that the Shares are being offered and sold pursuant to an exemption from registration contained in the Securities Act based in part upon Purchaser’s representations contained in this Agreement. Purchaser hereby represents and warrants as follows:

               (a) Purchaser Bears Economic Risk. Purchaser has substantial experience in evaluating and investing in private placement transactions of securities in companies similar to the Company so that it is capable of evaluating the merits and risks of its investment in the Company and has the capacity to protect its own interests. Purchaser must bear the economic risk of this investment indefinitely unless the Shares (or the Conversion Shares) are registered pursuant to the Securities Act, or an exemption from registration is available. Purchaser understands that the Company has no present intention of registering the Shares, the Conversion Shares or any shares of its Common Stock. Purchaser also understands that there is no assurance that any exemption from registration under the Securities Act will be available and that, even if available, such exemption may not allow Purchaser to transfer all or any portion of the Shares or the Conversion Shares under the circumstances, in the amounts or at the times Purchaser might propose.

               (b) Acquisition for Own Account. Purchaser is acquiring the Shares and the Conversion Shares for Purchaser’s own account for investment only, and not with a view towards their distribution.

               (c) Purchaser Can Protect Its Interest. Purchaser represents that by reason of its, or of its management’s, business or financial experience, Purchaser has the capacity to protect its own interests in connection with the transactions contemplated in this Agreement, and the Related Agreements. Further, Purchaser is aware of no publication of any advertisement in connection with the transactions contemplated in this Agreement.

               (d) Accredited Investor. Purchaser represents that it is an accredited investor within the meaning of Regulation D under the Securities Act.

               (e) Company Information. Purchaser has had an opportunity to discuss the Company’s business, management and financial affairs with directors, officers and management of the Company and has had the opportunity to review the Company’s operations and facilities. Purchaser has also had the opportunity to ask questions of and receive answers from, the Company and its management regarding the terms and conditions of this investment.

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               (f) Rule 144. Purchaser acknowledges and agrees that the Shares, and, if issued, the Conversion Shares are “restricted securities” as defined in Rule 144 promulgated under the Securities Act as in effect from time to time and must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Purchaser has been advised or is aware of the provisions of Rule 144, which permits limited resale of shares purchased in a private placement subject to the satisfaction of certain conditions, including, among other things: the availability of certain current public information about the Company, the resale occurring following the required holding period under Rule 144 and the number of shares being sold during any three-month period not exceeding specified limitations.

               (g) Residence. If Purchaser is an individual, then Purchaser resides in the state or province identified in the address of Purchaser set forth on Exhibit A; if Purchaser is a partnership, corporation, limited liability company or other entity, then the office or offices of Purchaser in which its investment decision was made is located at the address or addresses of Purchaser set forth on Exhibit A.

               (h) Foreign Investors. If Purchaser is not a United States person (as defined by Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended), Purchaser hereby represents that it has satisfied itself as to the full observance of the laws of its jurisdiction in connection with any invitation to subscribe for the Shares or any use of this Agreement, including (i) the legal requirements within its jurisdiction for the purchase of the Shares, (ii) any foreign exchange restrictions applicable to such purchase, (iii) any government or other consents that may need to be obtained, and (iv) the income tax and other tax consequences, if any, that may be relevant to the purchase, holding, redemption, sale or transfer of the Shares. Purchaser’s subscription and payment for and continued beneficial ownership of the Shares will not violate any applicable securities or other laws of Purchaser’s jurisdiction.

          4.3 Transfer Restrictions. Each Purchaser acknowledges and agrees that the Shares and, if issued, the Conversion Shares are subject to restrictions on transfer as set forth in the Investor Rights Agreement.

     5. Conditions To Execution of this Agreement.

          5.1 Conditions to Purchasers’ Execution of this Agreement. Purchasers’ execution of this Agreement is subject to the satisfaction, at or prior to the date hereof, of the following conditions:

               (a) Representations and Warranties True; Performance of Obligations. The representations and warranties made by the Company in Section 3 hereof are true and correct in all material respects (except for representations and warranties subject to “materiality” qualifiers, which shall be true, complete and correct in all respects) as of the date hereof, and the Company shall have performed all obligations and conditions herein required to be performed or observed by it on or prior to the date hereof.

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               (b) Corporate Documents. The Company shall have delivered to Purchasers or their counsel, copies of all corporate documents of the Company as Purchasers shall reasonably request.

               (c) Investor Rights Agreement. The Investor Rights Agreement substantially in the form attached hereto as Exhibit D shall have been executed and delivered by the Purchasers and delivered to the Escrow Agent.

               (d) Voting Agreement. The Voting Agreement substantially in the form attached hereto as Exhibit E shall have been executed and delivered by the Purchasers and certain other parties thereto and delivered to the Escrow Agent.

               (e) Reservation of Conversion Shares. The Conversion Shares issuable upon conversion of the Shares shall have been duly authorized and reserved for issuance upon such conversion.

               (f) Board of Directors. The Board of Directors of the Company shall have authorized that, upon the Closing, the authorized size of the Board of Directors of the Company shall be nine members and the Board shall consist of Promod Haque, Tal Simchony, Morgan Jones, Pascal Levensohn, Amit Chawla, Giora Bitan, Barak Hachamov, and two (2) vacancies.

               (g) Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated as of the execution of this Agreement and all documents and instruments incident to such execution shall be reasonably satisfactory in substance and form to Purchasers and their special counsel, and Purchasers and their special counsel shall have received all such counterpart originals or certified or other copies of such documents as they may reasonably request.

               (h) Proprietary Information and Inventions Agreement. The Company and each of its employees shall have entered into the Company’s standard form of Proprietary Information and Inventions Agreement, in substantially the form delivered to counsel for the Purchasers.

               (i) Minimum Investment. The amount of money placed into escrow by the Purchasers as of the date hereof for release upon satisfaction of the conditions set forth in Section 7 below shall be at least twenty million dollars ($20,000,000).

               (j) Exchange Agreement. The Exchange Agreement shall have been executed and delivered by the parties thereto.

          5.2 Conditions to Execution of this Agreement by the Company. The Company’s execution of this Agreement is subject to the satisfaction, on or prior to the date hereof, of the following conditions:

               (a) Representations and Warranties True. The representations and warranties in Section 4 made by those Purchasers acquiring Shares hereunder are true and correct in all material respects at the date of the date hereof.

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               (b) Performance of Obligations. Such Purchasers shall have performed and complied with all agreements and conditions herein required to be performed or complied with by such Purchasers on or before date hereof.

               (c) Investor Rights Agreement. The Investor Rights Agreement substantially in the form attached hereto as Exhibit D shall have been executed and delivered by the parties thereto and delivered to the Escrow Agent.

               (d) Voting Agreement. The Voting Agreement substantially in the form attached hereto as Exhibit E shall have been executed and delivered by the parties thereto and delivered to the Escrow Agent.

               (e) Exchange Agreement. The Exchange Agreement shall have been executed and delivered by the parties thereto

               (f) Minimum Investment. The amount of money placed into escrow by the Purchasers as of the date hereof for release upon satisfaction of the conditions set forth in Section 7 below shall be at least twenty million dollars ($20,000,000).

     6. Closing Deliverables.

     The Company shall deliver the following to the Purchasers at or prior to the Closing:

          6.1 Filing of Restated Charter. The Restated Charter as filed with the Secretary of State of the State of Delaware shall continue to be in full force and effect on the Closing Date.

          6.2 Corporate Documents. Copies of all corporate documents of the Company as Purchasers or their counsel shall reasonably request.

          6.3 Compliance Certificate. A Compliance Certificate, executed by the Chief Executive Officer of the Company, dated the Closing Date, to the effect that the conditions specified in subsections (a) and (e) of Section 5.1 and subsections (b) and (d) of Section 7.1 have been satisfied.

          6.4 Secretary’s Certificate. A certificate from the Company’s Secretary, a having attached thereto (i) the Company’s Restated Charter as in effect at the time of the Closing, (ii) the Company’s Bylaws as in effect at the time of the Closing, (iii) resolutions approved by the Board of Directors authorizing the transactions contemplated hereby, (iv) resolutions approved by the Company’s stockholders authorizing the filing of the Restated Charter, and (v) good standing certificates (including tax good standing) with respect to the Company from the applicable authority(ies) in Delaware and any other jurisdiction in which the Company is qualified to do business, dated a recent date before the Closing.

          6.5 Board of Directors. Proper authorization that, upon the Closing, the authorized size of the Board of Directors of the Company shall be nine members and the Board shall consist of Promod Haque, Tal Simchony, Morgan Jones, Pascal Levensohn, Amit Chawla, Giora Bitan, Barak Hachamov, and two (2) vacancies.

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          6.6 Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated at the Closing hereby and delivery of all documents and instruments incident to such transactions shall be reasonably satisfactory in substance and form to Purchasers and their special counsel, and Purchasers and their special counsel shall have received all such counterpart originals or certified or other copies of such documents as they may reasonably request.

     7. Conditions To Closing. The Purchasers and the Company will deliver their respective Release Instructions to the Escrow Agent and effect the Closing upon the satisfaction or waiver of the following conditions:

          7.1 Conditions to Purchasers’ Obligations at the Closing. Purchasers’ obligations to purchase the Shares at the initial Closing are subject to the satisfaction, at or prior to the Closing Date, of the following conditions:

               (a) Representations and Warranties True; Performance of Obligations. The representations and warranties made by the Company in Section 3 hereof shall have been true and correct in all material respects (except for representations and warranties subject to “materiality” qualifiers, which shall have been true, complete and correct in all respects) as of the date of this Agreement.

               (b) Filing of Restated Charter. The Restated Charter shall have been accepted for filing by the Secretary of State of the State of Delaware and shall continue to be in full force and effect as of the Closing Date.

               (c) Acquisition. The conditions for the Exchange Closing shall have been satisfied or waived by the parties to the Exchange Agreement.

               (d) Consents, Permits, and Waivers. The Company shall have obtained any and all consents, permits and waivers necessary or appropriate for consummation of the transactions contemplated by this Agreement and the Related Agreements (including any filing required to comply with the Hart Scott Rodino Antitrust Improvements Act of 1976, and except for such as may be properly obtained subsequent to the Closing).

               (e) Legal Opinion. Legal counsel to the Company shall have delivered an opinion addressed to the Purchasers, dated as of the Closing Date, in substantially the form attached hereto as Exhibit F.

          7.2 Conditions to Obligations of the Company. The Company’s obligation to issue, sell and deliver the Shares at each Closing is subject to the satisfaction, on or prior to such Closing, of the following conditions:

               (a) Representations and Warranties True. The representations and warranties in Section 4 made by those Purchasers acquiring Shares hereunder shall be true and correct in all material respects as of the date hereof.

               (b) Filing of Restated Charter. The Restated Charter shall have been accepted for filing by the Secretary of State of the State of Delaware.

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               (c) Acquisition. The conditions for the Exchange Closing shall have been satisfied or waived by the parties to the Exchange Agreement.

               (d) Consents, Permits, and Waivers. The Company shall have obtained of any and all consents, permits and waivers necessary or appropriate for consummation of the transactions contemplated by this Agreement and the Related Agreements (including any filing required to comply with the Hart Scott Rodino Antitrust Improvements Act of 1976, and except for such as may be properly obtained subsequent to the Closing).

     8. Termination Prior to Closing. This Agreement shall be terminated prior to Closing upon the termination of the Exchange Agreement pursuant to the terms thereof. In the event of such termination, the obligations and liabilities of all parties pursuant to this Agreement shall be of no further force or effect.

     9. Miscellaneous.

          9.1 Governing Law. This Agreement shall be governed in all respects by the laws of the State of California as such laws are applied to agreements between California residents entered into and performed entirely in California.

          9.2 Survival. The representations, warranties, covenants and agreements made herein shall survive any investigation made by any Purchaser and the closing of the transactions contemplated hereby. All statements as to factual matters contained in any certificate or other instrument delivered by or on behalf of the Company pursuant hereto in connection with the transactions contemplated hereby shall be deemed to be representations and warranties by the Company hereunder solely as of the date of such certificate or instrument.

          9.3 Successors and Assigns. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto and shall inure to the benefit of and be enforceable by each person who shall be a holder of the Shares from time to time.

          9.4 Entire Agreement. This Agreement, the exhibits and schedules hereto, the Related Agreements and the other documents delivered pursuant hereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and no party shall be liable or bound to any other in any manner by any representations, warranties, covenants and agreements except as specifically set forth herein and therein.

          9.5 Severability. In case any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

          9.6 Amendment and Waiver.

               (a) Except as otherwise provided for in Section 2.3, this Agreement may be amended or modified only upon the written consent of the Company and holders of at least a majority of the then outstanding Shares (treated as if converted and including any

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Conversion Shares into which the then outstanding Shares have been converted that have not been sold to the public).

     (b) The obligations of the Company and the rights of the holders of the Shares and the Conversion Shares under this Agreement may be waived only with the written consent of the holders of at least a majority of the then outstanding Shares (treated as if converted and including any Conversion Shares into which the then outstanding Shares have been converted that have not been sold to the public).

          9.7 Delays or Omissions. It is agreed that no delay or omission to exercise any right, power or remedy accruing to any party, upon any breach, default or noncompliance by another party under this Agreement, the Related Agreements or the Restated Charter, shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach, default or noncompliance, or any acquiescence therein, or of or in any similar breach, default or noncompliance thereafter occurring. It is further agreed that any waiver, permit, consent or approval of any kind or character on any Purchaser’s part of any breach, default or noncompliance under this Agreement, the Related Agreements or under the Restated Charter or any waiver on such party’s part of any provisions or conditions of this Agreement, the Related Agreements, or the Restated Charter must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement, the Related Agreements, the Restated Charter, by law, or otherwise afforded to any party, shall be cumulative and not alternative.

          9.8 Waiver of Conflicts. Each party to this Agreement acknowledges that Cooley Godward LLP (“Cooley Godward”), outside general counsel to the Company, has in the past performed and is or may now or in the future represent one or more Purchasers or their affiliates in matters unrelated to the transactions contemplated by this Agreement (the “Financing”), including representation of such Purchasers or their affiliates in matters of a similar nature to the Financing. The applicable rules of professional conduct require that Cooley Godward inform the parties hereunder of this representation and obtain their consent. Cooley has served as outside general counsel to the Company and has negotiated the terms of the Financing solely on behalf of the Company. It is the belief of Cooley Godward that these terms and conditions represent an arm’s length transaction between the Company and Purchasers. Purchasers have been represented by independent legal counsel regarding the terms of the Financing. The Company and each Purchaser hereby (a) acknowledge that they have had an opportunity to ask for and have obtained information relevant to such representation, including disclosure of the reasonably foreseeable adverse consequences of such representation; (b) acknowledge that with respect to the Financing, Cooley Godward has represented solely the Company, and not any Purchaser or any stockholder, director or employee of the Company or any Purchaser; and (c) gives its informed consent to Cooley Godward’s representation of the Company in the Financing.

          9.9 Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail, telex or facsimile if sent during normal business hours of the recipient, if not, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day

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after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the Company at the address as set forth on the signature page hereof and to Purchaser at the address set forth on Exhibit A, attached hereto or at such other address or electronic mail address as the Company or Purchaser may designate by ten (10) days advance written notice to the other parties hereto.

          9.10 Expenses. Each party shall bear all costs and expenses that it incurs with respect to the negotiation, execution, delivery and performance of this Agreement.

          9.11 Attorneys’ Fees. In the event that any suit or action is instituted to enforce any provision in this Agreement, the prevailing party in such dispute shall be entitled to recover from the losing party all fees, costs and expenses of enforcing any right of such prevailing party under or with respect to this Agreement, including without limitation, such reasonable fees and expenses of attorneys and accountants, which shall include, without limitation, all fees, costs and expenses of appeals.

          9.12 Titles and Subtitles. The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.

          9.13 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.

          9.14 Broker’s Fees

          . Each party hereto represents and warrants that no agent, broker, investment banker, person or firm acting on behalf of or under the authority of such party hereto is or will be entitled to any broker’s or finder’s fee or any other commission directly or indirectly in connection with the transactions contemplated herein. Each party hereto further agrees to indemnify each other party for any claims, losses or expenses incurred by such other party as a result of the representation in this Section 6.14 being untrue.

          9.15 Exculpation Among Purchasers. Each Purchaser acknowledges that it is not relying upon any person, firm, or corporation, other than the Company and its officers and directors, in making its investment or decision to invest in the Company. Each Purchaser agrees that no Purchaser nor the respective controlling persons, officers, directors, partners, agents, or employees of any Purchaser shall be liable to any other Purchaser for any action heretofore or hereafter taken or omitted to be taken by any of them in connection with the Shares and Conversion Shares.

          9.16 Pronouns. All pronouns contained herein, and any variations thereof, shall be deemed to refer to the masculine, feminine or neutral, singular or plural, as to the identity of the parties hereto may require.

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          9.17 California Corporate Securities Law. THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION OR IN THE ABSENCE OF AN EXEMPTION FROM SUCH QUALIFICATION IS UNLAWFUL. PRIOR TO ACCEPTANCE OF SUCH CONSIDERATION BY THE COMPANY, THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED OR AN EXEMPTION FROM SUCH QUALIFICATION BEING AVAILABLE..

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

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      In Witness Whereof, the parties hereto have executed the Series C Preferred Stock Purchase Agreement as of the date set forth in the first paragraph hereof.

COMPANY:
NexVerse Networks, Inc.
By:	/s/ Amit Chawla
	Amit Chawla, Chief Executive Officer
Address: 926 Rock Ave.           San Jose, CA 95131

SERIES C PREFERRED STOCK PURCHASE AGREEMENT
SIGNATURE PAGE

      In Witness Whereof, the parties hereto have executed the Series C Preferred Stock Purchase Agreement as of the date set forth in the first paragraph hereof.

ECI Telecom , Ltd.
Signature:	/s/    Illegible
Print Name:
Title:

SERIES C PREFERRED STOCK PURCHASE AGREEMENT
SIGNATURE PAGE

      In Witness Whereof, the parties hereto have executed the Series C Preferred Stock Purchase Agreement as of the date set forth in the first paragraph hereof.

Star Bay Technology Ventures IV, L.P.
By Levensohn Capital Partners II LLC, its General Partner By Levensohn Capital Management, LLC its Managing Member
By:	/s/Pascal Levensohn
Pascal Levensohn, President
Star Bay Partners, L.P. (Rollover Fund)
By APH Capital Management LLC, its General Partner By Levensohn Capital Management, LLC its Managing Member
By:	/s/ Pascal Levensohn
Pascal Levensohn, President
Star Bay Associates Fund, L.P.
By Levensohn Capital Management, LLC its General Partner
By:	/s/ Pascal Levensohn
Pascal Levensohn, President

SERIES C PREFERRED STOCK PURCHASE AGREEMENT
SIGNATURE PAGE

      In Witness Whereof, the parties hereto have executed the Series C Preferred Stock Purchase Agreement as of the date set forth in the first paragraph hereof.

Battery Ventures V, L.P.
By:	Battery Partners V, LLC General Partner
By:	/s/ Morgan M. Jones
Name: Morgan M. Jones Title: Member Manager
Battery Ventures Convergence Fund, L.P.
By:	Battery Convergence Partners, LLC General Partner
/s/ Morgan M. Jones
Name: Morgan M. Jones Title: Member Manager
Battery Investment Partners V, LLC
/s/ Morgan M. Jones
Name: Morgan M. Jones Title: Member Manager

SERIES C PREFERRED STOCK PURCHASE AGREEMENT
SIGNATURE PAGE

      In Witness Whereof, the parties hereto have executed the Series C Preferred Stock Purchase Agreement as of the date set forth in the first paragraph hereof.

Norwest Venture Partners IX, L.P.

By: Genesis VC Partners IX, LLC

/s/ Promod Haque

Name: Promod Haque
Title: Managing Director

NVP Entrepreneurs Fund IX, L.P.

By: Genesis VC Partners IX, LLC

/s/ Promod Haque

Name: Promod Haque
Title: Managing Director

SERIES C PREFERRED STOCK PURCHASE AGREEMENT
SIGNATURE PAGE

      In Witness Whereof, the parties hereto have executed the Series C Preferred Stock Purchase Agreement as of the date set forth in the first paragraph hereof.

KPCB Holdings, Inc., as Nominee
Signature:	/s/ Illegible
Print Name:
Title:

SERIES C PREFERRED STOCK PURCHASE AGREEMENT
SIGNATURE PAGE

      In Witness Whereof, the parties hereto have executed the Series C Preferred Stock Purchase Agreement as of the date set forth in the first paragraph hereof.

Liberty Mutual Insurance Company

Signature:    /s/ Ronald D. Ulich  

Name: Ronald D. Ulich
Title: Vice President

SERIES C PREFERRED STOCK PURCHASE AGREEMENT
SIGNATURE PAGE

      In Witness Whereof, the parties hereto have executed the Series C Preferred Stock Purchase Agreement as of the date set forth in the first paragraph hereof.

/s/ George B. Kaiser

George B. Kaiser

SERIES C PREFERRED STOCK PURCHASE AGREEMENT
SIGNATURE PAGE

Exhibit A

Schedule of Purchasers — First Closing

			Aggregate
Name and Address	Shares		Purchase Price
ECI Telecom, Ltd.		58,275,059	$	10,000,000.12
30 Hasivim Street Petah Tikva, 49133 Israel
Star Bay Technology Ventures IV, L.P.		4,816,409	$	826,495.87
333 Bush, Suite 2580 San Francisco, CA 94104 Attn: Pascal Levensohn Fax: 415 217-4727 Telephone: 415 217-4710 E-mail: Pascal@levcap.com
Star Bay Partners, L.P. (Rollover Fund)		8,297,101	$	1,423,782.51
333 Bush, Suite 2580 San Francisco, CA 94104 Attn: Pascal Levensohn Fax: 415 217-4727 Telephone: 415 217-4710 E-mail: Pascal@levcap.com
Star Bay Associates Fund, L.P.		289,753	$	49,721.62
333 Bush, Suite 2580 San Francisco, CA 94104 Attn: Pascal Levensohn Fax: 415 217-4727 Telephone: 415 217-4710 E-mail: Pascal@levcap.com

			Aggregate
Name and Address	Shares		Purchase Price
Liberty Mutual Insurance Company		18,065,269	$	3,100,000.16
Investments, 9A 175 Berkeley Street Boston, MA 02117 Attn: Charles Farber
Battery Ventures V, L. P.		23,620,512	$	4,053,279.86
20 William Street, Suite 200 Wellesley, MA 02481 Attn: Morgan Jones
Battery Ventures Convergence Fund, L. P.		1,507,695	$	258,720.46
20 William Street, Suite 200 Wellesley, MA 02481 Attn: Morgan Jones
Battery Investment Partners V, LLC		512,819	$	87,999.74
20 William Street, Suite 200 Wellesley, MA 02481 Attn: Morgan Jones
Norwest Venture Partners IX, L.P.		23,819,189	$	4,087,372.83
525 University Avenue Suite 800 Palo Alto, CA 94301-1922 Attn: Promod Haque
NVP Entrepreneurs Fund IX, L.P.		656,336	$	112,627.26
525 University Avenue Suite 800 Palo Alto, CA 94301-1922 Attn: Promod Haque
KPCB Holdings, Inc.		582,750	$	99,999.90
2750 Sand Hill Road Menlo Park, CA 94025 Attn: Matt Murphy
Total:		140,442,892	$	24,100,000.26

Schedule of Purchasers — Second Closing

			Aggregate
Name and Address	Shares		Purchase Price
George B. Kaiser		29,137,529	$	4,999,999.98
6733 South Yale Tulsa, OK 74136
Total:		29,137,529	$	4,999,999.98

EX-10.12

Exhibit 10.12

NEXVERSE NETWORKS, INC.

AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

OCTOBER 30, 2002

i.

Table Of Contents

	Page
SECTION 1. GENERAL		1
1.1 Definitions		1
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER		3
2.1 Restrictions on Transfer		3
2.2 Demand Registration		4
2.3 Piggyback Registrations		6
2.4 Form S-3 Registration		7
2.5 Expenses of Registration		8
2.6 Obligations of the Company		9
2.7 Termination of Registration Rights		10
2.8 Delay of Registration; Furnishing Information		10
2.9 Indemnification		11
2.10 Assignment of Registration Rights		13
2.11 Amendment of Registration Rights		13
2.12 Limitation on Subsequent Registration Rights		13
2.13 “Market Stand-Off” Agreement		13
2.14 Agreement to Furnish Information		14
2.15 Rule 144 Reporting		14
SECTION 3. COVENANTS		15
3.1 Basic Financial Information and Reporting		15
3.2 Inspection Rights		15
3.3 Confidentiality of Records		16
3.4 Reservation of Common Stock		16
3.5 Stock Vesting		16
3.6 Proprietary Information and Inventions Agreement		16
3.7 Consent of Directors		16
3.8 Certain Covenants Relating to SBA Matters		18
3.9 Qualified Small Business		18
3.10 Future Financing Commitment		19

ii.

	Page
3.11 Conflict Limitation		19
3.12 Termination of Covenants		19
SECTION 4. RIGHTS OF FIRST REFUSAL		19
4.1 Subsequent Offerings		19
4.2 Exercise of Rights		20
4.3 Issuance of Equity Securities to Other Persons		20
4.4 Termination and Waiver of Rights of First Refusal		20
4.5 Transfer of Rights of First Refusal		20
4.6 Excluded Securities		20
SECTION 5. MISCELLANEOUS		21
5.1 Governing Law		21
5.2 Successors and Assigns		21
5.3 Entire Agreement		22
5.4 Severability		22
5.5 Amendment and Waiver		22
5.6 Delays or Omissions		22
5.7 Notices		23
5.8 Attorneys’ Fees		23
5.9 Titles and Subtitles		23
5.10 Additional Investors		23
5.11 Counterparts		23
5.12 Aggregation of Stock		23
5.13 Effective Date Of Agreement		23

iii.

NEXVERSE NETWORKS, INC.

AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

     This Amended and Restated Investor Rights Agreement (this “Agreement”) is entered into as of the 30th day of October, 2002, by and among NexVerse Networks, Inc., a Delaware corporation (the “Company”) and the investors listed on Exhibit A hereto, referred to hereinafter as the “Investors” and each individually as an “Investor.”

Recitals

     Whereas, certain of the Investors and the Company are parties to that certain Investor Rights Agreement dated November 27, 2001 (the “Prior Agreement”);

     Whereas, certain Investors are purchasing shares of the Company’s Series C Preferred Stock (the “Series C Stock”) pursuant to that certain Series C Preferred Stock Purchase Agreement of even date herewith (the “Purchase Agreement”);

     Whereas, certain Investors hold shares of Common Stock issued upon conversion of the Company’s Series A Preferred Stock and/or the Company’s Series B Preferred Stock (together, the "Prior Preferred Stock”);

     Whereas, the Company is entering into that certain Share Exchange Agreement by and among the Company, ECI Telecom Ltd. (“ECI”), and ECI Telecom — NGTS, Inc. of even date herewith (the “Exchange Agreement”), pursuant to which the Company will acquire all of the outstanding capital stock of certain subsidiaries of ECI upon the Closing, as defined in the Exchange Agreement (the “Exchange Closing”);

     Whereas, the obligations to execute the Purchase Agreement are conditioned upon the execution and delivery of this Agreement to the Escrow Agent (as defined in the Purchase Agreement; and

     Whereas, the Investors and the Company wish to provide further inducement to the Investors to purchase shares of the Series C Stock pursuant to the terms of the Purchase Agreement, and the parties hereto have agreed, effective upon the Exchange Closing, to amend and restate the Prior Agreement in its entirety upon the terms and conditions set forth below.

     Now, Therefore, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree hereto as follows:

SECTION 1. GENERAL.

     1.1 Definitions. As used in this Agreement the following terms shall have the following respective meanings:

     (a) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

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     (b) “Form S-3” means such form under the Securities Act as in effect on the date hereof or any successor or similar registration form under the Securities Act subsequently adopted by the SEC which permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC.

     (c) “Holder” means any person owning of record Registrable Securities that have not been sold to the public or any assignee of record of such Registrable Securities in accordance with Section 2.10 hereof.

     (d) “Initial Offering” means the Company’s first firm commitment underwritten public offering of its Common Stock registered under the Securities Act.

     (e) “Qualified Offering” means a firm commitment underwritten primary public offering by the Company of its Common Stock registered under the Securities Act which results in the automatic conversion of the Company’s Preferred Stock into Common Stock pursuant to the Company’s certificate of incorporation.

     (f) “Register,” “registered,” and “registration” refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of effectiveness of such registration statement or document.

     (g) “Registrable Securities” means (a) Common Stock of the Company issuable or issued upon conversion of the Shares, (b) Common Stock of the Company issued upon conversion of the Prior Preferred Stock, (c) Common Stock of the Company issued pursuant to the Exchange Agreement, and (d) any Common Stock of the Company issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, such above-described securities. Notwithstanding the foregoing, Registrable Securities shall not include any securities sold by a person to the public either pursuant to a registration statement or Rule 144 or sold in a private transaction in which the transferor’s rights under Section 2 of this Agreement are not assigned.

     (h) “Registrable Securities then outstanding” shall be the number of shares of the Company’s Common Stock that are Registrable Securities and either (a) are then issued and outstanding or (b) are issuable pursuant to then exercisable or convertible securities.

     (i) “Registration Expenses” shall mean all expenses incurred by the Company in complying with Sections 2.2, 2.3 and 2.4 hereof, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel for the Company, reasonable fees and disbursements of a single special counsel for the Holders, blue sky fees and expenses and the expense of any special audits incident to or required by any such registration (but excluding the compensation of regular employees of the Company which shall be paid in any event by the Company).

     (j) “SEC” or “Commission” means the Securities and Exchange Commission.

     (k) “Securities Act” shall mean the Securities Act of 1933, as amended.

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     (l) “Selling Expenses” shall mean all underwriting discounts and selling commissions applicable to the sale.

     (m) “Shares” shall mean the Company’s Series C Stock held by the Investors listed on Exhibit A hereto and their permitted assigns.

     (n) “Special Registration Statement” shall mean (i) a registration statement relating to any employee benefit plan or (ii) with respect to any corporate reorganization or transaction under Rule 145 of the Securities Act, including any registration statements related to the issuance or resale of securities issued in such a transaction or (iii) a registration related to stock issued upon conversion of debt securities.

SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER.

     2.1 Restrictions on Transfer.

     (a) Each Holder agrees not to make any disposition of all or any portion of the Shares, Registrable Securities or other shares of Preferred Stock of the Company unless and until:

     (i) there is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such registration statement; or

     (ii) (A) The transferee has agreed in writing to be bound by the terms of this Agreement, (B) such Holder shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and (C) if reasonably requested by the Company, such Holder shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require registration of such shares under the Securities Act. It is agreed that the Company will not require opinions of counsel for transactions made pursuant to Rule 144, except in unusual circumstances. After its Initial Offering, the Company will not require the transferee to be bound by the terms of this Agreement.

     (b) Notwithstanding the provisions of subsection (a) above, no such restriction shall apply to a transfer by a Holder that is (A) a partnership transferring to its partners or former partners in accordance with partnership interests, (B) a corporation transferring to a wholly-owned subsidiary, a parent corporation that owns all of the capital stock of the Holder or a corporation affiliated with the Holder by common control with or by such Holder, provided that such affiliated corporation is not reasonably deemed to be a competitor of the Company, (C) a limited liability company transferring to its members or former members in accordance with their interest in the limited liability company, or (D) an individual transferring to the Holder’s family member or trust for the benefit of an individual Holder; provided that in each case the transferee will agree in writing to be subject to the terms of this Agreement to the same extent as if he were an original Holder hereunder.

3

     (c) Each certificate representing Shares or Registrable Securities shall be stamped or otherwise imprinted with legends substantially similar to the following (in addition to any legend required under applicable state securities laws):

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”) AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.

THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN INVESTOR RIGHTS AGREEMENT BY AND BETWEEN THE STOCKHOLDER AND THE COMPANY. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY.

     (d) The Company shall be obligated to reissue promptly unlegended certificates at the request of any Holder thereof if the Company has completed its Initial Offering and the Holder shall have obtained an opinion of counsel (which counsel may be counsel to the Company) reasonably acceptable to the Company to the effect that the securities proposed to be disposed of may lawfully be so disposed of without registration, qualification and legend.

     (e) Any legend endorsed on an instrument pursuant to applicable state securities laws and the stop-transfer instructions with respect to such securities shall be removed upon receipt by the Company of an order of the appropriate blue sky authority authorizing such removal.

     2.2 Demand Registration.

     (a) Subject to the conditions of this Section 2.2, if the Company shall receive a written request from the Holders of a majority of the Registrable Securities (the “Initiating Holders”) that the Company file a registration statement under the Securities Act covering the registration of at least a twenty five percent (25%) of the Registrable Securities then outstanding (or a lesser percent if the anticipated aggregate offering price, net of underwriting discounts and commissions, would exceed $5,000,000), then the Company shall, within thirty (30) days of the receipt thereof, give written notice of such request to all Holders, and subject to the limitations of this Section 2.2, effect, as expeditiously as reasonably possible, the registration under the Securities Act of all Registrable Securities that all Holders request to be registered.

     (b) If the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their

4

request made pursuant to this Section 2.2 or any request pursuant to Section 2.4 and the Company shall include such information in the written notice referred to in Section 2.2(a) or Section 2.4(a), as applicable. In such event, the right of any Holder to include its Registrable Securities in such registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by a majority in interest of the Initiating Holders (which underwriter or underwriters shall be reasonably acceptable to the Company). Notwithstanding any other provision of this Section 2.2 or Section 2.4, if the underwriter advises the Company that marketing factors require a limitation of the number of securities to be underwritten (including Registrable Securities) then the Company shall so advise all Holders of Registrable Securities which would otherwise be underwritten pursuant hereto, and the number of shares that may be included in the underwriting shall be allocated first, to the Holders of Series C Stock on a pro rata basis based on the total number of shares of Series C Stock held by such Holders; and second to the Holders of all other Registrable Securities on a pro rata basis based on the number of Registrable Securities held by such Holders; provided, however, that the number of shares of Registrable Securities to be included in such underwriting and registration shall not be reduced unless all other securities of the Company are first entirely excluded from the underwriting and registration. Any Registrable Securities excluded or withdrawn from such underwriting shall be withdrawn from the registration.

     (c) The Company shall not be required to effect a registration pursuant to this Section 2.2:

     (i) prior to the earlier of (A) the third anniversary of the date of this Agreement or (B) one hundred eighty (180) days following the effective date of the registration statement pertaining to the Initial Offering;

     (ii) after the Company has effected two (2) registrations pursuant to this Section 2.2, and such registrations have been declared or ordered effective;

     (iii) during the period starting with the date of filing of, and ending on the date one hundred eighty (180) days following the effective date of the registration statement pertaining to an underwritten public offering, other than pursuant to a Special Registration Statement; provided that the Company makes reasonable good faith efforts to cause such registration statement to become effective;

     (iv) if within thirty (30) days of receipt of a written request from Initiating Holders pursuant to Section 2.2(a), the Company gives notice to the Holders of the Company’s intention to file a registration statement for a public offering, other than pursuant to a Special Registration Statement, within ninety (90) days;

     (v) if the Company shall furnish to Holders requesting a registration statement pursuant to this Section 2.2, a certificate signed by the Chairman of the Board of Directors stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its stockholders for such

5

registration statement to be effected at such time, in which event the Company shall have the right to defer such filing for a period of not more than one hundred twenty (120) days after receipt of the request of the Initiating Holders; provided that such right to delay a request shall be exercised by the Company not more than once in any twelve (12) month period;

     (vi) if the Initiating Holders propose to dispose of shares of Registrable Securities that may be immediately registered on Form S-3 pursuant to a request made pursuant to Section 2.4 below, in which case the Company shall comply with Section 2.4 upon such request; or

     (vii) in any particular jurisdiction in which the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance.

     2.3 Piggyback Registrations. The Company shall notify all Holders of Registrable Securities in writing at least fifteen (15) days prior to the filing of any registration statement under the Securities Act for purposes of a public offering of securities of the Company (including, but not limited to, registration statements relating to secondary offerings of securities of the Company, but excluding Special Registration Statements) and will afford each such Holder an opportunity to include in such registration statement all or part of such Registrable Securities held by such Holder. Each Holder desiring to include in any such registration statement all or any part of the Registrable Securities held by it shall, within fifteen (15) days after the above-described notice from the Company, so notify the Company in writing. Such notice shall state the intended method of disposition of the Registrable Securities by such Holder. If a Holder decides not to include all of its Registrable Securities in any registration statement thereafter filed by the Company, such Holder shall nevertheless continue to have the right to include any Registrable Securities in any subsequent registration statement or registration statements as may be filed by the Company with respect to offerings of its securities, all upon the terms and conditions set forth herein.

     (a) Underwriting. If the registration statement under which the Company gives notice under this Section 2.3 is for an underwritten offering, the Company shall so advise the Holders of Registrable Securities. In such event, the right of any such Holder to be included in a registration pursuant to this Section 2.3 shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their Registrable Securities through such underwriting shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Company. Notwithstanding any other provision of this Agreement, if the underwriter determines in good faith that marketing factors require a limitation of the number of shares to be underwritten, the number of shares that may be included in the underwriting shall be allocated, first, to the Company; second, to the Holders of Series C Stock on a pro rata basis based on the total number of shares of Series C Stock held by such Holders; third, to the Holders of all other Registrable Securities on a pro rata basis based on the number of Registrable Securities held by such Holders; and fourth, to any stockholder of the Company (other than a Holder) on a pro rata basis; provided, however, that no such reduction shall reduce the amount of securities of the selling Holders included in the

6

registration below twenty-five percent (25%) of the total amount of securities included in such registration, unless such offering is the Initial Offering and such registration does not include shares of any other selling stockholders, in which event any or all of the Registrable Securities of the Holders may be excluded in accordance with the immediately preceding clause. In no event will shares of any other selling stockholder be included in such registration that would reduce the number of shares which may be included by Holders without the written consent of Holders of not less than a majority of the Registrable Securities proposed to be sold in the offering. If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Company and the underwriter, delivered at least ten (10) business days prior to the effective date of the registration statement. Any Registrable Securities excluded or withdrawn from such underwriting shall be excluded and withdrawn from the registration. For any Holder which is a partnership or corporation, the partners, retired partners and stockholders of such Holder, or the estates and family members of any such partners and retired partners and any trusts for the benefit of any of the foregoing person shall be deemed to be a single “Holder,” and any pro rata reduction with respect to such “Holder” shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such “Holder,” as defined in this sentence.

     (b) Right to Terminate Registration. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 2.3 prior to the effectiveness of such registration whether or not any Holder has elected to include securities in such registration. The Registration Expenses of such withdrawn registration shall be borne by the Company in accordance with Section 2.5 hereof.

     2.4 Form S-3 Registration. In case the Company shall receive from any Holder or Holders of Registrable Securities a written request or requests that the Company effect a registration on Form S-3 (or any successor to Form S-3) or any similar short-form registration statement and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by such Holder or Holders, the Company will:

     (a) promptly give written notice of the proposed registration, and any related qualification or compliance, to all other Holders of Registrable Securities; and

     (b) as soon as practicable, effect such registration and all such qualifications and compliances as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Holder’s or Holders’ Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other Holder or Holders joining in such request as are specified in a written request given within fifteen (15) days after receipt of such written notice from the Company; provided, however, that the Company shall not be obligated to effect any such registration, qualification or compliance pursuant to this Section 2.4:

     (i) if Form S-3 is not available for such offering by the Holders, or

7

     (ii) if the Holders, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) at an aggregate price to the public of less than five hundred thousand dollars ($500,000), or

     (iii) if within thirty (30) days of receipt of a written request from any Holder or Holders pursuant to this Section 2.4, the Company gives notice to such Holder or Holders of the Company’s intention to make a public offering within ninety (90) days, other than pursuant to a Special Registration Statement;

     (iv) if the Company shall furnish to the Holders a certificate signed by the Chairman of the Board of Directors of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its stockholders for such Form S-3 registration to be effected at such time, in which event the Company shall have the right to defer the filing of the Form S-3 registration statement for a period of not more than one hundred twenty (120) days after receipt of the request of the Holder or Holders under this Section 2.4; provided, that such right to delay a request shall be exercised by the Company not more than once in any twelve (12) month period, or

     (v) if the Company has, within the twelve (12) month period preceding the date of such request, already effected one (1) registration on Form S-3 for the Holders pursuant to this Section 2.4,

     (vi) if the Company has already effected four (4) registrations on Form S-3 for the Holders pursuant to this Section 2.4, or

     (vii) in any particular jurisdiction in which the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance.

     (c) Subject to the foregoing, the Company shall file a Form S-3 registration statement covering the Registrable Securities and other securities so requested to be registered as soon as practicable after receipt of the requests of the Holders. Registrations effected pursuant to this Section 2.4 shall not be counted as demands for registration or registrations effected pursuant to Section 2.2, respectively.

     2.5 Expenses of Registration. Except as specifically provided herein, all Registration Expenses incurred in connection with any registration, qualification or compliance pursuant to Section 2.2 or any registration under Section 2.3 or Section 2.4 herein shall be borne by the Company. All Selling Expenses incurred in connection with any registrations hereunder, shall be borne by the holders of the securities so registered pro rata on the basis of the number of shares so registered. The Company shall not, however, be required to pay for expenses of any registration proceeding begun pursuant to Section 2.2 or 2.4, the request of which has been subsequently withdrawn by the Initiating Holders unless (a) the withdrawal is based upon material adverse information concerning the Company of which the Initiating Holders were not aware at the time of such request or (b) the Holders of a majority of Registrable Securities agree

8

to forfeit their right to one requested registration pursuant to Section 2.2 or Section 2.4, as applicable, in which event such right shall be forfeited by all Holders). If the Holders are required to pay the Registration Expenses, such expenses shall be borne by the holders of securities (including Registrable Securities) requesting such registration in proportion to the number of shares for which registration was requested. If the Company is required to pay the Registration Expenses of a withdrawn offering pursuant to clause (a) above, then the Holders shall not forfeit their rights pursuant to Section 2.2 or Section 2.4 to a demand registration.

     2.6 Obligations of the Company. Whenever required to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:

     (a) prepare and file with the SEC a registration statement with respect to such Registrable Securities and use all reasonable efforts to cause such registration statement to become effective, and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for up to one hundred eighty (180) days or, if earlier, until the Holder or Holders have completed the distribution related thereto; provided, however, that at any time, upon written notice to the participating Holders and for a period not to exceed sixty (60) days thereafter (the “Suspension Period”), the Company may delay the filing or effectiveness of any registration statement or suspend the use or effectiveness of any registration statement (and the Initiating Holders hereby agree not to offer or sell any Registrable Securities pursuant to such registration statement during the Suspension Period) if the Company reasonably believes that the Company may, in the absence of such delay or suspension hereunder, be required under state or federal securities laws to disclose any corporate development the disclosure of which could reasonably be expected to have a material adverse effect upon the Company, its stockholders, a potentially significant transaction or event involving the Company, or any negotiations, discussions, or proposals directly relating thereto. No more than two (2) such Suspension Periods shall occur in any twelve (12) month period. In the event that the Company shall exercise its right to delay or suspend the filing or effectiveness of a registration hereunder, the applicable time period during which the registration statement is to remain effective shall be extended by a period of time equal to the duration of the Suspension Period. If so directed by the Company, the Initiating Holders shall use their best efforts to deliver to the Company (at the Company’s expense) all copies, other than permanent file copies then in such Initiating Holders’ possession, of the prospectus relating to such Registrable Securities current at the time of receipt of such notice.

     (b) prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement for the period set forth in subsection (a) above.

     (c) Furnish to the Holders such number of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them.

9

     (d) Use its reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders; provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions.

     (e) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter(s) of such offering. Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement.

     (f) Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. The Company will use reasonable efforts to promptly amend or supplement such prospectus in order to cause such prospectus not to include 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 not misleading in the light of the circumstances then existing.

     (g) Use its reasonable efforts to furnish, on the date that such Registrable Securities are delivered to the underwriters for sale, if such securities are being sold through underwriters, (i) an opinion, dated as of such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and (ii) a letter, dated as of such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering addressed to the underwriters.

     2.7 Termination of Registration Rights. A Holder’s registration rights shall expire if (a) the Company has completed its Initial Offering and is subject to the provisions of the Exchange Act, (b) such Holder (together with its affiliates) as reflected on the Company’s list of stockholders holds less than 1% of the Company’s outstanding Common Stock (treating all shares of convertible Preferred Stock on an as converted basis) and (c) all Registrable Securities held by and issuable to such Holder (and its affiliates) may be sold pursuant to Rule 144 during any ninety (90) day period.

     2.8 Delay of Registration; Furnishing Information.

     (a) No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2.

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     (b) It shall be a condition precedent to the obligations of the Company to take any action pursuant to Section 2.2, 2.3 or 2.4 that the selling Holders shall furnish to the Company such information regarding themselves, the Registrable Securities held by them and the intended method of disposition of such securities as shall be required to effect the registration of their Registrable Securities.

     2.9 Indemnification. In the event any Registrable Securities are included in a registration statement under Sections 2.2, 2.3 or 2.4:

     (a) Subject to Section 2.9(d), the Company will indemnify and hold harmless each Holder, the partners, officers and directors of each Holder, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a “Violation”) by the Company: (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement or incorporated by reference therein, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law in connection with the offering covered by such registration statement; and the Company will reimburse each such Holder, partner, officer, director, underwriter or controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided however, that the indemnity agreement contained in this Section 2.9(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by such Holder, partner, officer, director, underwriter or controlling person of such Holder.

     (b) Subject to Section 2.9(d), each Holder will, if Registrable Securities held by such Holder are included in the securities as to which such registration qualifications or compliance is being effected, indemnify and hold harmless the Company, each of its directors, its officers and each person, if any, who controls the Company within the meaning of the Securities Act, any underwriter and any other Holder selling securities under such registration statement or any of such other Holder’s partners, directors or officers or any person who controls such Holder, against any losses, claims, damages or liabilities (joint or several) to which the Company or any such director, officer, controlling person, underwriter or other such Holder, or partner, director, officer or controlling person of such other Holder may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any of the following

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statements: (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement or incorporated reference therein, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act (collectively, a “Holder Violation”), in each case to the extent (and only to the extent) that such Holder Violation occurs in reliance upon and in conformity with written information furnished by such Holder under an instrument duly executed by such Holder and stated to be specifically for use in connection with such registration; and each such Holder will reimburse any legal or other expenses reasonably incurred by the Company or any such director, officer, controlling person, underwriter or other Holder, or partner, officer, director or controlling person of such other Holder in connection with investigating or defending any such loss, claim, damage, liability or action if it is judicially determined that there was such a Holder Violation; provided, however, that the indemnity agreement contained in this Section 2.9(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided further, that in no event shall any indemnity under this Section 2.9 exceed the net proceeds from the offering received by such Holder.

     (c) Promptly after receipt by an indemnified party under this Section 2.9 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.9, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if materially prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 2.9, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 2.9.

     (d) If the indemnification provided for in this Section 2.9 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any losses, claims, damages or liabilities referred to herein, the indemnifying party, in lieu of indemnifying such indemnified party thereunder, shall to the extent permitted by applicable law contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the Violation(s) that resulted in such loss, claim, damage or liability, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be

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determined by a court of law by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, that in no event shall any contribution by a Holder hereunder exceed the net proceeds from the offering received by such Holder.

     (e) The obligations of the Company and Holders under this Section 2.9 shall survive completion of any offering of Registrable Securities in a registration statement and the termination of this Agreement. No indemnifying party, in the defense of any such claim or litigation, shall, except with the consent of each indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation.

     2.10 Assignment of Registration Rights. The rights to cause the Company to register Registrable Securities pursuant to this Section 2 may be assigned by a Holder to a transferee or assignee of Registrable Securities that (a) is a subsidiary, parent, general partner, limited partner, retired partner, member or retired member, of a Holder, (b) is a Holder’s family member or trust for the benefit of an individual Holder, or (c) acquires at least one million (1,000,000) shares of Registrable Securities (as adjusted for stock splits and combinations); or (d) is an entity affiliated by common control (or other related entity) with such Holder ; provided, however, (i) the transferor shall, within ten (10) days after such transfer, furnish to the Company written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned and (ii) such transferee shall agree to be subject to all restrictions set forth in this Agreement.

     2.11 Amendment of Registration Rights. Any provision of this Section 2 may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Holders of at least a majority of the Registrable Securities then outstanding. Any amendment or waiver effected in accordance with this Section 2.11 shall be binding upon each Holder and the Company. By acceptance of any benefits under this Section 2, Holders of Registrable Securities hereby agree to be bound by the provisions hereunder.

     2.12 Limitation on Subsequent Registration Rights. Other than as provided in Section 5.10, after the date of this Agreement, the Company shall not, without the prior written consent of the Holders of at least a majority of the Registrable Securities then outstanding, enter into any agreement with any holder or prospective holder of any securities of the Company that would grant such holder registration rights on a parity with or senior to those granted to the Holders hereunder, other than the right to a Special Registration Statement.

     2.13 “Market Stand-Off” Agreement. Each Holder hereby agrees that such Holder shall not sell, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, any Common Stock (or other securities) of the Company held by such Holder (other than those included in the registration) for a period specified by the representative of the underwriters of Common Stock

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(or other securities) of the Company not to exceed one hundred eighty (180) days following the effective date of a registration statement of the Company filed under the Securities Act; provided that:

     (i) such agreement shall apply only to the Company’s Initial Offering; and

     (ii) all officers and directors of the Company and holders of at least one percent (1%) of the Company’s voting securities enter into similar agreements.

     2.14 Agreement to Furnish Information. Each Holder agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriter that are consistent with the Holder’s obligations under Section 2.13 or that are necessary to give further effect thereto. In addition, if requested by the Company or the representative of the underwriters of Common Stock (or other securities) of the Company, each Holder shall provide, within ten (10) days of such request, such information as may be reasonably required by the Company or such representative in connection with the completion of any public offering of the Company’s securities pursuant to a registration statement filed under the Securities Act. The obligations described in Section 2.13 and this Section 2.14 shall not apply to a Special Registration Statement. The Company may impose stop-transfer instructions with respect to the shares of Common Stock (or other securities) subject to the foregoing restriction until the end of said one hundred eighty (180) day period. Each Holder agrees that any transferee of any shares of Registrable Securities shall be bound by Sections 2.13 and 2.14. The underwriters of the Company’s stock are intended third party beneficiaries of Sections 2.13 and 2.14 and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto.

     2.15 Rule 144 Reporting. With a view to making available to the Holders the benefits of certain rules and regulations of the SEC which may permit the sale of the Registrable Securities to the public without registration, the Company agrees to use its best efforts to:

     (a) Make and keep public information available, as those terms are understood and defined in SEC Rule 144 or any similar or analogous rule promulgated under the Securities Act, at all times after the effective date of the first registration filed by the Company for an offering of its securities to the general public;

     (b) File with the SEC, in a timely manner, all reports and other documents required of the Company under the Exchange Act; and

     (c) So long as a Holder owns any Registrable Securities, furnish to such Holder forthwith upon request: a written statement by the Company as to its compliance with the reporting requirements of said Rule 144 of the Securities Act, and of the Exchange Act (at any time after it has become subject to such reporting requirements); a copy of the most recent annual or quarterly report of the Company filed with the Commission; and such other reports and documents as a Holder may reasonably request in connection with availing itself of any rule or regulation of the SEC allowing it to sell any such securities without registration.

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SECTION 3. COVENANTS.

     3.1 Basic Financial Information and Reporting.

     (a) The Company will maintain true books and records of account in which full and correct entries will be made of all its business transactions pursuant to a system of accounting established and administered in accordance with generally accepted accounting principles consistently applied (except as noted therein) and will set aside on its books all such proper accruals and reserves as shall be required under generally accepted accounting principles consistently applied.

     (b) As soon as practicable after the end of each fiscal year of the Company, and in any event within one hundred twenty (120) days thereafter, the Company will furnish (i) each Investor holding (with its affiliates) at least one million (1,000,000) shares of Registrable Securities (as adjusted for stock splits and combinations) (a “Major Investor”) and (ii) at the written request of each Investor holding (with its affiliates) at least one hundred thousand (100,000) shares of Registrable Securities (as adjusted for stock splits and combinations), a balance sheet of the Company, as at the end of fiscal year, and a statement of income and a statement of cash flows of the Company, for such year, all prepared in accordance with generally accepted accounting principles consistently applied (except as noted therein) and setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail. Such financial statements shall be accompanied by a report and opinion thereon by independent public accountants of national standing selected by the Company’s Board of Directors.

     (c) The Company will furnish each Major Investor, as soon as practicable after the end of the first, second and third quarterly accounting periods in each fiscal year of the Company, and in any event within forty-five (45) days thereafter, a balance sheet of the Company as of the end of each such quarterly period, and a statement of income and a statement of cash flows of the Company for such period and for the current fiscal year to date, prepared in accordance with generally accepted accounting principles consistently applied (except as noted therein) or; with the exception that no notes need be attached to such statements and year-end audit adjustments may not have been made.

     (d) The Company will furnish each Major Investor: (i) at least thirty (30) days prior to the beginning of each fiscal year an annual budget and operating plans for such fiscal year (and as soon as available, any subsequent written revisions thereto); and (ii) as soon as practicable after the end of each month, and in any event within twenty (20) days thereafter, a balance sheet of the Company as of the end of each such month, and a statement of income and a statement of cash flows of the Company for such month and for the current fiscal year to date, including a comparison to plan figures for such period, prepared in accordance with generally accepted accounting principles consistently applied (except as noted thereon), with the exception that no notes need be attached to such statements and year-end audit adjustments may not have been made.

     3.2 Inspection Rights. Each Major Investor shall have the right to visit and inspect any of the properties of the Company or any of its subsidiaries, and to discuss the affairs, finances and accounts of the Company or any of its subsidiaries with its officers, and to review

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such information as is reasonably requested all at such reasonable times and as often as may be reasonably requested; provided, however, that the Company shall not be obligated under this Section 3.2 with respect to a competitor of the Company or with respect to information which the Board of Directors determines in good faith is confidential or subject to attorney-client privilege and should not, therefore, be disclosed.

     3.3 Confidentiality of Records. Each Investor agrees to use the same degree of care as such Investor uses to protect its own confidential information to keep confidential any information furnished to it that the Company identifies as being confidential or proprietary (so long as such information is not in the public domain), except that such Investor may disclose such proprietary or confidential information (i) to any partner, subsidiary, affiliate or parent of such Investor for the purpose of evaluating its investment in the Company as long as such partner, subsidiary, affiliate or parent is advised of the confidentiality provisions of this Section 3.4 and is reasonably deemed by such Investor not to be a competitor of the Company; (ii) at such time as it enters the public domain, not through the fault of such Investor; (iii) that is communicated to such Investor free of any obligation of confidentiality; or (iv) that is developed by Investor or its agents independently of and without reference to any confidential information communicated by the Company.

     3.4 Reservation of Common Stock. The Company will at all times reserve and keep available, solely for issuance and delivery upon the conversion of the Preferred Stock, all Common Stock issuable from time to time upon such conversion.

     3.5 Stock Vesting. Unless otherwise approved by the Board of Directors, all stock options and other stock equivalents issued after the date of this Agreement to employees, directors, consultants and other service providers shall be subject to vesting as follows: (a) twenty-five percent (25%) of such stock shall vest at the end of the first year following the earlier of the date of issuance or such person’s services commencement date with the company, and (b) seventy-five percent (75%) of such stock shall vest monthly over the remaining three (3) years. With respect to any shares of stock purchased by any such person, the Company’s repurchase option shall provide that upon such person’s termination of employment or service with the Company, with or without cause, the Company or its assignee shall have the option to purchase at cost any unvested shares of stock held by such person.

     3.6 Proprietary Information and Inventions Agreement. The Company shall require all employees and consultants to execute and deliver a Proprietary Information and Inventions Agreement substantially in the Company’s standard form.

     3.7 Consent of Directors. The consent of a majority of the Board of Directors, shall be required to approve any of the following actions of the Company:

     (i) loans, leases, contracts or other transactions with any director, officer or key employee of the Company, or any member of any such person’s family, including the parents, spouse, children and other relatives of any such person; except advances to employees for reasonable travel expenses;

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     (ii) creation of any mortgage, pledge or other security interest over all or substantially all of the assets of the Company or any of its subsidiaries;

     (iii) engagement and disengagement of the independent public accountants of the Company;

     (iv) appointment and removal of the Chief Executive Officer, Chief Financial Officer, Chief Technical Officer, President, Vice President of Sales, Vice President of Business Development and any other executive officer serving in such capacity whether or not holding such title or serving at a comparable level, and amendment of any terms of their employment;

     (v) compensation of any of its employees, including officers, in an amount greater than $75,000;

     (vi) creation or amendment of any signatory rights;

     (vii) provision of any guarantee by the Company or any subsidiary in an amount in excess of $25,000;

     (viii) adoption of an annual budget or an operating plan;

     (ix) any sale, or grant of an exclusive license or license outside the ordinary course of business to, any or all of the Company’s intellectual property;

     (x) any capital expenditure or commitment in an amount greater than fifty thousand dollars ($50,000) in a single transaction or one hundred thousand dollars ($100,000) in a series of related transactions, unless specifically provided for in the approved annual budget;

     (xi) increasing the number of shares reserved for grant under the Company’s equity incentive plans;

     (xii) making or modifying any election regarding the characterization of the Company for United States tax purposes;

     (xiii) incurring indebtedness in excess of $500,000, other than trade debt incurred in the ordinary course of business, or

     (xiv) entering into any strategic alliance with a corporation or other entity.

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     3.8 Certain Covenants Relating to SBA Matters

     (a) Use of Proceeds. The proceeds from the issuance and sale of the Series C Stock pursuant to the Purchase Agreement (the “Proceeds”) shall be used by the Company for its growth, modernization or expansion. The Company shall provide each Investor which is a licensed Small Business Investment Company (an “SBIC Investor”) and the Small Business Administration (the “SBA”) reasonable access to the Company’s books and records for the purpose of confirming the use of Proceeds.

     (b) Business Activity. For a period of one year following the initial Closing under the Purchase Agreement the Company shall not change the nature of its business activity if such change would render the Company ineligible as provided in 13 C.F.R. Section 107.720.

     (c) Compliance. So long as any SBIC Investor holds any securities of the Company, the Company will at all times comply with the non-discrimination requirements of 13 C.F.R. Parts 112, 113 and 117.

     (d) Information for SBIC Investor. Within forty five (45) days after the end of each fiscal year and at such other times as an SBIC Investor may reasonably request, the Company shall deliver to such SBIC Investor a written assessment, in form and substance satisfactory to such SBIC Investor, of the economic impact of such SBIC Investor’s financing specifying the full-time equivalent jobs created or retained in connection with such investment, and the impact of the financing on the Company’s business in terms of profits and on taxes paid by the Company and its employees. Upon request, the Company agrees to promptly provide each SBIC Investor with sufficient information to permit such Investor to comply with their obligations under the Small Business Investment Act of 1958, as amended, and the regulations promulgated thereunder and related thereto; provided, however, each SBIC Investor agrees that it will protect any information which the Company labels as confidential to the extent permitted by law. Any submission of any financial information under this Section shall include a certificate of the Company’s president, chief executive officer, treasurer or chief financial officer.

     (e) Number of Holders of Voting Securities. So long as any SBIC Investor holds any securities purchased pursuant to the Purchase Agreement or issued by the Company with respect thereto, the Company shall notify each SBIC Investor (i) at least fifteen (15) days prior to taking any action after which the number of record holders of the Company’s voting securities would be increased from fewer than fifty (50) to fifty (50) or more, and (ii) of any other action or occurrence after which the number of record holders of the Company’s voting securities was increased (or would increase) from fewer than fifty (50) to fifty (50) or more, as soon as practicable after the Company becomes aware that such other action or occurrence has occurred or is proposed to occur.

     3.9 Qualified Small Business. The Company will use reasonable efforts to comply with the reporting and recordkeeping requirements of Section 1202 of the Internal Revenue Code of 1986, as amended (the “Code”), any regulations promulgated thereunder and any similar state laws and regulations, and agrees not to repurchase any stock of the Company if such repurchase would cause the Shares not to so qualify as “Qualified Small Business Stock,” so long as the Company’s Board of Directors determines that it is in the best interests of and not unduly

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burdensome to the Company comply with the provisions of Section 1202 of the Code.

     3.10 Future Financing Commitment. In the event (a) the Company is unable to raise financing from external sources on terms deemed acceptable by the Board of Directors of the Company, (b) two-thirds of the members of the Board of Directors of the Company approve the sale of securities of the Company in a future equity financing, (c) the aggregate amount of such sale does not exceed $10,000,000, and (d) the Holders of Common Stock issued upon conversion of Prior Preferred Stock (the “Prior Investors”) purchase their pro rata share of such securities, then ECI shall be obligated to purchase its pro rata share of such securities; provided that ECI shall have no obligation to participate in any such financing before July 1, 2004. For purposes of this Section 3.12, the Prior Investors’ or ECI’s “pro rata” share is equal to the ratio of (x) the number of shares of the Company’s Common Stock (including all shares of Common Stock issuable or issued upon conversion of the Shares) which the Prior Investors or ECI, as the case may be, hold immediately prior to the issuance of such securities to (y) the total number of shares of Common Stock (including all shares of Common Stock issued or issuable upon conversion of the Shares) held by the Prior Investors and ECI.

     3.11 Conflict Limitation. Notwithstanding any other term contained herein, in the event the Company proposes, negotiates or enters into any transaction with ECI, the directors of the Company designated by ECI shall recuse themselves from any discussion or decision of the Board of Directors with respect to such transaction. The foregoing provision shall also apply if a direct competitor of ECI proposes an acquisition of the Company and the competitor so requests, it being understood that this shall not affect ECI’s right as a stockholder.

     3.12 Termination of Covenants. All covenants contained in Section 3 of this Agreement shall expire and terminate as to each Investor upon the earlier of (i) the effective date of the registration statement pertaining to a Qualified Offering or (ii) upon (a) the sale, lease or other disposition of all or substantially all of the assets of the Company or (b) an acquisition of the Company by another corporation or entity by consolidation, merger or other reorganization in which the holders of the Company’s outstanding voting stock immediately prior to such transaction own, immediately after such transaction, securities representing less than fifty percent (50%) of the voting power of the corporation or other entity surviving such transaction, provided that this Section 3.12(ii)(b) shall not apply to a merger effected exclusively for the purpose of changing the domicile of the Company (a “Change in Control”).

SECTION 4. RIGHTS OF FIRST REFUSAL.

     4.1 Subsequent Offerings. Each Major Investor shall have a right of first refusal to purchase its pro rata share of all Equity Securities, as defined below, that the Company may, from time to time, propose to sell and issue after the date of this Agreement, other than the Equity Securities excluded by Section 4.6 hereof. Each Investor’s pro rata share is equal to the ratio of (a) the number of shares of the Company’s Common Stock (including all shares of Common Stock issuable or issued upon conversion of the Shares) which such Investor is deemed to be a holder immediately prior to the issuance of such Equity Securities to (b) the total number of shares of the Company’s outstanding Common Stock (including all shares of Common Stock issued or issuable upon conversion of the Shares or upon the exercise of any outstanding warrants or options) immediately prior to the issuance of the Equity Securities. The term

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“Equity Securities” shall mean (i) any Common Stock, Preferred Stock or other security of the Company, (ii) any security convertible into or exercisable or exchangeable for, with or without consideration, any Common Stock, Preferred Stock or other security (including any option to purchase such a convertible security), (iii) any security carrying any warrant or right to subscribe to or purchase any Common Stock, Preferred Stock or other security or (iv) any such warrant or right.

     4.2 Exercise of Rights. If the Company proposes to issue any Equity Securities, it shall give each Major Investor written notice of its intention, describing the Equity Securities, the price and the terms and conditions upon which the Company proposes to issue the same. Each Major Investor shall have fifteen (15) business days from the giving of such notice to agree to purchase its pro rata share of the Equity Securities for the price and upon the terms and conditions specified in the notice by giving written notice to the Company and stating therein the quantity of Equity Securities to be purchased. Notwithstanding the foregoing, the Company shall not be required to offer or sell such Equity Securities to any Major Investor who would cause the Company to be in violation of applicable federal securities laws by virtue of such offer or sale.

     4.3 Issuance of Equity Securities to Other Persons. If not all of the Major Investors elect to purchase their pro rata share of the Equity Securities, then the Company shall promptly notify in writing the Major Investors who do so elect and shall offer such Major Investors the right to acquire such unsubscribed shares. The Major Investors shall have five (5) business days after receipt of such notice to notify the Company of its election to purchase all or a portion thereof of the unsubscribed shares. If the Major Investors fail to exercise in full the rights of first refusal, the Company shall have ninety (90) days thereafter to sell the Equity Securities in respect of which the Major Investor’s rights were not exercised, at a price and upon general terms and conditions not more favorable to the purchasers thereof than specified in the Company’s notice to the Major Investors pursuant to Section 4.2 hereof. If the Company has not sold such Equity Securities within ninety (90) days of the notice provided pursuant to Section 4.2, the Company shall not thereafter issue or sell any Equity Securities, without first offering such securities to the Major Investors in the manner provided above.

     4.4 Termination and Waiver of Rights of First Refusal. The rights of first refusal established by this Section 4 shall not apply to, and shall terminate upon the earlier of (i) the effective date of the registration statement pertaining to a Qualified Offering or (ii) a Change in Control. The rights of first refusal established by this Section 4 may be amended, or any provision waived with the written consent of Major Investors holding a majority of the Registrable Securities held by all Major Investors, or as permitted by Section 5.6.

     4.5 Transfer of Rights of First Refusal. The rights of first refusal of each Major Investor under this Section 4 may be transferred to the same parties, subject to the same restrictions as any transfer of registration rights pursuant to Section 2.10.

     4.6 Excluded Securities. The rights of first refusal established by this Section 4 shall have no application to any of the following Equity Securities:

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     (a) shares of common stock and/or options, warrants or other Common Stock purchase rights and the Common Stock issued pursuant to such options, warrants or other rights (as adjusted for any stock dividends, combinations, splits, recapitalizations and the like) after the date hereof to employees, officers or directors of, or consultants or advisors to, the Company or any subsidiary pursuant to stock purchase or stock option plans or other arrangements that are approved by the Board of Directors;

     (b) stock issued or issuable pursuant to any rights or agreements, options, warrants or convertible securities outstanding as of the date of this Agreement; and stock issued pursuant to any such rights or agreements granted after the date of this Agreement, so long as the rights of first refusal established by this Section 4 were complied with with respect to the initial sale or grant by the Company of such rights or agreements;

     (c) any Equity Securities issued for consideration other than cash pursuant to a merger, consolidation, strategic alliance, acquisition or similar business combination approved by the Board of Directors;

     (d) shares of Common Stock issued in connection with any stock split, stock dividend or recapitalization by the Company;

     (e) shares of Common Stock issued upon conversion of shares of the Company’s Preferred Stock;

     (f) any Equity Securities issued pursuant to any equipment loan or leasing arrangement, real property leasing arrangement, or debt financing from a bank or similar financial or lending institution approved by the Board of Directors;

     (g) any Equity Securities that are issued by the Company pursuant to a registration statement filed under the Securities Act;

     (h) any Equity Securities issued in connection with strategic transactions involving the Company and other entities, including (i) joint ventures, manufacturing, marketing or distribution arrangements or (ii) technology transfer or development arrangements; provided that the issuance of shares therein has been approved by the Company’s Board of Directors; and

     (i) any Equity Securities issued by the Company pursuant to the terms of the Purchase Agreement.

SECTION 5. MISCELLANEOUS.

     5.1 Governing Law. This Agreement shall be governed by and construed under the laws of the State of California as applied to agreements among California residents entered into and to be performed entirely within California.

     5.2 Successors and Assigns. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors, and administrators of the parties hereto and shall inure to the benefit of and be enforceable by each person who shall be a holder of Registrable Securities from time to time;

21

provided, however, that prior to the receipt by the Company of adequate written notice of the transfer of any Registrable Securities specifying the full name and address of the transferee, the Company may deem and treat the person listed as the holder of such shares in its records as the absolute owner and holder of such shares for all purposes, including the payment of dividends or any redemption price.

     5.3 Entire Agreement. This Agreement, the Exhibits and Schedules hereto, the Purchase Agreement and the other documents delivered pursuant thereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and no party shall be liable or bound to any other in any manner by any representations, warranties, covenants and agreements except as specifically set forth herein and therein. Upon the effective date of this Agreement as set forth in Section 5.13 below, the Prior Agreement is hereby amended and restated in its entirety as set forth herein and shall be of no further force or effect.

     5.4 Severability. In the event one or more of the provisions of this Agreement should, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

     5.5 Amendment and Waiver.

     (a) Except as otherwise expressly provided, this Agreement may be amended or modified only upon the written consent of the Company and the holders of at least a majority of the Registrable Securities, provided however, that so long as ECI or its affiliates continue to hold Registrable Securities, the written consent of ECI shall be required for any amendment or modification of Sections 3.10 or 3.11.

     (b) Except as otherwise expressly provided, the obligations of the Company and the rights of the Holders under this Agreement may be waived only with the written consent of the holders of at least a majority of the Registrable Securities.

     (c) For the purposes of determining the number of Holder or Investors entitled to vote or exercise any rights hereunder, the Company shall be entitled to rely solely on the list of record holders of its stock as maintained by or on behalf of the Company.

     5.6 Delays or Omissions. It is agreed that no delay or omission to exercise any right, power, or remedy accruing to any Holder, upon any breach, default or noncompliance of the Company under this Agreement shall impair any such right, power, or remedy, nor shall it be construed to be a waiver of any such breach, default or noncompliance, or any acquiescence therein, or of any similar breach, default or noncompliance thereafter occurring. It is further agreed that any waiver, permit, consent, or approval of any kind or character on any Holder’s part of any breach, default or noncompliance under this Agreement or any waiver on such Holder’s part of any provisions or conditions of this Agreement must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement, by law, or otherwise afforded to Holders, shall be cumulative and not alternative.

22

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

     5.8 Attorneys’ Fees. In the event that any suit or action is instituted to enforce any provision in this Agreement, the prevailing party in such dispute shall be entitled to recover from the losing party all fees, costs and expenses of enforcing any right of such prevailing party under or with respect to this Agreement, including without limitation, such reasonable fees and expenses of attorneys and accountants, which shall include, without limitation, all fees, costs and expenses of appeals.

     5.9 Titles and Subtitles. The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.

     5.10 Additional Investors. Notwithstanding anything to the contrary contained herein, if the Company shall issue additional shares of its Series C Stock pursuant to the Purchase Agreement, any purchaser of such shares of Preferred Stock may become a party to this Agreement by executing and delivering an additional counterpart signature page to this Agreement and shall be deemed an "Investor,” a “Holder” and a party hereunder.

     5.11 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.

     5.12 Aggregation of Stock. All shares of Registrable Securities held or acquired by affiliated entities or persons or persons or entities under common management or control shall be aggregated together for the purpose of determining the availability of any rights under this Agreement.

     5.13 Effective Date Of Agreement. This Agreement and the rights and obligations contained herein shall be effective immediately upon and simultaneously with the Closing as defined in the Purchase Agreement. Prior to such Closing, this Agreement shall be of no force or effect.

[THIS SPACE INTENTIONALLY LEFT BLANK]

23

In Witness Whereof, the parties hereto have executed this Amended and Restated Investor Rights Agreement as of the date set forth in the first paragraph hereof.

COMPANY:

NexVerse Networks, Inc.

By:	/s/ Amit Chawla
	Amit Chawla, Chief Executive Officer

Address:	926 Rock Ave.
	San Jose, CA 95131

AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
SIGNATURE PAGE

In Witness Whereof, the parties hereto have executed this Amended and Restated Investor Rights Agreement as of the date set forth in the first paragraph hereof.

	Star Bay Technology Ventures IV, L.P.
	By Levensohn Capital Partners II LLC,
	its General Partner
	By Levensohn Capital Management, LLC
	its Managing Member
	By:	/s/ Pascal Levensohn
	Pascal Levensohn, President
	Star Bay Partners, L.P. (Rollover Fund)
By APH Capital Management LLC,
its General Partner
By Levensohn Capital Management, LLC
	its Managing Member
	By:	/s/ Pascal Levensohn
	Pascal Levensohn, President
	Star Bay Entrepreneurs Fund, L.P.
By Levensohn Capital Management, LLC
its General Partner
	By:	/s/ Pascal Levensohn
	Pascal Levensohn, President
	Star Bay Associates Fund, L.P.
By Levensohn Capital Management, LLC
	its General Partner
	By:	/s/ Pascal Levensohn
	Pascal Levensohn, President

AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
SIGNATURE PAGE

In Witness Whereof, the parties hereto have executed this Amended and Restated Investor Rights Agreement as of the date set forth in the first paragraph hereof.

Comdisco Ventures, Inc., successor in interest to Comdisco, Inc.

Signature: /s/ Victor Hanna

Print Name: Victor Hanna

Title: Managing Director

AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
SIGNATURE PAGE

In Witness Whereof, the parties hereto have executed this Amended and Restated Investor Rights Agreement as of the date set forth in the first paragraph hereof.

Battery Ventures V, L.P.
By:	Battery Partners V, LLC
	General Partner
/s/ Morgan M. Jones
Name:	Morgan M. Jones
Title:	Member Manager
Battery Ventures Convergence Fund, L.P.
By:	Battery Convergence Partners, LLC
	General Partner
/s/ Morgan M. Jones
Name:	Morgan M. Jones
Title:	Member Manager
Battery Investment Partners V, LLC
/s/ Morgan M. Jones
Name:	Morgan M. Jones
Title:	Member Manager

AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
SIGNATURE PAGE

In Witness Whereof, the parties hereto have executed this Amended and Restated Investor Rights Agreement as of the date set forth in the first paragraph hereof.

Norwest Venture Partners VII, L.P.
By:	Itasca VC Partners VII, LLP
Its:	General Partner
/s/ Promod Haque
Name:	Promod Haque
Title:	General Partner
Norwest Venture Partners IX, L.P.
By:	Genesis VC Partners IX, LLC
/s/ Promod Haque
Name:	Promod Haque
Title:	Managing Director
NVP Entrepreneurs Fund IX, L.P.
By:	Genesis VC Partners IX, LLC
/s/ Promod Haque
Name:	Promod Haque
Title:	Managing Director

AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
SIGNATURE PAGE

In Witness Whereof, the parties hereto have executed this Amended and Restated Investor Rights Agreement as of the date set forth in the first paragraph hereof.

KPCB Holdings, Inc., as Nominee
	Signature:	/s/ Illegible
	Print Name:
	Title:

AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
SIGNATURE PAGE

In Witness Whereof, the parties hereto have executed this Amended and Restated Investor Rights Agreement as of the date set forth in the first paragraph hereof.

Liberty Mutual Insurance Company
Signature:	/s/ Ronald D. Ulich
Name: Ronald D. Ulich
Title: Vice President

AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
SIGNATURE PAGE

In Witness Whereof, the parties hereto have executed this Amended and Restated Investor Rights Agreement as of the date set forth in the first paragraph hereof.

/s/ George B. Kaiser

George B. Kaiser

AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
SIGNATURE PAGE

Exhibit A

Schedule of Investors

ECI Telecom Ltd.

Star Bay Technology Ventures IV, L.P.

Star Bay Partners, L.P. (Rollover Fund)

Star Bay Entrepreneurs Fund, L.P.

Star Bay Associates Fund, L.P.

Comdisco, Inc.

GATX Ventures, Inc., a Delaware Corporation

Battery Ventures V, L.P.

Battery Ventures Convergence Fund, L. P.

Battery Investment Partners V, LLC

Norwest Venture Partners VII, L.P.

Norwest Venture Partners IX, L.P.

NVP Entrepreneurs Fund IX, L.P.

KPCB Holdings, Inc., as Nominee

Dominion Capital Management L.L.C.

Comerica Bank — California, a California Banking Corporation, Successor by Merger to Imperial Bank

Liberty Mutual Insurance Company

George B. Kaiser

EX-10.13

Exhibit 10.13

NEXVERSE NETWORKS, INC.

AMENDED AND RESTATED VOTING AGREEMENT

     This Amended and Restated Voting Agreement (the “Agreement”) is made and entered into as of this 30th day of October, 2002, by and among NexVerse Networks, Inc., a Delaware corporation (the “Company”), those certain holders of the Company’s Common Stock listed on Exhibit A hereto (the “Key Holders”) and the persons and entities listed on Exhibit B hereto (the “Investors”).

Witnesseth

     Whereas, the Key Holders are the beneficial owners of an aggregate of three million four hundred ninety three thousand one hundred seventy two (3,493,172) shares of the common stock of the Company (the “Common Stock”);

     Whereas, certain Investors hold shares of Common Stock and certain Investors are purchasing shares of the Company’s Series C Preferred Stock (the “Series C Preferred”), pursuant to that certain Series C Preferred Stock Purchase Agreement of even date herewith (the “Purchase Agreement”);

     Whereas, the Company is entering into that certain Share Exchange Agreement by and among the Company, ECI Telecom Ltd. (“ECI”), and ECI Telecom – NGTS, Inc. of even date herewith (the “Exchange Agreement”), pursuant to which the Company will acquire all of the outstanding capital stock of certain subsidiaries of ECI upon the Closing, as defined in the Exchange Agreement (the “Exchange Closing”);

     Whereas, the Key Holders, certain Investors and the Company are parties to that certain Voting Agreement dated November 27, 2001 (the “Prior Agreement”);

     Whereas, the obligations to execute the Purchase Agreement are conditioned upon the execution and delivery of this Agreement to the Escrow Agent (as defined in the Purchase Agreement); and

     Whereas, the Key Holders, the Investors and the Company wish to provide further inducement to the Investors to purchase shares of the Series C Preferred pursuant to the terms of the Purchase Agreement, and the parties hereto have agreed, effective upon the Exchange Closing, to amend and restate the Prior Agreement in its entirety upon the terms and conditions set forth below.

     Now, Therefore, in consideration of these premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

AGREEMENT

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1. Voting.

     1.1 Key Holder Shares; Investor Shares.

          (a) The Key Holders each agree to hold all shares of voting capital stock of the Company registered in their respective names or beneficially owned by them as of the date hereof and any and all other securities of the Company legally or beneficially acquired by each of the Key Holders after the date hereof (hereinafter collectively referred to as the “Key Holder Shares”) subject to, and to vote the Key Holder Shares in accordance with, the provisions of this Agreement.

          (b) The Investors each agree to hold all shares of voting capital stock of the Company (including but not limited to all shares of Common Stock issued upon conversion of the Series C Preferred) registered in their respective names or beneficially owned by them as of the date hereof and any and all other securities of the Company legally or beneficially acquired by each of the Investors after the date hereof (hereinafter collectively referred to as the “Investor Shares”) subject to, and to vote the Investor Shares in accordance with, the provisions of this Agreement.

     1.2 Election of Directors. On all matters relating to the election of directors of the Company, the Key Holders and the Investors agree to vote all Key Holder Shares and Investor Shares held by them (or the holders thereof shall consent pursuant to an action by written consent of the holders of capital stock of the Company) so as to elect members of the Company’s Board of Directors as follows:

          (a) At each election of directors, the Investors shall vote all of their respective Investor Shares so as to elect: (i) one representative of Levensohn Capital Management so long as it holds not less than five million (5,000,000) shares of Series C Preferred (as adjusted for stock splits, dividends and the like), which individual shall initially be Pascal Levensohn; (ii) one representative of Norwest Venture Capital so long as it holds not less than five million (5,000,000) shares of Series C Preferred (as adjusted for stock splits, dividends and the like), which individual shall initially be Promod Haque; (iii) one representative of Battery Ventures so long as it holds not less than five million (5,000,000) shares of Series C Preferred (as adjusted for stock splits, dividends and the like), which individual shall initially be Morgan Jones; and (iv) either: (x) three representatives of ECI so long as it holds not less than ten million (10,000,000) shares of Series C Preferred (as adjusted for stock splits, dividends and the like), (y) two representatives of ECI so long as it holds not less than seven million five hundred thousand (7,500,000) shares of Series C Preferred (as adjusted for stock splits, dividends and the like), or (z) one representative of ECI so long as it holds not less than five million (5,000,000) shares of Series C Preferred (as adjusted for stock splits, dividends and the like) two of which individuals shall initially be Giora Bitan and Barak Hachamov, provided however, that so long as ECI is entitled to designate more than one director, at least one of such designees shall, at all times during the term of this Agreement, be neither an officer nor a director of ECI or any of its affiliates. Any vote taken to remove any director elected pursuant to this Section 1.2(a), or to fill any vacancy created by the resignation, removal or death of a director elected pursuant to this Section 1.2(a), shall also be subject to the provisions of this Section 1.2(a).

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          (b) At each election of directors in which the holders of Common Stock, voting as a separate class, are entitled to elect directors of the Company, the Key Holders and Investors shall vote all of their respective Key Holder Shares and Investor Shares so as to elect: (i) the person serving as Chief Executive Officer of the Company, which individual shall initially be Tal Simchony, and (ii) a Key Holder designated by a majority of the directors elected pursuant to Sections 1.2(a)(i), 1.2(a)(ii), and 1.2(a)(iii), which individual shall initially be Amit Chawla. Any vote taken to remove any director elected pursuant to this Section 1.2(b), or to fill any vacancy created by the resignation, removal or death of a director elected pursuant to this Section 1.2(b), shall also be subject to the provisions of this Section 1.2(b).

          (c) At each election of directors in which the holders of Common Stock and holders of Series C Preferred, voting together as a single class, are entitled to elect directors of the Company, the Key Holders and Investors shall vote all of their respective Key Holder Shares and Investor Shares so as to elect one nominee who shall be an industry representative not affiliated with the Company or any Investor that is acceptable to the other members of the Company’s Board of Directors. Any vote taken to remove any director elected pursuant to this Section 1.2(c), or to fill any vacancy created by the resignation, removal or death of a director elected pursuant to this Section 1.2(c), shall also be subject to the provisions of this Section 1.2(c).

     1.3 No Liability for Election of Recommended Director. None of the parties hereto and no officer, director, stockholder, partner, employee or agent of any party makes any representation or warranty as to the fitness or competence of the nominee of any party hereunder to serve on the Board of Directors by virtue of such party’s execution of this Agreement or by the act of such party in voting for such nominee pursuant to this Agreement.

     1.4 Legend.

          (a) Concurrently with the execution of this Agreement, there shall be imprinted or otherwise placed, on certificates representing the Key Holder Shares and the Investor Shares the following restrictive legend (the “Legend”):

“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF A VOTING AGREEMENT WHICH PLACES CERTAIN RESTRICTIONS ON THE VOTING OF THE SHARES REPRESENTED HEREBY. ANY PERSON ACCEPTING ANY INTEREST IN SUCH SHARES SHALL BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL THE PROVISIONS OF SUCH AGREEMENT. A COPY OF SUCH VOTING AGREEMENT WILL BE FURNISHED TO THE RECORD HOLDER OF THIS CERTIFICATE WITHOUT CHARGE UPON WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS.”

          (b) The Company agrees that, during the term of this Agreement, it will not remove, and will not permit to be removed (upon registration of transfer, reissuance or otherwise), the Legend from any such certificate and will place or cause to be placed the Legend

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on any new certificate issued to represent Key Holder Shares or Investor Shares theretofore represented by a certificate carrying the Legend.

     1.5 Successors. The provisions of this Agreement shall be binding upon the successors in interest to any of the Key Holder Shares or Investor Shares. The Company shall not permit the transfer of any of the Key Holder Shares or Investor Shares on its books or issue a new certificate representing any of the Key Holder Shares or Investor Shares unless and until the person to whom such security is to be transferred shall have executed a written agreement, substantially in the form of this Agreement, pursuant to which such person becomes a party to this Agreement and agrees to be bound by all the provisions hereof as if such person were a Key Holder or Investor, as applicable.

     1.6 Other Rights. Except as provided by this Agreement or any other agreement entered into in connection with the Financing, each Key Holder and Investor shall exercise the full rights of a holder of capital stock of the Company with respect to the Key Holder Shares and the Investor Shares, respectively.

2. Termination.

     2.1 This Agreement shall continue in full force and effect from the date hereof through the earliest of the following dates, on which date it shall terminate in its entirety:

          (a) the date of the closing of a firmly underwritten public offering of the Common Stock pursuant to a registration statement filed with the Securities and Exchange Commission, and declared effective under the Securities Act of 1933, as amended which results in the Preferred Stock being converted into Common Stock;

          (b) ten (10) years from the date of this Agreement;

          (c) the date of the closing of a sale, lease, or other disposition of all or substantially all of the Company’s assets or the Company’s merger into or consolidation with any other corporation or other entity, or any other corporate reorganization, in which the holders of the Company’s outstanding voting stock immediately prior to such transaction own, immediately after such transaction, securities representing less than fifty percent (50%) of the voting power of the corporation or other entity surviving such transaction, provided that this Section 2.1(d) shall not apply to a merger effected exclusively for the purpose of changing the domicile of the Company; or

          (d) the date as of which the parties hereto terminate this Agreement by written consent of a majority in interest of the holders of Series C Preferred, a majority in interest of the Key Holders then providing services to the Company as officers, employees or consultants, and the written consent of each party entitled to designate a seat pursuant to Section 1.2(a).

3. Miscellaneous.

     3.1 Ownership. Each Key Holder represents and warrants to the Investors and the Company that (a) such Key Holder now owns the Key Holder Shares, free and clear of liens or encumbrances, and has not, prior to or on the date of this Agreement, executed or delivered any

- 4 -

proxy or entered into any other voting agreement or similar arrangement other than one which has expired or terminated prior to the date hereof, and (b) such Key Holder has full power and capacity to execute, deliver and perform this Agreement, which has been duly executed and delivered by, and evidences the valid and binding obligation of, such Key Holder enforceable in accordance with its terms. Each Investor represents and warrants to the Investors and the Company that (a) such Investor now owns, or will own upon the Closing (as defined in the Purchase Agreement), the Investor Shares, free and clear of liens or encumbrances, and has not, prior to or on the date of this Agreement, executed or delivered any proxy or entered into any other voting agreement or similar arrangement other than one which has expired or terminated prior to the date hereof, and (b) such Investor has full power and capacity to execute, deliver and perform this Agreement, which has been duly executed and delivered by, and evidences the valid and binding obligation of, such Investor enforceable in accordance with its terms.

     3.2 Further Action. If and whenever the Key Holder Shares are sold, the Key Holders or the personal representative of the Key Holders shall do all things and execute and deliver all documents and make all transfers, and cause any transferee of the Key Holder Shares to do all things and execute and deliver all documents, as may be necessary to consummate such sale consistent with this Agreement.

     3.3 Specific Performance. The parties hereto hereby declare that it is impossible to measure in money the damages which will accrue to a party hereto or to their heirs, personal representatives, or assigns by reason of a failure to perform any of the obligations under this Agreement and agree that the terms of this Agreement shall be specifically enforceable. If any party hereto or his heirs, personal representatives, or assigns institutes any action or proceeding to specifically enforce the provisions hereof, any person against whom such action or proceeding is brought hereby waives the claim or defense therein that such party or such personal representative has an adequate remedy at law, and such person shall not offer in any such action or proceeding the claim or defense that such remedy at law exists.

     3.4 Governing Law. This Agreement, and the rights of the parties hereto, shall be governed by and construed in accordance with the laws of the State of California as such laws apply to agreements among California residents made and to be performed entirely within the State of California.

     3.5 Amendment or Waiver. This Agreement may be amended (or provisions of this Agreement waived) only by an instrument in writing signed by (i) the Company, (ii) a majority in interest of the Investors and (iii) a majority in interest of the Key Holders then providing services to the Company as officers, employees or consultants. Any amendment or waiver so effected shall be binding upon the Company, each of the parties hereto and any assignee of any such party provided, however, that notwithstanding the foregoing, Section 1.2(a) of this Agreement shall not be amended or waived without the written consent of each of the parties entitled to designate a seat pursuant to Section 1.2(a). Notwithstanding the foregoing, Section 1.2 of this Agreement may be amended to add obligations of holders of additional series of the Company’s Preferred Stock by an instrument in writing signed by the Company and the holders of such series.

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     3.6 Severability. In the event one or more of the provisions of this Agreement should, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

     3.7 Successors. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, successors, assigns, administrators, executors and other legal representatives.

     3.8 Additional Shares. In the event that subsequent to the date of this Agreement any shares or other securities are issued on, or in exchange for, any of the Key Holder Shares or Investor Shares by reason of any stock dividend, stock split, combination of shares, reclassification or the like, such shares or securities shall be deemed to be Key Holder Shares or Investor Shares, as the case may be, for purposes of this Agreement.

     3.9 Addition of Investors. Notwithstanding anything to the contrary contained herein, if the Company shall issue additional shares of its Series C Preferred pursuant to the Purchase Agreement, any purchaser of such shares of Series C Preferred shall become a party to this Agreement by executing and delivering an additional counterpart signature page to this Agreement and shall be deemed an “Investor” hereunder.

     3.10 Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed an original but all of which together shall constitute one and the same agreement.

     3.11 Waiver. No waivers of any breach of this Agreement extended by any party hereto to any other party shall be construed as a waiver of any rights or remedies of any other party hereto or with respect to any subsequent breach.

     3.12 Attorney’s Fees. In the event that any suit or action is instituted to enforce any provision in this Agreement, the prevailing party in such dispute shall be entitled to recover from the losing party all fees, costs and expenses of enforcing any right of such prevailing party under or with respect to this Agreement, including without limitation, such reasonable fees and expenses of attorneys and accountants, which shall include, without limitation, all fees, costs and expenses of appeals.

     3.13 Notices. Any notices required in connection with this Agreement shall be in writing and shall be deemed effectively given: (i) upon personal delivery to the party to be notified, (ii) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient; if not, then on the next business day, (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (iv) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written notification of receipt. All notices shall be addressed to the holder appearing on the books of the Company or at such address as such party may designate by ten (10) days advance written notice to the other parties hereto.

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     3.14 Entire Agreement. This Agreement and the Exhibits hereto, along with the Purchase Agreement and each of the Exhibits thereto, constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof and no party shall be liable or bound to any other in any manner by any representations, warranties, covenants and agreements except as specifically set forth herein and therein. Upon the effective date of this Agreement as set forth in Section 3.15 below, the Prior Agreement is hereby amended and restated in its entirety as set forth herein and shall be of no further force or effect.

     3.15 Effective Date Of Agreement. This Agreement and the rights and obligations contained herein shall be effective immediately upon and simultaneously with the Closing as defined in the Purchase Agreement. Prior to such Closing, this Agreement shall be of no force or effect.

[THIS SPACE INTENTIONALLY LEFT BLANK]

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     In Witness Whereof, the parties hereto have executed this Amended and Restated Voting Agreement as of the date first above written.

COMPANY:
NexVerse Networks, Inc.
By:	/s/ Amit Chawla
	Amit Chawla, Chief Executive Officer

Address:	926 Rock Ave.
	San Jose, CA 95131

KEY HOLDERS:

/s/ Amit Chawla

Amit Chawla

/s/ Vijay Nadkarni

Vijay Nadkarni

/s/ Gursharan Sidhu

Gursharan Sidhu

/s/ Paul Singh

Paul Singh

AMENDED AND RESTATED VOTING AGREEMENT
SIGNATURE PAGE

     In Witness Whereof, the parties hereto have executed this Amended and Restated Voting Agreement as of the date first above written.

	Star Bay Technology Ventures IV, L.P.
	By Levensohn Capital Partners II LLC,
	its General Partner
	By Levensohn Capital Management, LLC
	its Managing Member
	By:	/s/ Pascal Levensohn
	Pascal Levensohn, President
	Star Bay Partners, L.P. (Rollover Fund)
By APH Capital Management LLC,
its General Partner
By Levensohn Capital Management, LLC
	its Managing Member
	By:	/s/ Pascal Levensohn
	Pascal Levensohn, President
	Star Bay Entrepreneurs Fund, L.P.
By Levensohn Capital Management, LLC
its General Partner
	By:	/s/ Pascal Levensohn
	Pascal Levensohn, President
	Star Bay Associates Fund, L.P.
By Levensohn Capital Management, LLC
	its General Partner
	By:	/s/ Pascal Levensohn
	Pascal Levensohn, President

AMENDED AND RESTATED VOTING AGREEMENT
SIGNATURE PAGE

     In Witness Whereof, the parties hereto have executed this Amended and Restated Voting Agreement as of the date first above written.

Comdisco, Ventures, Inc. successor in interest to Comdisco, Inc.
Signature:	/s/ Victor Hanna
Print Name:	Victor Hanna
Title:	Managing Director

AMENDED AND RESTATED VOTING AGREEMENT
SIGNATURE PAGE

     In Witness Whereof, the parties hereto have executed this Amended and Restated Voting Agreement as of the date first above written.

Battery Ventures V, L.P.
By:	Battery Partners V, LLC
	General Partner
/s/ Morgan M. Jones
Name:	Morgan M. Jones
Title:	Member Manager
Battery Ventures Convergence Fund, L.P.
By:	Battery Convergence Partners, LLC
	General Partner
/s/ Morgan M. Jones
Name:	Morgan M. Jones
Title:	Member Manager
Battery Investment Partners V, LLC
/s/ Morgan M. Jones
Name:	Morgan M. Jones
Title:	Member Manager

AMENDED AND RESTATED VOTING AGREEMENT
SIGNATURE PAGE

     In Witness Whereof, the parties hereto have executed this Amended and Restated Voting Agreement as of the date first above written.

Norwest Venture Partners VII, L.P.
By:	Itasca VC Partners VII, LLP
Its:	General Partner
/s/ Promod Haque
Name:	Promod Haque
Title:	General Partner
Norwest Venture Partners IX, L.P.
By:	Genesis VC Partners IX, LLC
/s/ Promod Haque
Name:	Promod Haque
Title:	Managing Director
NVP Entrepreneurs Fund IX, L.P.
By:	Genesis VC Partners IX, LLC
/s/ Promod Haque
Name:	Promod Haque
Title:	Managing Director

AMENDED AND RESTATED VOTING AGREEMENT
SIGNATURE PAGE

     In Witness Whereof, the parties hereto have executed this Amended and Restated Voting Agreement as of the date first above written.

KPCB Holdings, Inc., as Nominee
Signature:	/s/  Illegible
Print Name:
Title:

AMENDED AND RESTATED VOTING AGREEMENT
SIGNATURE PAGE

     In Witness Whereof, the parties hereto have executed this Amended and Restated Voting Agreement as of the date first above written.

Liberty Mutual Insurance Company
Signature:	/s/ Ronald D. Ulich
Name: Ronald D. Ulich
Title: Vice President

AMENDED AND RESTATED VOTING AGREEMENT
SIGNATURE PAGE

     In Witness Whereof, the parties hereto have executed this Amended and Restated Voting Agreement as of the date first above written.

/s/ George B. Kaiser

George B. Kaiser

AMENDED AND RESTATED VOTING AGREEMENT
SIGNATURE PAGE

Exhibit A

LIST OF KEY HOLDERS

Amit Chawla
Gursharan Sidhu
Vijay Nadkarni
Paul Singh

Exhibit B

LIST OF INVESTORS

ECI Telecom Ltd.

Star Bay Technology Ventures IV, L.P.

Star Bay Partners, L.P. (Rollover Fund)

Star Bay Entrepreneurs Fund, L.P.

Star Bay Associates Fund, L.P.

Comdisco, Inc.

GATX Ventures, Inc., a Delaware Corporation

Battery Ventures V, L.P.

Battery Ventures Convergence Fund, L. P.

Battery Investment Partners V, LLC

Norwest Venture Partners VII, L.P.

Norwest Venture Partners IX, L.P.

NVP Entrepreneurs Fund IX, L.P

KPCB Holdings, Inc., as Nominee

Dominion Capital Management L.L.C.

Comerica Bank – California, a California Banking Corporation, Successor by Merger to Imperial Bank

Liberty Mutual Insurance Company

George B. Kaiser

EX-10.14

Exhibit 10.14

Veraz Networks, Inc.

2001 Equity Incentive Plan

Adopted: November 26, 2001
Approved By Stockholders: November 26, 2001
Amended by the Board of Directors: December 31, 2002
Approved By Stockholders As Amended: December 31, 2002
Amended by the Board of Directors: March 4, 2003
Approved By Stockholders As Amended: March 4, 2003
Amended by the Board of Directors: October 21, 2003
Amended by the Board of Directors: January 10, 2005
Approved By Stockholders as Amended: May 6, 2005
Amended by the Board of Directors: May 8, 2006
Approved By Stockholders as Amended: August 4, 2006
Termination Date: November 25, 2011

1. Purposes.

     (a) Eligible Stock Award Recipients. The persons eligible to receive Stock Awards are the Employees, Directors and Consultants of the Company and its Affiliates.

     (b) Available Stock Awards. The purpose of the Plan is to provide a means by which eligible recipients of Stock Awards may be given an opportunity to benefit from increases in value of the Common Stock through the granting of the following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii) stock bonuses and (iv) rights to acquire restricted stock.

     (c) General Purpose. The Company, by means of the Plan, seeks to retain the services of the group of persons eligible to receive Stock Awards, to secure and retain the services of new members of this group and to provide incentives for such persons to exert maximum efforts for the success of the Company and its Affiliates.

2. Definitions.

     (a) “Affiliate” means any parent corporation or subsidiary corporation of the Company, whether now or hereafter existing, as those terms are defined in Sections 424(e) and (f), respectively, of the Code.

     (b) “Board” means the Board of Directors of the Company.

     (c) “Capitalization Adjustment” has the meaning ascribed to that term in Section 11(a).

     (d) “Change in Control” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:

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          (i) any Exchange Act Person becomes the Owner, directly or indirectly, of securities of the Company representing more than fifty percent (50%)of the combined voting power of the Company’s then outstanding securities other than by virtue of a merger, consolidation or similar transaction. Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because the level of Ownership held by any Exchange Act Person (the “Subject Person”) exceeds the designated percentage threshold of the outstanding voting securities as a result of a repurchase or other acquisition of voting securities by the Company reducing the number of shares outstanding, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of voting securities by the Company, and after such share acquisition, the Subject Person becomes the Owner of any additional voting securities that, assuming the repurchase or other acquisition had not occurred, increases the percentage of the then outstanding voting securities Owned by the Subject Person over the designated percentage threshold, then a Change in Control shall be deemed to occur;

          (ii) there is consummated a merger, consolidation or similar transaction involving (directly or indirectly) the Company and, immediately after the consummation of such merger, consolidation or similar transaction, the stockholders of the Company immediately prior thereto do not Own, directly or indirectly, outstanding voting securities representing more than fifty percent (50%) of the combined outstanding voting power of the surviving Entity in such merger, consolidation or similar transaction or more than fifty percent (50%) of the combined outstanding voting power of the parent of the surviving Entity in such merger, consolidation or similar transaction;

          (iii) the stockholders of the Company approve or the Board approves a plan of complete dissolution or liquidation of the Company, or a complete dissolution or liquidation of the Company shall otherwise occur; or

          (iv) there is consummated a sale, lease, license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries, other than a sale, lease, license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries to an Entity, more than fifty percent (50%) of the combined voting power of the voting securities of which are Owned by stockholders of the Company in substantially the same proportions as their Ownership of the Company immediately prior to such sale, lease, license or other disposition.

     Notwithstanding the foregoing or any other provision of this Plan, the definition of Change in Control (or any analogous term) in an individual written agreement between the Company or any Affiliate and the Participant shall supersede the foregoing definition with respect to Stock Awards subject to such agreement (it being understood, however, that if no definition of Change in Control or any analogous term is set forth in such an individual written agreement, the foregoing definition shall apply).

     (e) “Code” means the Internal Revenue Code of 1986, as amended.

     (f) “Committee” means a committee of one or more members of the Board appointed by the Board in accordance with Section 3(c).

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     (g) “Common Stock” means the common stock of the Company.

     (h) “Company” means Veraz Networks, Inc., a Delaware corporation.

     (i) “Consultant” means any person, including an advisor, (i) engaged by the Company or an Affiliate to render consulting or advisory services and who is compensated for such services or (ii) serving as a member of the Board of Directors of an Affiliate and who is compensated for such services. However, the term “Consultant” shall not include Directors who are not compensated by the Company for their services as Directors, and the payment of a director’s fee by the Company for services as a Director shall not cause a Director to be considered a “Consultant” for purposes of the Plan.

     (j) “Continuous Service” means that the Participant’s service with the Company or an Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. A change in the capacity in which the Participant renders service to the Company or an Affiliate as an Employee, Consultant or Director or a change in the entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant’s service with the Company or an Affiliate, shall not terminate a Participant’s Continuous Service. For example, a change in status from an Employee of the Company to a Consultant of an Affiliate or a Director shall not constitute an interruption of Continuous Service. The Board or the chief executive officer of the Company, in that party’s sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by that party, including sick leave, military leave or any other personal leave. Notwithstanding the foregoing, a leave of absence shall be treated as Continuous Service for purposes of vesting in a Stock Award only to such extent as may be provided in the Company’s leave of absence policy or in the written terms of the Participant’s leave of absence.

     (k) “Corporate Transaction” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:

          (i) a sale or other disposition of all or substantially all, as determined by the Board in its discretion, of the consolidated assets of the Company and its Subsidiaries;

          (ii) a sale or other disposition of at least eighty percent (80%) of the outstanding securities of the Company;

          (iii) a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or

          (iv) a merger, consolidation or similar transaction following which the Company is the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other property, whether in the form of securities, cash or otherwise.

     (l) “Director” means a member of the Board of Directors of the Company.

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     (m) “Disability” means the inability of a person, in the opinion of a qualified physician acceptable to the Company, to perform the major duties of that person’s position with the Company or an Affiliate because of the sickness or injury of the person.

     (n) “Employee” means any person employed by the Company or an Affiliate. Service as a Director or payment of a director’s fee by the Company or an Affiliate shall not be sufficient to constitute “employment” by the Company or an Affiliate.

     (o) “Entity” means a corporation, partnership or other entity.

     (p) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

     (q) “Exchange Act Person” means any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act), except that “Exchange Act Person” shall not include (A) the Company or any Subsidiary of the Company, (B) any employee benefit plan of the Company or any Subsidiary of the Company or any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary of the Company, (C) an underwriter temporarily holding securities pursuant to an offering of such securities, or (D) an Entity Owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their Ownership of stock of the Company.

     (r) “Fair Market Value” means, as of any date, the value of the Common Stock determined in good faith by the Board, and in a manner consistent with Section 260.140.50 of Title 10 of the California Code of Regulations.

     (s) “Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.

     (t) “Nonstatutory Stock Option” means an Option not intended to qualify as an Incentive Stock Option.

     (u) “Officer” means any person designated by the Company as an officer.

     (v) “Option” means an Incentive Stock Option or a Nonstatutory Stock Option granted pursuant to the Plan.

     (w) “Option Agreement” means a written agreement between the Company and an Optionholder evidencing the terms and conditions of an individual Option grant. Each Option Agreement shall be subject to the terms and conditions of the Plan.

     (x) “Optionholder” means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.

     (y) “Own,” “Owned,” “Owner,” “Ownership” A person or Entity shall be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to have acquired “Ownership” of

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securities if such person or Entity, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power, which includes the power to vote or to direct the voting, with respect to such securities.

     (z) “Participant” means a person to whom a Stock Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Stock Award.

     (aa) “Plan” means this Veraz Networks, Inc. 2001 Equity Incentive Plan.

     (bb) “Securities Act” means the Securities Act of 1933, as amended.

     (cc) “Stock Award” means any right granted under the Plan, including an Option, a stock bonus and a right to acquire restricted stock.

     (dd) “Stock Award Agreement” means a written agreement between the Company and a holder of a Stock Award evidencing the terms and conditions of an individual Stock Award grant. Each Stock Award Agreement shall be subject to the terms and conditions of the Plan.

     (ee) “Subsidiary” means, with respect to the Company, (i) any corporation of which more than fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company, and (ii) any partnership in which the Company has a direct or indirect interest (whether in the form of voting or participation in profits or capital contribution) of more than fifty percent (50%).

     (ff) “Ten Percent Stockholder” means a person who Owns (or is deemed to Own pursuant to Section 424(d) of the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of any of its Affiliates.

3. Administration.

     (a) Administration by Board. The Board shall administer the Plan unless and until the Board delegates administration to a Committee, as provided in Section 3(c).

     (b) Powers of Board. The Board shall have the power, subject to, and within the limitations of, the express provisions of the Plan:

          (i) To determine from time to time which of the persons eligible under the Plan shall be granted Stock Awards; when and how each Stock Award shall be granted; what type or combination of types of Stock Award shall be granted; the provisions of each Stock Award granted (which need not be identical), including the time or times when a person shall be permitted to receive Common Stock pursuant to a Stock Award; and the number of shares of Common Stock with respect to which a Stock Award shall be granted to each such person.

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          (ii) To construe and interpret the Plan and Stock Awards granted under it, and to establish, amend and revoke rules and regulations for its administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any Stock Award Agreement, in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective.

          (iii) To amend the Plan or a Stock Award as provided in Section 12.

          (iv) To terminate or suspend the Plan as provided in Section 13.

          (v) Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company and that are not in conflict with the provisions of the Plan.

     (c) Delegation to Committee. The Board may delegate administration of the Plan to a Committee or Committees of one (1) or more members of the Board, and the term “Committee” shall apply to any person or persons to whom such authority has been delegated. If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board, including the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board shall thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may abolish the Committee at any time and revest in the Board the administration of the Plan.

     (d) Delegation to an Officer. The Board may delegate to one or more Officers of the Company the authority to do one or both of the following: (i) designate Officers and Employees of the Company or any of its Subsidiaries to be recipients of Stock Awards and (ii) determine the number of shares of Common Stock to be subject to such Stock Awards granted to such Officers and Employees of the Company; provided, however, that the Board resolutions regarding such delegation shall specify the total number of shares of Common Stock that may be subject to the Stock Awards granted by such Officer and that such Officer may not grant a Stock Award to himself or herself. Notwithstanding the foregoing, the Board may not delegate authority to an Officer to determine the Fair Market Value of the Common Stock.

     (e) Effect of Board’s Decision. All determinations, interpretations and constructions made by the Board in good faith shall not be subject to review by any person and shall be final, binding and conclusive on all persons.

     (e) Arbitration. Any dispute or claim concerning any Stock Awards granted (or not granted) pursuant to the Plan or any disputes or claims relating to or arising out of the Plan shall be fully, finally and exclusively resolved by binding arbitration conducted pursuant to the Commercial Arbitration Rules of the American Arbitration Association in Santa Clara, California. The Company shall pay all arbitration fees. In addition to any other relief, the arbitrator may award to the prevailing party recovery of its attorneys’ fees and costs. By

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accepting a Stock Award, Participants and the Company waive their respective rights to have any such disputes or claims tried by a judge or jury.

4. Shares Subject to the Plan.

     (a) Share Reserve. Subject to the provisions of Section 11(a) relating to Capitalization Adjustments, the Common Stock that may be issued pursuant to Stock Awards shall not exceed in the aggregate Nineteen Million Eight Hundred Ninety-Seven Thousand Seven Hundred Seventy-Two (19,897,772) shares of Common Stock (the “Share Reserve Limit”), provided however, that the Share Reserve Limit shall be reduced by that number of shares of Common Stock issued from or subject to outstanding options granted under the Company’s 2003 Israeli Share Option Plan.

     (b) Reversion of Shares to the Share Reserve. If any Stock Award shall for any reason expire or otherwise terminate, in whole or in part, without having been exercised in full, or if any shares of Common Stock issued to a Participant pursuant to a Stock Award are forfeited back to or repurchased by the Company because of or in connection with the failure to meet a contingency or condition required to vest such shares in the Participant, the shares of Common Stock not acquired, forfeited or repurchased under such Stock Award shall revert to and again become available for issuance under the Plan; provided, however, that subject to the provisions of Section 11(a) relating to Capitalization Adjustments, the aggregate maximum number of shares of Common Stock that may be issued as Incentive Stock Options shall be Five Million Seven Hundred Forty Thousand Fifty Eight (5,740,058) shares of Common Stock.

     (c) Source of Shares. The shares of Common Stock subject to the Plan may be unissued shares or reacquired shares, bought on the market or otherwise.

     (d) Share Reserve Limitation. To the extent required by Section 260.140.45 of Title 10 of the California Code of Regulations, the total number of shares of Common Stock issuable upon exercise of all outstanding Options and the total number of shares of Common Stock provided for under any stock bonus or similar plan of the Company shall not exceed the applicable percentage as calculated in accordance with the conditions and exclusions of Section 260.140.45 of Title 10 of the California Code of Regulations, based on the shares of Common Stock of the Company that are outstanding at the time the calculation is made.

5. Eligibility.

     (a) Eligibility for Specific Stock Awards. Incentive Stock Options may be granted only to Employees. Stock Awards other than Incentive Stock Options may be granted to Employees, Directors and Consultants.

     (b) Ten Percent Stockholders.

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          (i) A Ten Percent Stockholder shall not be granted an Incentive Stock Option unless the exercise price of such Option is at least one hundred ten percent (110%) of the Fair Market Value of the Common Stock on the date of grant and the Option is not exercisable after the expiration of five (5) years from the date of grant.

          (ii) A Ten Percent Stockholder shall not be granted a Nonstatutory Stock Option unless the exercise price of such Option is at least (i) one hundred ten percent (110%) of the Fair Market Value of the Common Stock on the date of grant or (ii) such lower percentage of the Fair Market Value of the Common Stock on the date of grant as is permitted by Section 260.140.41 of Title 10 of the California Code of Regulations at the time of the grant of the Option.

          (iii) A Ten Percent Stockholder shall not be granted a restricted stock award unless the purchase price of the restricted stock is at least (i) one hundred percent (100%) of the Fair Market Value of the Common Stock on the date of grant or (ii) such lower percentage of the Fair Market Value of the Common Stock on the date of grant as is permitted by Section 260.140.41 of Title 10 of the California Code of Regulations at the time of the grant of the restricted stock award.

     (c) Consultants. A Consultant shall not be eligible for the grant of a Stock Award if, at the time of grant, either the offer or the sale of the Company’s securities to such Consultant is not exempt under Rule 701 of the Securities Act (“Rule 701”) because of the nature of the services that the Consultant is providing to the Company, because the Consultant is not a natural person, or because of some other provision of Rule 701, unless the Company determines that such grant need not comply with the requirements of Rule 701 and will satisfy another exemption under the Securities Act as well as comply with the securities laws of all other relevant jurisdictions.

6. Option Provisions.

     Each Option shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. All Options shall be separately designated Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and, if certificates are issued, a separate certificate or certificates shall be issued for shares of Common Stock purchased on exercise of each type of Option. The provisions of separate Options need not be identical, but each Option shall include (through incorporation of provisions hereof by reference in the Option or otherwise) the substance of each of the following provisions:

     (a) Term. Subject to the provisions of Section 5(b) regarding Ten Percent Stockholders, no Option shall be exercisable after the expiration of ten (10) years from the date it was granted.

     (b) Exercise Price of an Incentive Stock Option. Subject to the provisions of Section 5(b) regarding Ten Percent Stockholders, the exercise price of each Incentive Stock Option shall be not less than one hundred percent (100%) of the Fair Market Value of the Common Stock subject to the Option on the date the Option is granted. Notwithstanding the

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foregoing, an Incentive Stock Option may be granted with an exercise price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 424(a) of the Code.

     (c) Exercise Price of a Nonstatutory Stock Option. Subject to the provisions of Section 5(b) regarding Ten Percent Stockholders, the exercise price of each Nonstatutory Stock Option shall be not less than eighty-five percent (85%) of the Fair Market Value of the Common Stock subject to the Option on the date the Option is granted. Notwithstanding the foregoing, a Nonstatutory Stock Option may be granted with an exercise price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 424(a) of the Code.

     (d) Consideration. The purchase price of Common Stock acquired pursuant to an Option shall be paid, to the extent permitted by applicable statutes and regulations, either (i) in cash at the time the Option is exercised or (ii) at the discretion of the Board at the time of the grant of the Option (or subsequently in the case of a Nonstatutory Stock Option) (1) by delivery to the Company of other Common Stock, (2) according to a deferred payment or other similar arrangement with the Optionholder or (3) in any other form of legal consideration that may be acceptable to the Board. Unless otherwise specifically provided in the Option, the purchase price of Common Stock acquired pursuant to an Option that is paid by delivery to the Company of other Common Stock acquired, directly or indirectly from the Company, shall be paid only by shares of the Common Stock of the Company that have been held for more than six (6) months (or such longer or shorter period of time required to avoid a charge to earnings for financial accounting purposes). At any time that the Company is incorporated in Delaware, payment of the Common Stock’s “par value,” as defined in the Delaware General Corporation Law, shall not be made by deferred payment.

     In the case of any deferred payment arrangement, interest shall be compounded at least annually and shall be charged at the minimum rate of interest necessary to avoid (1) the treatment as interest, under any applicable provisions of the Code, of any amounts other than amounts stated to be interest under the deferred payment arrangement and (2) the treatment of the Option as a variable award for financial accounting purposes.

     (e) Transferability of an Incentive Stock Option. An Incentive Stock Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder. Notwithstanding the foregoing, the Optionholder may, by delivering written notice to the Company, in a form satisfactory to the Company, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option.

     (f) Transferability of a Nonstatutory Stock Option. A Nonstatutory Stock Option shall not be transferable except by will or by the laws of descent and distribution and, to the extent provided in the Option Agreement, to such further extent as permitted by Section 260.140.41(d) of Title 10 of the California Code of Regulations at the time of the grant of the Option, and shall be exercisable during the lifetime of the Optionholder only by the

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Optionholder. If the Nonstatutory Stock Option does not provide for transferability, then the Nonstatutory Stock Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder. Notwithstanding the foregoing, the Optionholder may, by delivering written notice to the Company, in a form satisfactory to the Company, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option.

     (g) Vesting Generally. The total number of shares of Common Stock subject to an Option may, but need not, vest and therefore become exercisable in periodic installments that may, but need not, be equal. The Option may be subject to such other terms and conditions on the time or times when it may be exercised (which may be based on performance or other criteria) as the Board may deem appropriate. The vesting provisions of individual Options may vary. The provisions of this Section 6(g) are subject to any Option provisions governing the minimum number of shares of Common Stock as to which an Option may be exercised.

     (h) Minimum Vesting. Notwithstanding the foregoing Section 6(g), to the extent that the following restrictions on vesting are required by Section 260.140.41(f) of Title 10 of the California Code of Regulations at the time of the grant of the Option, then:

          (i) Options granted to an Employee who is not an Officer, Director or Consultant shall provide for vesting of the total number of shares of Common Stock at a rate of at least twenty percent (20%) per year over five (5) years from the date the Option was granted, subject to reasonable conditions such as continued employment; and

          (ii) Options granted to Officers, Directors or Consultants may be made fully exercisable, subject to reasonable conditions such as continued employment, at any time or during any period established by the Company.

     (i) Termination of Continuous Service. In the event that an Optionholder’s Continuous Service terminates (other than upon the Optionholder’s death or Disability), the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination) but only within such period of time ending on the earlier of (i) the date three (3) months following the termination of the Optionholder’s Continuous Service (or such longer or shorter period specified in the Option Agreement, which period shall not be less than thirty (30) days unless such termination is for cause), or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination, the Optionholder does not exercise his or her Option within the time specified in the Option Agreement, the Option shall terminate.

     (j) Extension of Termination Date. An Optionholder’s Option Agreement may also provide that if the exercise of the Option following the termination of the Optionholder’s Continuous Service (other than upon the Optionholder’s death or Disability) would be prohibited at any time solely because the issuance of shares of Common Stock would violate the registration requirements under the Securities Act, then the Option shall terminate on the earlier of (i) the expiration of the term of the Option set forth in Section 6(a) or (ii) the expiration of a

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period of three (3) months after the termination of the Optionholder’s Continuous Service during which the exercise of the Option would not be in violation of such registration requirements.

     (k) Disability of Optionholder. In the event that an Optionholder’s Continuous Service terminates as a result of the Optionholder’s Disability, the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination), but only within such period of time ending on the earlier of (i) the date twelve (12) months following such termination (or such longer or shorter period specified in the Option Agreement, which period shall not be less than six (6) months) or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination, the Optionholder does not exercise his or her Option within the time specified herein, the Option shall terminate.

     (l) Death of Optionholder. In the event that (i) an Optionholder’s Continuous Service terminates as a result of the Optionholder’s death or (ii) the Optionholder dies within the period (if any) specified in the Option Agreement after the termination of the Optionholder’s Continuous Service for a reason other than death, then the Option may be exercised (to the extent the Optionholder was entitled to exercise such Option as of the date of death) by the Optionholder’s estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a person designated to exercise the option upon the Optionholder’s death pursuant to Section 6(e) or 6(f), but only within the period ending on the earlier of (1) the date eighteen (18) months following the date of death (or such longer or shorter period specified in the Option Agreement, which period shall not be less than six (6) months) or (2) the expiration of the term of such Option as set forth in the Option Agreement. If, after death, the Option is not exercised within the time specified herein, the Option shall terminate.

     (m) Early Exercise. The Option may, but need not, include a provision whereby the Optionholder may elect at any time before the Optionholder’s Continuous Service terminates to exercise the Option as to any part or all of the shares of Common Stock subject to the Option prior to the full vesting of the Option. Subject to the “Repurchase Limitation” in Section 10(h), any unvested shares of Common Stock so purchased may be subject to a repurchase option in favor of the Company or to any other restriction the Board determines to be appropriate. Provided that the “Repurchase Limitation” in Section 10(h) is not violated, the Company will not exercise its repurchase option until at least six (6) months (or such longer or shorter period of time required to avoid a charge to earnings for financial accounting purposes) have elapsed following exercise of the Option unless the Board otherwise specifically provides in the Option.

     (n) Right of Repurchase. Subject to the “Repurchase Limitation” in Section 10(h), the Option may, but need not, include a provision whereby the Company may elect to repurchase all or any part of the vested shares of Common Stock acquired by the Optionholder pursuant to the exercise of the Option. Provided that the “Repurchase Limitation” in Section 10(h) is not violated, the Company will not exercise its repurchase option until at least six (6) months (or such longer or shorter period of time required to avoid a charge to earnings for financial accounting purposes) have elapsed following exercise of the Option unless the Board otherwise specifically provides in the Option.

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     (o) Right of First Refusal. The Option may, but need not, include a provision whereby the Company may elect to exercise a right of first refusal following receipt of notice from the Optionholder of the intent to transfer all or any part of the shares of Common Stock received upon the exercise of the Option. Except as expressly provided in this Section 6(o), such right of first refusal shall otherwise comply with any applicable provisions of the Bylaws of the Company.

7. Provisions of Stock Awards other than Options.

     (a) Stock Bonus Awards. Each stock bonus agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. The terms and conditions of stock bonus agreements may change from time to time, and the terms and conditions of separate stock bonus agreements need not be identical, but each stock bonus agreement shall include (through incorporation of provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:

          (i) Consideration. A stock bonus may be awarded in consideration for past services actually rendered to the Company or an Affiliate for its benefit.

          (ii) Vesting. Subject to the “Repurchase Limitation” in Section 10(h), shares of Common Stock awarded under the stock bonus agreement may, but need not, be subject to a share repurchase option in favor of the Company in accordance with a vesting schedule to be determined by the Board.

          (iii) Termination of Participant’s Continuous Service. Subject to the “Repurchase Limitation” in Section 10(h), in the event that a Participant’s Continuous Service terminates, the Company may reacquire any or all of the shares of Common Stock held by the Participant that have not vested as of the date of termination under the terms of the stock bonus agreement.

          (iv) Transferability. Rights to acquire shares of Common Stock under the stock bonus agreement shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Participant only by the Participant.

     (b) Restricted Stock Awards. Each restricted stock purchase agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. The terms and conditions of the restricted stock purchase agreements may change from time to time, and the terms and conditions of separate restricted stock purchase agreements need not be identical, but each restricted stock purchase agreement shall include (through incorporation of provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:

          (i) Purchase Price. Subject to the provisions of Section 5(b) regarding Ten Percent Stockholders, the purchase price of restricted stock awards shall not be less than eighty-

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five percent (85%) of the Common Stock’s Fair Market Value on the date such award is made or at the time the purchase is consummated.

          (ii) Consideration. The purchase price of Common Stock acquired pursuant to the restricted stock purchase agreement shall be paid either: (i) in cash at the time of purchase; (ii) at the discretion of the Board, according to a deferred payment or other similar arrangement with the Participant; or (iii) in any other form of legal consideration that may be acceptable to the Board in its discretion; provided, however, that at any time that the Company is incorporated in Delaware, then payment of the Common Stock’s “par value,” as defined in the Delaware General Corporation Law, shall not be made by deferred payment.

          (iii) Vesting. Subject to the “Repurchase Limitation” in Section 10(h), shares of Common Stock acquired under the restricted stock purchase agreement may, but need not, be subject to a share repurchase option in favor of the Company in accordance with a vesting schedule to be determined by the Board.

          (iv) Termination of Participant’s Continuous Service. Subject to the “Repurchase Limitation” in Section 10(h), in the event that a Participant’s Continuous Service terminates, the Company may repurchase or otherwise reacquire any or all of the shares of Common Stock held by the Participant that have not vested as of the date of termination under the terms of the restricted stock purchase agreement.

          (v) Transferability. Rights to acquire shares of Common Stock under the restricted stock purchase agreement shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Participant only by the Participant.

8. Covenants of the Company.

     (a) Availability of Shares. During the terms of the Stock Awards, the Company shall keep available at all times the number of shares of Common Stock required to satisfy such Stock Awards.

     (b) Securities Law Compliance. The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Stock Awards and to issue and sell shares of Common Stock upon exercise of the Stock Awards; provided, however, that this undertaking shall not require the Company to register under the Securities Act the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any such Stock Award. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority which counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell Common Stock upon exercise of such Stock Awards unless and until such authority is obtained.

9. Use of Proceeds from Stock.

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     Proceeds from the sale of Common Stock pursuant to Stock Awards shall constitute general funds of the Company.

10. Miscellaneous.

     (a) Acceleration of Exercisability and Vesting. The Board shall have the power to accelerate the time at which a Stock Award may first be exercised or the time during which a Stock Award or any part thereof will vest in accordance with the Plan, notwithstanding the provisions in the Stock Award stating the time at which it may first be exercised or the time during which it will vest.

     (b) Stockholder Rights. No Participant shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Common Stock subject to such Stock Award unless and until such Participant has satisfied all requirements for exercise of the Stock Award pursuant to its terms.

     (c) No Employment or other Service Rights. Nothing in the Plan or any instrument executed or Stock Award granted pursuant thereto shall confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Stock Award was granted or shall affect the right of the Company or an Affiliate to terminate (i) the employment of an Employee with or without notice and with or without cause, (ii) the service of a Consultant pursuant to the terms of such Consultant’s agreement with the Company or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be.

     (d) Incentive Stock Option $100,000 Limitation. To the extent that the aggregate Fair Market Value (determined at the time of grant) of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by any Optionholder during any calendar year (under all plans of the Company and its Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or portions thereof that exceed such limit (according to the order in which they were granted) shall be treated as Nonstatutory Stock Options, notwithstanding any contrary provision of an Stock Award Agreement.

     (e) Investment Assurances. The Company may require a Participant, as a condition of exercising or acquiring Common Stock under any Stock Award, (i) to give written assurances satisfactory to the Company as to the Participant’s knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Stock Award; and (ii) to give written assurances satisfactory to the Company stating that the Participant is acquiring Common Stock subject to the Stock Award for the Participant’s own account and not with any present intention of selling or otherwise distributing the Common Stock. The foregoing requirements, and any assurances given pursuant to such requirements, shall be inoperative if (1) the issuance of the shares of Common Stock upon the exercise or acquisition of Common Stock under the Stock Award has been registered

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under a then currently effective registration statement under the Securities Act or (2) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the Common Stock.

     (f) Withholding Obligations. To the extent provided by the terms of a Stock Award Agreement, the Participant may satisfy any federal, state or local tax withholding obligation relating to the exercise or acquisition of Common Stock under a Stock Award by any of the following means (in addition to the Company’s right to withhold from any compensation paid to the Participant by the Company) or by a combination of such means: (i) tendering a cash payment; (ii) authorizing the Company to withhold shares of Common Stock from the shares of Common Stock otherwise issuable to the Participant as a result of the exercise or acquisition of Common Stock under the Stock Award; provided, however, that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law (or such lower amount as may be necessary to avoid variable award accounting); or (iii) delivering to the Company owned and unencumbered shares of Common Stock.

     (g) Information Obligation. To the extent required by Section 260.140.46 of Title 10 of the California Code of Regulations, the Company shall deliver financial statements to Participants at least annually. This Section 10(g) shall not apply to key Employees whose duties in connection with the Company assure them access to equivalent information.

     (h) Repurchase Limitation. The terms of any repurchase option shall be specified in the Stock Award and may be either at Fair Market Value at the time of repurchase or at not less than the original purchase price. To the extent required by Section 260.140.41 and Section 260.140.42 of Title 10 of the California Code of Regulations at the time a Stock Award is made, any repurchase option contained in a Stock Award granted to a person who is not an Officer, Director or Consultant shall be upon the terms described below:

          (i) Fair Market Value. If the repurchase option gives the Company the right to repurchase the shares of Common Stock upon termination of employment at not less than the Fair Market Value of the shares of Common Stock to be purchased on the date of termination of Continuous Service, then (i) the right to repurchase shall be exercised for cash or cancellation of purchase money indebtedness for the shares of Common Stock within ninety (90) days of termination of Continuous Service (or in the case of shares of Common Stock issued upon exercise of Stock Awards after such date of termination, within ninety (90) days after the date of the exercise) or such longer period as may be agreed to by the Company and the Participant (for example, for purposes of satisfying the requirements of Section 1202(c)(3) of the Code regarding “qualified small business stock”) and (ii) the right terminates when the shares of Common Stock become publicly traded.

          (ii) Original Purchase Price. If the repurchase option gives the Company the right to repurchase the shares of Common Stock upon termination of Continuous Service at the

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original purchase price, then (i) the right to repurchase at the original purchase price shall lapse at the rate of at least twenty percent (20%) of the shares of Common Stock per year over five (5) years from the date the Stock Award is granted (without respect to the date the Stock Award was exercised or became exercisable) and (ii) the right to repurchase shall be exercised for cash or cancellation of purchase money indebtedness for the shares of Common Stock within ninety (90) days of termination of Continuous Service (or in the case of shares of Common Stock issued upon exercise of Options after such date of termination, within ninety (90) days after the date of the exercise) or such longer period as may be agreed to by the Company and the Participant (for example, for purposes of satisfying the requirements of Section 1202(c)(3) of the Code regarding “qualified small business stock”).

     (i) Cancellation and Re-Grant of Options; Authority to Reprice. The Board shall have the authority to effect, at any time and from time to time, with the consent of any adversely affected Optionholders, (1) the reduction in the exercise price of any outstanding Options under the Plan and/or (2) the cancellation of any outstanding Options under the Plan and the grant in substitution therefor of new Options under the Plan covering the same or a different numbers of shares of Common Stock. The exercise price per share of Common Stock shall be not less than that specified under the Plan for newly granted Stock Awards except that the Board may grant an Option with a lower exercise price if such Option is granted as part of a transaction to which Section 424(a) of the Code applies.

11. Adjustments upon Changes in Stock.

     (a) Capitalization Adjustments. If any change is made in, or other event occurs with respect to, the Common Stock subject to the Plan or subject to any Stock Award without the receipt of consideration by the Company (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company (each a “Capitalization Adjustment”), the Plan will be appropriately adjusted in the class(es) and maximum number of securities subject to the Plan pursuant to Sections 4(a) and 4(b) and the maximum number of securities subject to award to any person pursuant to Section 5(c), and the outstanding Stock Awards will be appropriately adjusted in the class(es) and number of securities and price per share of Common Stock subject to such outstanding Stock Awards. The Board shall make such adjustments, and its determination shall be final, binding and conclusive. (The conversion of any convertible securities of the Company shall not be treated as a transaction “without receipt of consideration” by the Company).

     (b) Dissolution or Liquidation. In the event of a dissolution or liquidation of the Company, then all outstanding Stock Awards shall terminate immediately prior to the completion of such dissolution or liquidation.

     (c) Corporate Transaction. In the event of a Corporate Transaction, any surviving corporation or acquiring corporation may assume any or all Stock Awards outstanding under the

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Plan or may substitute similar stock awards for Stock Awards outstanding under the Plan (it being understood that similar stock awards include, but are not limited to, awards to acquire the same consideration paid to the stockholders or the Company, as the case may be, pursuant to the Corporate Transaction). In the event that any surviving corporation or acquiring corporation does not assume any or all such outstanding Stock Awards or substitute similar stock awards for such outstanding Stock Awards, then with respect to Stock Awards that have been neither assumed nor substituted and that are held by Participants whose Continuous Service has not terminated prior to the effective time of the Corporate Transaction, the vesting of such Stock Awards (and, if applicable, the time at which such Stock Awards may be exercised) shall (contingent upon the effectiveness of the Corporate Transaction) be accelerated in full to a date prior to the effective time of such Corporate Transaction as the Board shall determine (or, if the Board shall not determine such a date, to the date that is five (5) days prior to the effective time of the Corporate Transaction), and the Stock Awards shall terminate if not exercised (if applicable) at or prior to such effective time. With respect to any other Stock Awards outstanding under the Plan that have been neither assumed nor substituted, the vesting of such Stock Awards (and, if applicable, the time at which such Stock Award may be exercised) shall not be accelerated unless otherwise provided in a written agreement between the Company or any Affiliate and the holder of such Stock Award, and such Stock Awards shall terminate if not exercised (if applicable) prior to the effective time of the Corporate Transaction.

     (d) Change in Control. A Stock Award held by any Participant whose Continuous Service has not terminated prior to the effective time of a Change in Control may be subject to additional acceleration of vesting and exercisability upon or after such event as may be provided in the Stock Award Agreement for such Stock Award or as may be provided in any other written agreement between the Company or any Affiliate and the Participant, but in the absence of such provision, no such acceleration shall occur.

12. Amendment of the Plan and Stock Awards.

     (a) Amendment of Plan. The Board at any time, and from time to time, may amend the Plan. However, except as provided in Section 11(a) relating to Capitalization Adjustments, no amendment shall be effective unless approved by the stockholders of the Company to the extent stockholder approval is necessary to satisfy the requirements of Section 422 of the Code.

     (b) Stockholder Approval. The Board, in its sole discretion, may submit any other amendment to the Plan for stockholder approval.

     (c) Contemplated Amendments. It is expressly contemplated that the Board may amend the Plan in any respect the Board deems necessary or advisable to provide eligible Employees with the maximum benefits provided or to be provided under the provisions of the Code and the regulations promulgated thereunder relating to Incentive Stock Options and/or to bring the Plan and/or Incentive Stock Options granted under it into compliance therewith.

     (d) No Impairment of Rights. Rights under any Stock Award granted before amendment of the Plan shall not be impaired by any amendment of the Plan unless (i) the Company requests the consent of the Participant and (ii) the Participant consents in writing.

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     (e) Amendment of Stock Awards. The Board at any time, and from time to time, may amend the terms of any one or more Stock Awards; provided, however, that the rights under any Stock Award shall not be impaired by any such amendment unless (i) the Company requests the consent of the Participant and (ii) the Participant consents in writing.

13. Termination or Suspension of the Plan.

     (a) Plan Term. The Board may suspend or terminate the Plan at any time. Unless sooner terminated, the Plan shall terminate on the day before the tenth (10th) anniversary of the date the Plan is adopted by the Board or approved by the stockholders of the Company, whichever is earlier. No Stock Awards may be granted under the Plan while the Plan is suspended or after it is terminated.

     (b) No Impairment of Rights. Suspension or termination of the Plan shall not impair rights and obligations under any Stock Award granted while the Plan is in effect except with the written consent of the Participant.

14. Effective Date of Plan.

     The Plan shall become effective as determined by the Board, but no Stock Award shall be exercised (or, in the case of a stock bonus, shall be granted) unless and until the Plan has been approved by the stockholders of the Company, which approval shall be within twelve (12) months before or after the date the Plan is adopted by the Board.

15. Choice of Law.

     The law of the State of California shall govern all questions concerning the construction, validity and interpretation of this Plan, without regard to such state’s conflict of laws rules.

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Veraz Networks, Inc.
2001 Equity Incentive Plan

Stock Option Agreement
(Incentive Stock Option or Nonstatutory Stock Option)

      Pursuant to your Stock Option Grant Notice (“Grant Notice”) and this Stock Option Agreement, Veraz Networks, Inc. (the “Company”) has granted you an option under its 2001 Equity Incentive Plan (the “Plan”) to purchase the number of shares of the Company’s Common Stock indicated in your Grant Notice at the exercise price indicated in your Grant Notice. Defined terms not explicitly defined in this Stock Option Agreement but defined in the Plan shall have the same definitions as in the Plan.

      The details of your option are as follows:

      1. Vesting. Subject to the limitations contained herein, your option will vest as provided in your Grant Notice, provided that vesting will cease upon the termination of your Continuous Service.

      2. Number of Shares and Exercise Price. The number of shares of Common Stock subject to your option and your exercise price per share referenced in your Grant Notice may be adjusted from time to time for Capitalization Adjustments.

      3. Method of Payment. Payment of the exercise price is due in full upon exercise of all or any part of your option. You may elect to make payment of the exercise price in cash or by check or in any other manner permitted by your Grant Notice, which may include one or more of the following:

          (a) In the Company’s sole discretion at the time your option is exercised and provided that at the time of exercise the Common Stock is publicly traded and quoted regularly in The Wall Street Journal, pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of Common Stock, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds.

          (b) Provided that at the time of exercise the Common Stock is publicly traded and quoted regularly in The Wall Street Journal, by delivery of already-owned shares of Common Stock either that you have held for the period required to avoid a charge to the Company’s reported earnings (generally six (6) months) or that you did not acquire, directly or indirectly from the Company, that are owned free and clear of any liens, claims, encumbrances or security interests, and that are valued at Fair Market Value on the date of exercise. “Delivery” for these purposes, in the sole discretion of the Company at the time you exercise your option, shall include delivery to the Company of your attestation of ownership of such shares of Common Stock in a form approved by the Company. Notwithstanding the foregoing, you may not exercise your option by tender to the Company of Common Stock to the extent such tender

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would violate the provisions of any law, regulation or agreement restricting the redemption of the Company’s stock.

      4. Whole Shares. You may exercise your option only for whole shares of Common Stock.

      5. Securities Law Compliance. Notwithstanding anything to the contrary contained herein, you may not exercise your option unless the shares of Common Stock issuable upon such exercise are then registered under the Securities Act or, if such shares of Common Stock are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. The exercise of your option also must comply with other applicable laws and regulations governing your option, and you may not exercise your option if the Company determines that such exercise would not be in material compliance with such laws and regulations.

      6. Term. You may not exercise your option before the commencement or after the expiration of its term. The term of your option commences on the Date of Grant and expires upon the earliest of the following:

          (a) three (3) months after the termination of your Continuous Service for any reason other than your Disability or death, provided that if during any part of such three (3) month period your option is not exercisable solely because of the condition set forth in Section 6, your option shall not expire until the earlier of the Expiration Date or until it shall have been exercisable for an aggregate period of three (3) months after the termination of your Continuous Service;

          (b) twelve (12) months after the termination of your Continuous Service due to your Disability;

          (c) eighteen (18) months after your death if you die either during your Continuous Service or within three (3) months after your Continuous Service terminates;

          (d) the Expiration Date indicated in your Grant Notice; or

          (e) the day before the tenth (10th) anniversary of the Date of Grant.

      If your option is an Incentive Stock Option, note that to obtain the federal income tax advantages associated with an Incentive Stock Option, the Code requires that at all times beginning on the date of grant of your option and ending on the day three (3) months before the date of your option’s exercise, you must be an employee of the Company or an Affiliate, except in the event of your death or Disability. The Company has provided for extended exercisability of your option under certain circumstances for your benefit but cannot guarantee that your option will necessarily be treated as an Incentive Stock Option if you continue to provide services to the Company or an Affiliate as a Consultant or Director after your employment terminates or if you otherwise exercise your option more than three (3) months after the date your employment with the Company or an Affiliate terminates.

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      7. Exercise.

          (a) You may exercise the vested portion of your option during its term by delivering a Notice of Exercise (in a form designated by the Company) together with the exercise price to the Secretary of the Company, or to such other person as the Company may designate, during regular business hours, together with such additional documents as the Company may then require.

          (b) By exercising your option you agree that, as a condition to any exercise of your option, the Company may require you to enter into an arrangement providing for the payment by you to the Company of any tax withholding obligation of the Company arising by reason of (1) the exercise of your option, (2) the lapse of any substantial risk of forfeiture to which the shares of Common Stock are subject at the time of exercise, or (3) the disposition of shares of Common Stock acquired upon such exercise.

          (c) If your option is an Incentive Stock Option, by exercising your option you agree that you will notify the Company in writing within fifteen (15) days after the date of any disposition of any of the shares of the Common Stock issued upon exercise of your option that occurs within two (2) years after the date of your option grant or within one (1) year after such shares of Common Stock are transferred upon exercise of your option.

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

      8. Transferability. Your option is not transferable, except by will or by the laws of descent and distribution, and is exercisable during your life only by you. Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, you may designate a third party who, in the event of your death, shall thereafter be entitled to exercise your option.

      9. Right of First Refusal. Shares of Common Stock that you acquire upon exercise of your option are subject to any right of first refusal that may be described in the Company’s bylaws in effect at such time the Company elects to exercise its right; provided, however, that if your option is an Incentive Stock Option and the right of first refusal described

3.

in the Company’s bylaws in effect at the time the Company elects to exercise its right is more beneficial to you than the right of first refusal described in the Company’s bylaws on the Date of Grant, then the right of first refusal described in the Company’s bylaws on the Date of Grant shall apply. The Company’s right of first refusal shall expire on the Listing Date. For purposes of this Agreement, Listing Date shall mean the first date upon which any security of the Company is listed (or approved for listing) upon notice of issuance on a national securities exchange or on the National Market System of the Nasdaq Stock Market (or any successor to that entity).

      10. Right of Repurchase. To the extent provided in the Company’s bylaws in effect at such time the Company elects to exercise its right, the Company shall have the right to repurchase all or any part of the shares of Common Stock you acquire pursuant to the exercise of your option.

      11. Option not a Service Contract. Your option is not an employment or service contract, and nothing in your option shall be deemed to create in any way whatsoever any obligation on your part to continue in the employ of the Company or an Affiliate, or of the Company or an Affiliate to continue your employment. In addition, nothing in your option shall obligate the Company or an Affiliate, their respective stockholders, Boards of Directors, Officers or Employees to continue any relationship that you might have as a Director or Consultant for the Company or an Affiliate.

      12. Withholding Obligations.

          (a) At the time you exercise your option, in whole or in part, or at any time thereafter as requested by the Company, you hereby authorize withholding from payroll and any other amounts payable to you, and otherwise agree to make adequate provision for (including by means of a “cashless exercise” pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board to the extent permitted by the Company), any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or an Affiliate, if any, which arise in connection with the exercise of your option.

          (b) Upon your request and subject to approval by the Company, in its sole discretion, and compliance with any applicable legal conditions or restrictions, the Company may withhold from fully vested shares of Common Stock otherwise issuable to you upon the exercise of your option a number of whole shares of Common Stock having a Fair Market Value, determined by the Company as of the date of exercise, not in excess of the minimum amount of tax required to be withheld by law (or such lower amount as may be necessary to avoid variable award accounting). If the date of determination of any tax withholding obligation is deferred to a date later than the date of exercise of your option, share withholding pursuant to the preceding sentence shall not be permitted unless you make a proper and timely election under Section 83(b) of the Code, covering the aggregate number of shares of Common Stock acquired upon such exercise with respect to which such determination is otherwise deferred, to accelerate the determination of such tax withholding obligation to the date of exercise of your option. Notwithstanding the filing of such election, shares of Common Stock shall be withheld solely from fully vested shares of Common Stock determined as of the date of exercise of your option

4.

that are otherwise issuable to you upon such exercise. Any adverse consequences to you arising in connection with such share withholding procedure shall be your sole responsibility.

          (c) You may not exercise your option unless the tax withholding obligations of the Company and/or any Affiliate are satisfied. Accordingly, you may not be able to exercise your option when desired even though your option is vested, and the Company shall have no obligation to issue a certificate for such shares of Common Stock or release such shares of Common Stock from any escrow provided for herein unless such obligations are satisfied.

      13. Notices. Any notices provided for in your option or the Plan shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five (5) days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company.

      14. Governing Plan Document. Your option is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your option, and is further subject to all interpretations, amendments, rules and regulations, which may from time to time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of your option and those of the Plan, the provisions of the Plan shall control.

5.

Veraz Networks, Inc.
Stock Option Grant Notice
(2001 Equity Incentive Plan)

Veraz Networks, Inc. (the “Company”), pursuant to its 2001 Equity Incentive Plan (the “Plan”), hereby grants to Optionholder an option to purchase the number of shares of the Company’s Common Stock set forth below. This option is subject to all of the terms and conditions as set forth herein and in the Stock Option Agreement, the Plan and the Notice of Exercise, all of which are attached hereto and incorporated herein in their entirety.

Optionholder:
Date of Grant:
Vesting Commencement Date:
Number of Shares Subject to Option:
Exercise Price (Per Share):	$
Total Exercise Price:	$
Expiration Date:

Type of Grant:	¨	Incentive Stock Option1	¨	Nonstatutory Stock Option
Exercise Schedule:	Early exercise is permitted per the Attachments
Vesting Schedule:	1/4th of the Shares shall vest on the one-year anniversary of the Vesting Commencement Date.
	1/48th of the Shares shall vest monthly thereafter over the following three years.
Payment:	By one or a combination of the following items (described in the Stock Option Agreement):
		By cash or check
		Pursuant to a Regulation T Program if the Shares are publicly traded
		By delivery of already-owned shares if the Shares are publicly traded

Additional Terms/Acknowledgements: The undersigned Optionholder acknowledges receipt of, and understands and agrees to, this Grant Notice, the Stock Option Agreement and the Plan. Optionholder further acknowledges that as of the Date of Grant, this Grant Notice, the Stock Option Agreement and the Plan set forth the entire understanding between Optionholder and the Company regarding the acquisition of stock in the Company and supersede all prior oral and written agreements on that subject with the exception of (i) options previously granted and delivered to Optionholder under the Plan, and (ii) the following agreements only:

Other Agreements:

Veraz Networks, Inc.		Optionholder:
By:
	Signature	Signature
Title:		Date:
Date:

Attachments: Stock Option Agreement, 2001 Equity Incentive Plan and Notice of Exercise

¹ If this is an incentive stock option, it (plus your other outstanding incentive stock options) cannot be first exercisable for more than $100,000 in any calendar year. Any excess over $100,000 is a nonstatutory option.

NOTICE OF EXERCISE

Veraz Networks, Inc.
926 Rock Ave.
San Jose, CA 95131	Date of Exercise:

Ladies and Gentlemen:

     This constitutes notice under my stock option that I elect to purchase the number of shares for the price set forth below.

Type of option (check one):	Nonstatutory
Stock option dated:
Number of shares as to which option is exercised:
Certificates to be issued in name of:
Total exercise price:	$
Cash payment delivered herewith:	$

     By this exercise, I agree (i) to provide such additional documents as you may require pursuant to the terms of the 2001 Equity Incentive Plan, (ii) to provide for the payment by me to you (in the manner designated by you) of your withholding obligation, if any, relating to the exercise of this option, and (iii) if this exercise relates to an incentive stock option, to notify you in writing within fifteen (15) days after the date of any disposition of any of the shares of Common Stock issued upon exercise of this option that occurs within two (2) years after the date of grant of this option or within one (1) year after such shares of Common Stock are issued upon exercise of this option.

     I hereby make the following certifications and representations with respect to the number of shares of Common Stock of the Company listed above (the “Shares”), which are being acquired by me for my own account upon exercise of the Option as set forth above:

     I acknowledge that the Shares have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and are deemed to constitute “restricted securities” under Rule 701 and “control securities” under Rule 144 promulgated under the Securities Act. I warrant and represent to the Company that I have no present intention of distributing or selling said Shares, except as permitted under the Securities Act and any applicable state securities laws.

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     I further acknowledge that I will not be able to resell the Shares for at least ninety days (90) after the stock of the Company becomes publicly traded (i.e., subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934) under Rule 701 and that more restrictive conditions apply to affiliates of the Company under Rule 144.

     I further acknowledge that all certificates representing any of the Shares subject to the provisions of the Option shall have endorsed thereon appropriate legends reflecting the foregoing limitations, as well as any legends reflecting restrictions pursuant to the Company’s Certificate of Incorporation, Bylaws and/or applicable securities laws.

     I further agree that, if required by the Company (or a representative of the underwriters) in connection with the first underwritten registration of the offering of any securities of the Company under the Securities Act, I will not sell or otherwise transfer or dispose of any shares of Common Stock or other securities of the Company during such period (not to exceed one hundred eighty (180) days) following the effective date of the registration statement of the Company filed under the Securities Act as may be requested by the Company or the representative of the underwriters. I further agree that the Company may impose stop-transfer instructions with respect to securities subject to the foregoing restrictions until the end of such period.

Very truly yours,

2.

EX-10.15

Exhibit 10.15

VERAZ NETWORKS, INC.

2003 ISRAELI SHARE OPTION PLAN

A. NAME AND PURPOSE

     1. Name: This plan, as amended from time to time, shall be known as the “Veraz Networks, Inc. 2003 Israeli Share Option Plan” (the “Plan”).

     2. Purpose: The purpose and intent of the Plan is to provide incentives to employees, directors, consultants and contractors of Veraz Networks, Inc., a company incorporated under the laws of the State of Delaware (the “Company”), or any subsidiary or affiliate thereof (where applicable in this Plan, the term “Company” shall include any subsidiary or affiliate of the Company), by providing them with opportunities to purchase shares of common stock, par value of USD 0.001 each (the “Shares”) of the Company, pursuant to a plan approved by the Board of Directors of the Company (the “Board”) which is designed to benefit from, and is made pursuant to, the provisions of either Section 102 or Section 3(9) of the Israeli Income Tax Ordinance [New Version] 1961 (the “Ordinance”), as applicable, and the rules and regulations promulgated thereunder.

B. GENERAL TERMS AND CONDITIONS OF THE PLAN

     3. Administration:

          3.1 The Board may appoint a Share Incentive Committee, which will consist of such number of Directors of the Company, as may be fixed from time to time by the Board. The Board shall appoint the members of the committee, may from time to time remove members from, or add members to, the Committee and shall fill vacancies in the Committee however caused. The Plan will be administered by the Share Incentive Committee or other committee of the Board, and until the Board delegates administration to such committee, by the Board (collectively — the “Committee”).

          3.2 The Committee shall select one of its members as its Chairman and shall hold its meetings at such times and places, as it shall determine. Actions taken by a majority of the members of the Committee, at a meeting at which a majority of its members is present, or acts reduced to, or approved in, writing by all members of the Committee, shall be the valid acts of the Committee. The Committee may appoint a Secretary, who shall keep records of its meetings and shall make such rules and regulations for the conduct of its business, as it shall deem advisable.

          3.3 Subject to the general terms and conditions of this Plan and applicable law, the Committee shall have the full authority in its discretion, from time to time and at any time, to determine (i) the persons (“Grantees”) to whom options to purchase Shares (the “Options”) shall be granted, (ii) the number of Shares subject to each Option, (iii) the time or times at which the same shall be granted, (iv) the schedule and conditions on which such Options may be exercised and on which such Shares shall be paid for, and/or (v) any other matter which is necessary or desirable for, or incidental to, the administration of the Plan. In determining the number of Shares subject to the Options to be granted to each Grantee, the Committee may

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consider, among other things, the Grantee’s salary and the duration of the Grantee’s employment by the Company.

          3.4 Subject to the general terms and conditions of the Plan and the Ordinance, the Committee shall have the full authority in its discretion, from time to time and at any time, to determine:

               (a) with respect to the grant of 102 Options (as defined in Section 5.1(a)(i) below) — whether the Company shall elect the “Ordinary Income Route” under Section 102(b)(1) of the Ordinance (the “Ordinary Income Route”) or the “Capital Gains Route” under Section 102(b)(2) of the Ordinance (the “Capital Gains Route”) (the Ordinary Income Route and the Capital Gains Route together — the “Taxation Routes”) for the grant of 102 Options, and the identity of the trustee who shall be granted such 102 Options in accordance with the provisions of this Plan and the then prevailing Taxation Route; or — whether 102 Options will not be granted to a trustee, as detailed in Section 102(c) of the Ordinance;

                    In the event the Committee determines that the Company shall elect one of the Taxation Routes for the grant of 102 Options, the Company shall be entitled to change such election only following the lapse of one year from the end of the tax year in which 102 Options are first granted under the then prevailing Taxation Route; and

               (b) with respect to the grant of 3(9) Options (as defined in Section 5.1(a)(ii) below) - whether or not 3(9) Options shall be granted to a trustee in accordance with the terms and conditions of this Plan, and the identity of the trustee who shall be granted such 3(9) Options in accordance with the provisions of this Plan.

          3.5 The Committee may, from time to time, adopt such rules and regulations for carrying out the Plan as it may deem necessary. No member of the Board or of the Committee shall be liable for any act or determination made in good faith with respect to the Plan or any Option granted thereunder.

          3.6 The interpretation and construction by the Committee of any provision of the Plan or of any Option thereunder shall be final and conclusive and binding on all parties who have an interest in the Plan or any Option or Share issuance thereunder unless otherwise determined by the Board.

     4. Eligible Grantees:

          4.1 The Committee, at its discretion, may grant Options to any employee, director, consultant or contractor of the Company.

          4.2 The grant of an Option to a Grantee hereunder, shall neither entitle such Grantee to participate, nor disqualify him from participating, in any other grant of options pursuant to this Plan or any other share option plan of the Company.

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     5. Grant of Options, Issuance of Shares, Dividends and Shareholder Rights:

          5.1 Grant of Options and Issuance of Shares.

               (a) Subject to the provisions of the Ordinance and applicable law,

                    (i) all grants of Options to employees, directors and office holders of the Company, other than to a Controlling Shareholder of the Company (i.e., “Baal Shlita”, as such term is defined in the Ordinance), shall be made only pursuant to the provisions of Section 102 of the Ordinance and the rules and regulations promulgated thereunder (“102 Options”), or any other section of the Ordinance that will be relevant for such issuance in the future; and

                    (ii) all grants of Options to consultants, contractors or Controlling Shareholders of the Company shall be made only pursuant to the provisions of Section 3(9) of the Ordinance and the rules and regulations promulgated thereunder (“3(9) Options”), or any other section of the Ordinance that will be relevant for such issuance in the future.

               (b) Subject to Sections 7.1 and 7.2 hereof, the effective date of the grant of an Option (the “Date of Grant”) shall be the date specified by the Committee in its determination relating to the award of such Option. The Committee shall promptly give the Grantee written notice (the “Grant Notice”) of the grant of an Option and a written agreement between the Company and the Grantee evidencing the terms and conditions of an individual Option grant shall be entered into (the “Option Agreement”). Each Option Agreement shall be subject to the terms and conditions of the Plan.

               (c) Trust. In the event Options are granted under the Plan to a trustee designated by the Committee in accordance with the provisions of Section 3.4 hereof and, with respect to 102 Options, approved by the Israeli Commissioner of Income Tax (the “Trustee”), the Trustee shall hold each such Option and the Shares issued upon exercise thereof in trust (the “Trust”) for the benefit of the Grantee in respect of whom such Option was granted (the “Beneficial Grantee”).

                    In accordance with Section 102 of the Ordinance and the rules and regulations promulgated thereunder, the tax treatment of 102 Options (and any Shares received upon exercise of such Options) in accordance with the Ordinary Income Route or Capital Gains Route, as applicable, shall be contingent upon the Trustee holding such 102 Options for a period of at least (i) one year from the end of the tax year in which the 102 Options are granted, if the Company elects the Ordinary Income Route, or (ii) two years from the end of the tax year in which the 102 Options are granted, if the Company elects the Capital Gains Route, or (iii) such other period as shall be available under applicable law or as shall be approved by the Israeli Commissioner of Income Tax.

                    All certificates representing Shares issued to the Trustee under the Plan shall be deposited with the Trustee, and shall be held by the Trustee until such time that such Shares are released from the Trust as herein provided.

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               (d) Subject to the terms hereof, and specifically subject to the provisions of Section 9.4 below, at any time after the options have vested, upon the written request of any Beneficial Grantee, the Trustee shall release from the Trust the Options granted, and/or the Shares issued, on behalf of such Beneficial Grantee, by executing and delivering to the Company such instrument(s) as the Company may require, giving due notice of such release to such Beneficial Grantee, provided, however, that the Trustee shall not so release any such Options and/or Shares to such Beneficial Grantee unless the latter, prior to, or concurrently with, such release, provides the Trustee with evidence, satisfactory in form and substance to the Trustee, that all taxes, if any, required to be paid upon such release have, in fact, been paid.

          5.2 Dividend. All Shares issued upon the exercise of Options granted under the Plan shall entitle the Beneficial Grantee thereof to receive dividends with respect thereto. For so long as Shares issued to the Trustee on behalf of a Beneficial Grantee are held in the Trust, the dividends paid or distributed with respect thereto shall be remitted to the Trustee for the benefit of such Beneficial Grantee or distributed directly to such Beneficial Grantee, as shall be solely determined by the Committee prior to each such distribution or payment.

          5.3 Shareholder Rights. The holder of an Option shall have no shareholder rights with respect to the Shares subject to the Option until such person shall have exercised the Option, paid the exercise price and become the recordholder of the purchased Shares.

     6. Reserved Shares: The Board may increase or decrease the number of Shares to be reserved under the Plan. The Committee shall have full authority in its discretion to determine that the Company may issue, for the purposes of this Plan, unissued Shares or previously issued Shares that shall have been or may be reacquired by the Company. All Shares under the Plan, in respect of which the right hereunder of a Grantee to purchase the same shall, for any reason, terminate, expire or otherwise cease to exist, shall again be available for grant through Options under the Plan.

     7. Grant of Options:

          7.1 The implementation of the Plan and the granting of any Option under the Plan shall be subject to the Company’s procurement of all approvals and permits required by regulatory authorities having jurisdiction over the Plan, the Options granted under it and the Shares issued pursuant to it.

          7.2 Without derogating from the foregoing, the Committee in its discretion may, subject to the provisions of the Ordinance, award to Grantees Options available under the Plan, provided however, that 102 Options granted under one of the Taxation Routes may be granted to the Trustee only following the fulfillment of any procedure required by the Ordinance or any rules or regulations promulgated thereunder.

          7.3 The Grant Notice and/or Option Agreement shall include, inter alia, the number of Shares subject to each Option, the vesting schedule, the dates when the Options may be exercised, the exercise price, whether the Options granted thereby are 102 Options or 3(9) Options, and such other terms and conditions as the Committee at its discretion may prescribe, including but not limited to right of repurchase and/or right of first refusal provisions, provided

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that they are consistent with this Plan. Each Grant Notice and Option Agreement evidencing a 102 Option shall, in addition, be subject to the provisions of the Ordinance applicable to such options.

          7.4 Vesting. Without derogating from the rights and powers of the Committee under Section 7.3 hereof, unless otherwise specified by the Committee, the Options shall be for a term of ten (10) years, and, unless determined otherwise by the Committee, the schedule pursuant to which such Options shall vest, and the Beneficial Grantee thereof shall be entitled to pay for and acquire the Shares, shall be such that the Shares subject to each Option shall be fully vested on the first business day following the passing of four (4) years from the Date of Grant (the “Vesting Period”) as follows: 25% of the Shares subject to the Options shall vest on the first anniversary of the Adoption Date and 1/36 of the remaining Shares subject to such Options shall vest on the last day of each month, during thirty six (36) months following the first anniversary of the Adoption Date (the “Adoption Date” for the purpose of this Plan means the Date of Grant or any other date determined by the Committee for a given grant of Options).

               “Vesting Period” of an Option means, for the purpose of the Plan and its related instruments, the period between the Adoption Date and the date on which the holder of an Option may exercise the rights awarded pursuant to terms of the Option.

          7.5 Acceleration of Vesting. Anything herein to the contrary in this Plan notwithstanding, the Committee shall have full authority to determine any provisions regarding the acceleration of the Vesting Period of any Option or the cancellation of all or any portion of any outstanding restrictions with respect to any Option or Share upon certain events or occurrences, and to include such provisions in the Grant Notice and Option Agreement on such terms and conditions as the Committee shall deem appropriate.

     8. Exercise Price: The exercise price per Share subject to each Option shall be determined by the Committee in its sole and absolute discretion; provided, however, that such exercise price shall not be less than the par value of the Shares into which such Option is exercisable.

     9. Exercise of Options:

          9.1 Options shall be exercisable pursuant to the teems under which they were awarded and subject to the terms and conditions of the Plan.

          9.2 The exercise of an Option shall be made by a written notice of exercise (the “Notice of Exercise”) delivered by the Beneficial Grantee (or, with respect to Options held in the Trust, by the Trustee upon receipt of written instructions from the Beneficial Grantee) to the Company at its principal executive office or to the principle office of the Company’s subsidiary, Veraz Networks Ltd., specifying the number of Shares to be purchased and accompanied by the payment therefor, and containing such other terms and conditions as the Committee shall prescribe from time to time.

          9.3 Anything herein to the contrary notwithstanding, but without derogating from the provisions of Section 10 hereof, if any Option has not been exercised and the Shares subject thereto not paid for within ten (10) years after the Date of Grant (or any shorter period set

5.

forth in the Grant Notice or Option Agreement), such Option and the right to acquire such Shares shall terminate, all interests and rights of the Grantee in and to the same shall ipso facto expire, and, in the event that in connection therewith any Options are still held in the Trust as aforesaid, the Trust with respect thereto shall ipso facto expire, and the Shares subject to such Options shall again be available for grant through Options under the Plan, as provided for in Section 6 herein.

          9.4 Each payment for Shares shall be in respect of a whole number of Shares, and shall be effected in cash or by a bank’s check payable to the order of the Company, or such other method of payment acceptable to the Company.

     10. Termination of Employment:

          10.1 Definitions.

               “Continuous Service” means that the Grantee’s service with the Company, whether as an employee, director or consultant, is not interrupted or terminated. A change in the capacity in which the Grantee renders service to the Company as an employee, director or consultant or a change in the entity for which the Grantee renders such service, provided that there is no interruption or termination of the Grantee’s service with the Company, shall not terminate a Grantee’s Continuous Service. For example, a change in status from an employee of the Company to a consultant or a Director shall not constitute an interruption of Continuous Service. The Board or the chief executive officer of the Company, in that party’s sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by that party, including sick leave, military leave or any other personal leave. Notwithstanding the foregoing, a leave of absence shall be treated as Continuous Service for purposes of vesting in an Option only to such extent as may be provided in the Company’s leave of absence policy or in the written terms of the Grantee’s leave of absence.

               “Disability” means the inability of a person, in the opinion of a qualified physician acceptable to the Company, to perform the major duties of that person’s position with the Company because of the sickness or injury of the person.

          10.2 Termination of Continuous Service. In the event that a Grantee’s Continuous Service terminates (other than upon the Grantee’s death or Disability), the Grantee may exercise his or her Option (to the extent that the Grantee was entitled to exercise such Option as of the date of termination) but only within such period of time ending on the earlier of (i) the date three (3) months following the termination of the Grantee’s Continuous Service (or such longer or shorter period specified in the Option Agreement, which period shall not be less than thirty (30) days unless such termination is for cause), or (ii) the expiration of the term of the Option as set forth in the Grant Notice or Option Agreement. If, after termination, the Grantee does not exercise his or her Option within the time specified in the Grant Notice or Option Agreement, the Option shall terminate.

          10.3 Extension of Termination Date. A Grantee’s Option Agreement may also provide that if the exercise of the Option following the termination of the Grantee’s Continuous Service (other than upon the Grantee’s death or Disability) would be prohibited at any time solely because the issuance of Shares would violate registration requirements under any

6.

applicable law, then the Option shall terminate on the earlier of (i) the expiration of the term of the Option set forth in Section 9.3 or (ii) the expiration of a period of three (3) months after the termination of the Grantee’s Continuous Service during which the exercise of the Option would not be in violation of such registration requirements.

          10.4 Disability of Grantee. In the event that a Grantee’s Continuous Service terminates as a result of the Grantee’s Disability, the Grantee may exercise his or her Option (to the extent that the Grantee was entitled to exercise such Option as of the date of termination), but only within such period of time ending on the earlier of (i) the date twelve (12) months following such termination (or such longer or shorter period specified in the Option Agreement, which period shall not be less than six (6) months) or (ii) the expiration of the term of the Option as set forth in the Grant Notice or Option Agreement. If, after termination, the Grantee does not exercise his or her Option within the time specified herein, the Option shall terminate.

          10.5 Death of Grantee. In the event that (i) a Grantee’s Continuous Service terminates as a result of the Grantee’s death or (ii) the Grantee dies within the period (if any) specified in the Option Agreement after the termination of the Grantee’s Continuous Service for a reason other than death, then the Option may be exercised (to the extent the Grantee was entitled to exercise such Option as of the date of death) by the Grantee’s estate, by a person who acquired the right to exercise the Option by will or by the laws of descent and distribution, but only within the period ending on the earlier of (1) the date eighteen (18) months following the date of death (or such longer or shorter period specified in the Option Agreement, which period shall not be less than six (6) months) or (2) the expiration of the term of such Option as set forth in the Grant Notice or Option Agreement. If, after death, the Option is not exercised within the time specified herein, the Option shall terminate.

     11. Capitalization Adjustments, Liquidation and Corporate Transaction:

          11.1 Definitions:

               “Corporate Transaction” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:

               (i) a sale or other disposition of all or substantially all, as determined by the Board in its discretion, of the consolidated assets of the Company and its subsidiaries;

               (ii) a sale or other disposition of at least eighty percent (80%) of the outstanding securities of the Company;

               (iii) a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or

               (iv) a merger, consolidation or similar transaction following which the Company is the surviving corporation but the shares of common stock of the Company outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other property, whether in the form of securities, cash or otherwise.

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          11.2 Capitalization Adjustments. Subject to any required action by the shareholders of the Company, the number of Shares subject to each outstanding Option, and the number of Shares which have been authorized for issuance under the Plan but as to which no Options have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Option, as well as the price per share of Shares subject to each such outstanding Option, shall be proportionately adjusted for any increase or decrease in the number of issued Shares resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Shares or the payment of a stock dividend (bonus shares) with respect to the Shares or any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Such adjustment shall be made by the Committee, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of any class, or securities convertible into shares of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of Shares subject to an Option.

          11.3 Liquidation. Unless otherwise provided by the Board, in the event of the proposed dissolution or liquidation of the Company, all outstanding Options will terminate immediately prior to the consummation of such proposed action. In such case, the Committee may declare that any Option shall terminate as of a date fixed by the Committee and give each Grantee the right to exercise his Option, including any Option which would not otherwise be exercisable.

          11.4 Corporate Transaction. In the event of a Corporate Transaction, any surviving corporation or acquiring corporation may assume any or all Options outstanding under the Plan or may substitute similar options for Options outstanding under the Plan (it being understood that similar options include, but are not limited to, options to acquire the same consideration paid to the stockholders or the Company, as the case may be, pursuant to the Corporate Transaction). In the event that any surviving corporation or acquiring corporation does not assume any or all such outstanding Options or substitute similar options for such outstanding Options, then with respect to Options that have been neither assumed nor substituted and that are held by Grantees whose Continuous Service has not terminated prior to the effective time of the Corporate Transaction, the vesting of such Options (and, if applicable, the time at which such Options may be exercised) shall (contingent upon the effectiveness of the Corporate Transaction) be accelerated in full to a date prior to the effective time of such Corporate Transaction as the Board shall determine (or, if the Board shall not determine such a date, to the date that is five (5) days prior to the effective time of the Corporate Transaction), and the Options shall terminate if not exercised (if applicable) at or prior to such effective time. With respect to any other Options outstanding under the Plan that have been neither assumed nor substituted, the vesting of such Options (and, if applicable, the time at which such Options may be exercised) shall not be accelerated unless otherwise provided in a written agreement between the Company and the holder of such Option, and such Options shall terminate if not exercised (if applicable) prior to the effective time of the Corporate Transaction.

          11.5 The grant of Options under the Plan shall in no way affect the right of the Company to adjust, reclassify, reorganize or otherwise change its capital or business structure or

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to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

     12. Limitations on Transfer:

          12.1 Non Transferability. No Option shall be assignable or transferable by the Grantee to whom granted otherwise than by will or the laws of descent and distribution, and an Option may be exercised during the lifetime of the Grantee only by such Grantee or by such Grantee’s guardian or legal representative. The terms of such Option shall be binding upon the beneficiaries, executors, administrators, heirs and successors of such Grantee.

          12.2 Underwriter’s Lock-up. If requested by any managing underwriter, each Grantee so requested shall enter into a lock-up agreement pursuant to which he or she will not, for a period of 120 days following the effective date of a registration statement for any primary or secondary public offering of Shares (or for a period of 180 days following the initial public offering of Shares) and for such reasonable period of time prior to the effective date of such registration statement as such underwriter may specify, offer, sell or otherwise dispose of any Shares, except any Shares sold pursuant to such registration statement, without the prior consent of such underwriter.

     13. Term, Approval and Amendment of the Plan:

          13.1 The Plan shall take effect upon its adoption by the Board and shall terminate on the tenth anniversary of such date. Notwithstanding the foregoing, in the event that approval of the Plan by the shareholders of the Company is required under applicable law, in connection with the application of certain tax treatment or pursuant to applicable stock exchange rules or regulations or otherwise, such approval shall be obtained within the time required under the applicable law. All Options outstanding at the time of termination of the Plan shall continue to have full force and effect in accordance with the provisions of the Plan and the documents evidencing such Options.

          13.2 Subject to applicable laws, the Board shall have complete and exclusive power and authority to amend or modify the Plan in any or all respects, provided, however, that, unless otherwise determined by the Board, an amendment which requires shareholder approval in order for the Plan to continue to comply with any law, regulation or stock exchange requirement shall not be effective unless approved by the requisite vote of shareholders. However, no such amendment or modification shall adversely affect any rights and obligations with respect to Options at the time outstanding under the Plan, unless the Grantee consents to such amendment or modification.

     14. Withholding and Tax Consequences: The Company’s obligation to deliver Shares upon the exercise of any Options granted under the Plan shall be subject to the satisfaction of all applicable income tax and other compulsory payments withholding requirements. All tax consequences and obligations regarding any other compulsory payments arising from the grant or exercise of any Option, from the payment for, or the subsequent disposition of, Shares subject thereto or from any other event or act (of the Company or the Grantee) hereunder, shall be borne solely by the Grantee, and the Grantee shall indemnify the

9.

Company and/or the Trustee, as applicable, and hold them harmless against and from any and all liability for any such tax or other compulsory payment, or interest or penalty thereon, including without limitation, liabilities relating to the necessity to withhold, or to have withheld, any such tax or other compulsory payment from any payment made to the Grantee.

     15. Miscellaneous:

          15.1 Continuance of Employment. Neither the Plan nor the grant of an Option thereunder shall impose any obligation on the Company to continue the employment or service of any Grantee. Nothing in the Plan or in any Option granted thereunder shall confer upon any Grantee any right to continue in the employ or service of the Company for any period of specific duration, or interfere with or otherwise restrict in any way the right of the Company to terminate such employment or service at any time, for any reason, with or without cause.

          15.2 Governing Law. The Plan and all instruments issued thereunder or in connection therewith, shall be governed by, and interpreted in accordance with, the laws of the State of Israel.

          15.3 Use of Funds. Any proceeds received by the Company from the sale of Shares pursuant to the exercise of Options granted under the Plan shall be used for general corporate purposes of the Company.

          15.4 Multiple Agreements. The terms of each Option may differ from other Options granted under the Plan at the same time, or at any other time. The Committee may also grant more than one Option to a given Grantee during the term of the Plan, either in addition to, or in substitution for, one or more Options previously granted to that Grantee. The grant of multiple Options may be evidenced by a single Grant Notice/Option Agreement or multiple Notices of Grant/Option Agreements, as determined by the Committee.

          15.5 Non-Exclusivity of the Plan. The adoption of the Plan by the Board shall not be construed as amending, modifying or rescinding any previously approved incentive arrangement or as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of stock options otherwise than under the Plan, and such arrangements may be either applicable generally or only in specific cases.

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EX-10.16

Exhibit 10.16

Veraz Networks, Inc.
2006 Equity Incentive Plan

Approved by the Board: June 29, 2006
Approved by the Stockholders: ___, 2006
Termination Date: June 28, 2016

1. General.

     (a) Successor and Continuation of Prior Plan. The Plan is intended as the successor to and continuation of the Veraz Networks, Inc. 2001 Equity Incentive Plan (the “Prior Plan”). Following the Effective Date, no additional stock awards shall be granted under the Prior Plan. Any shares remaining available for issuance pursuant to the exercise of options or settlement of stock awards under the Prior Plan shall become available for issuance pursuant to Stock Awards granted hereunder. Any shares subject to outstanding stock awards granted under the Prior Plan that expire or terminate for any reason prior to exercise or settlement shall become available for issuance pursuant to Stock Awards granted hereunder. On the Effective Date, all outstanding stock awards granted under the Prior Plan shall be deemed to be stock awards granted pursuant to the Plan, but shall remain subject to the terms of the Prior Plan with respect to which they were originally granted. All Stock Awards granted subsequent to the effective date of this Plan shall be subject to the terms of this Plan.

     (b) Eligible Stock Award Recipients. The persons eligible to receive Stock Awards are Employees, Directors and Consultants.

     (c) Available Stock Awards. The Plan provides for the grant of the following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii) Restricted Stock Awards, (iv) Restricted Stock Unit Awards, (v) Stock Appreciation Rights, (vi) Performance Stock Awards, and (vii) Other Stock Awards.

     (d) Purpose. The Company, by means of the Plan, seeks to secure and retain the services of the group of persons eligible to receive Stock Awards as set forth in Section 1(b), to provide incentives for such persons to exert maximum efforts for the success of the Company and any Affiliate, and to provide a means by which such eligible recipients may be given an opportunity to benefit from increases in value of the Common Stock through the granting of Stock Awards.

2. Administration.

     (a) Administration by Board. The Board shall administer the Plan unless and until the Board delegates administration of the Plan to a Committee or Committees, as provided in Section 2(d). However, the Board may not delegate administration of the Non-Discretionary Grant Program.

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     (b) Powers of Board. Except with respect to the Non-Discretionary Grant Program, the Board shall have the power, subject to, and within the limitations of, the express provisions of the Plan:

          (i) To determine from time to time (A) which of the persons eligible under the Plan shall be granted Stock Awards; (B) when and how each Stock Award shall be granted; (C) what type or combination of types of Stock Award shall be granted; (D) the provisions of each Stock Award granted (which need not be identical), including the time or times when a person shall be permitted to receive cash or Common Stock pursuant to a Stock Award; and (E) the number of shares of Common Stock with respect to which a Stock Award shall be granted to each such person.

          (ii) To construe and interpret the Plan and Stock Awards granted under it, and to establish, amend and revoke rules and regulations for its administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any Stock Award Agreement, in a manner and to the extent it shall deem necessary or expedient to make the Plan or Stock Award fully effective.

          (iii) To settle all controversies regarding the Plan and Stock Awards granted under it.

          (iv) To accelerate the time at which a Stock Award may first be exercised or the time during which a Stock Award or any part thereof will vest in accordance with the Plan, notwithstanding the provisions in the Stock Award stating the time at which it may first be exercised or the time during which it will vest.

          (v) To effect, at any time and from time to time, with the consent of any adversely affected Participant, (1) the reduction of the exercise price of any outstanding Option or the strike price of any outstanding Stock Appreciation Right; (2) the cancellation of any outstanding Option or Stock Appreciation Right and the grant in substitution therefor of (a) a new Option or Stock Appreciation Right under the Plan or another equity plan of the Company covering the same or different number of shares of Common Stock, (b) a Restricted Stock Award, (c) a Restricted Stock Unit Award, (d) an Other Stock Award, (e) cash, and/or (f) other valuable consideration as determined by the Board in its sole discretion; or (3) any other action that is treated as a repricing under generally accepted accounting principles.

          (vi) To suspend or terminate the Plan at any time. Suspension or termination of the Plan shall not impair rights and obligations under any Stock Award granted while the Plan is in effect except with the written consent of the affected Participant.

          (vii) To amend the Plan in any respect the Board deems necessary or advisable, including, without limitation, relating to Incentive Stock Options and certain nonqualified deferred compensation under Section 409A of the Code and/or to bring the Plan or Stock Awards granted under the Plan into compliance therewith, subject to the limitations, if any, of applicable law. However, except as provided in Section 10(a) relating to Capitalization Adjustments, stockholder approval shall be required for any amendment of the Plan that either (i) materially increases the number of shares of Common Stock available for issuance under the Plan, (ii)

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materially expands the class of individuals eligible to receive Stock Awards under the Plan, (iii) materially increases the benefits accruing to Participants under the Plan or materially reduces the price at which shares of Common Stock may be issued or purchased under the Plan, (iv) materially extends the term of the Plan, or (v) expands the types of Stock Awards available for issuance under the Plan, but in each of (i) through (v) only to the extent required by applicable law or listing requirements. Except as provided above, rights under any Stock Award granted before amendment of the Plan shall not be impaired by any amendment of the Plan unless (i) the Company requests the consent of the affected Participant, and (ii) such Participant consents in writing.

          (viii) To submit any amendment to the Plan for stockholder approval, including, but not limited to, amendments to the Plan intended to satisfy the requirements of (i) Section 162(m) of the Code and the regulations thereunder regarding the exclusion of performance-based compensation from the limit on corporate deductibility of compensation paid to Covered Employees, (ii) Section 422 of the Code regarding Incentive Stock Options, or (iii) Rule 16b-3.

          (ix) To approve forms of Stock Award Agreements for use under the Plan and to amend the terms of any one or more Stock Awards, including, but not limited to, amendments to provide terms more favorable than previously provided in the Stock Award Agreement, subject to any specified limits in the Plan that are not subject to Board discretion; provided however, that, the rights under any Stock Award shall not be impaired by any such amendment unless (i) the Company requests the consent of the affected Participant, and (ii) such Participant consents in writing. Notwithstanding the foregoing, subject to the limitations of applicable law, if any, the Board may amend the terms of any one or more Stock Awards without the affected Participant’s consent if necessary to maintain the qualified status of the Stock Award as an Incentive Stock Option or to bring the Stock Award into compliance with Section 409A of the Code and the related guidance thereunder.

          (x) Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company and that are not in conflict with the provisions of the Plan or Stock Awards.

          (xi) To adopt such procedures and sub-plans as are necessary or appropriate to permit participation in the Plan by Employees, Directors or Consultants who are foreign nationals or employed outside the United States.

     (c) Administration of Non-Discretionary Grant Program. The Board shall have the power, subject to and within the limitation of, the express provisions of the Non-Discretionary Grant Program:

          (i) To determine the provisions of each Option to the extent not specified in the Non-Discretionary Grant Program.

          (ii) To construe and interpret the Non-Discretionary Grant Program and the Options granted under it, and to establish, amend and revoke rules and regulations for its administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Non-Discretionary Grant Program or in any Option Agreement, in a manner

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and to the extent it shall deem necessary or expedient to make the Non-Discretionary Grant Program or Option fully effective.

          (iii) Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company and that are not in conflict with the provisions of the Non-Discretionary Grant Program.

     (d) Delegation to Committee.

          (i) General. The Board may delegate some or all of the administration of the Plan (except the Non-Discretionary Grant Program) to a Committee or Committees. If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board that have been delegated to the Committee, including the power to delegate to a subcommittee of the Committee any of the administrative powers the Committee is authorized to exercise (and references in the Plan to the Board shall thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may retain the authority to concurrently administer the Plan with the Committee and may, at any time, revest in the Board some or all of the powers previously delegated.

          (ii) Section 162(m) and Rule 16b-3 Compliance. In the sole discretion of the Board, the Committee may consist solely of two or more Outside Directors, in accordance with Section 162(m) of the Code, or solely of two or more Non-Employee Directors, in accordance with Rule 16b-3. In addition, the Board or the Committee, in its sole discretion, may (A) delegate to a Committee who need not be Outside Directors the authority to grant Stock Awards to eligible persons who are either (I) not then Covered Employees and are not expected to be Covered Employees at the time of recognition of income resulting from such Stock Award, or (II) not persons with respect to whom the Company wishes to comply with Section 162(m) of the Code, or (B) delegate to a Committee who need not be Non-Employee Directors the authority to grant Stock Awards to eligible persons who are not then subject to Section 16 of the Exchange Act.

     (e) Delegation to Officers. The Board may delegate to one or more Officers the authority to do one or both of the following (i) designate Officers and Employees of the Company or any of its Subsidiaries to be recipients of Options (and, to the extent permitted by Delaware law, other Stock Awards) and the terms thereof, and (ii) determine the number of shares of Common Stock to be subject to such Stock Awards granted to such Officers and Employees; provided, however, that the Board resolutions regarding such delegation shall specify the total number of shares of Common Stock that may be subject to the Stock Awards granted by such Officers and that such Officer may not grant a Stock Award to himself or herself. Notwithstanding anything to the contrary in this Section 2(e), the Board may not delegate to an Officer authority to determine the Fair Market Value of the Common Stock pursuant to Section 14(x)(iii) below.

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     (f) Effect of Board’s Decision. All determinations, interpretations and constructions made by the Board in good faith shall not be subject to review by any person and shall be final, binding and conclusive on all persons.

3. Shares Subject to the Plan.

     (a) Share Reserve. Subject to the provisions of Section 10(a) relating to Capitalization Adjustments, the aggregate number of shares of common stock of the Company that may be issued pursuant to Stock Awards under the Plan and the Israeli Sub-Plan shall not exceed a number of shares equal to (i) three percent (3%) of the number of shares of Common Stock outstanding immediately following the IPO Date, less (ii) one million nine hundred twenty-five thousand (1,925,000) (pre-split) shares; provided, however, that such share reserve shall be increased from time to time by the number of shares of Common Stock that (i) are issuable pursuant to stock awards outstanding under the Company’s Prior Plan as of the IPO Date, and (ii) but for the termination of the Prior Plan as of the IPO Date, would otherwise have reverted to the share reserve of the Prior Plan. In addition, the number of shares of Common Stock available for issuance under the Plan shall automatically increase on January 1st of each year commencing in 2007 and ending on (and including) January 1, 2016, in an amount equal to the lesser of (i) three percent (3%) of the total number of shares of Common Stock outstanding on December 31st of the preceding calendar year, or (ii) the number of shares of stock (not to exceed 6,000,000 (pre-split) shares) determined by the Board of Directors. Notwithstanding the foregoing, the Board may act prior to the first day of any calendar year, to provide that there shall be no increase in the share reserve for such calendar year or that the increase in the share reserve for such calendar year shall be a lesser number of shares of Common Stock than would otherwise occur pursuant to the preceding sentence. Shares may be issued in connection with a merger or acquisition as permitted by NASD Rule 4350(i)(1)(A)(iii) or, if applicable, NYSE Listed Company Manual Section 303A.08, or AMEX Company Guide Section 711 and such issuance shall not reduce the number of shares available for issuance under the Plan.

     (b) Reversion of Shares to the Share Reserve. If any (i) Stock Award shall for any reason expire or otherwise terminate, in whole or in part, without having been exercised in full, (ii) shares of Common Stock issued to a Participant pursuant to a Stock Award are forfeited back to or repurchased by the Company because of the failure to meet a contingency or condition required for the vesting of such shares, (iii) a Stock Award is settled in cash, (iv) if any shares of Common Stock are cancelled in accordance with the cancellation and regrant provisions of Section 3(b)(v), then the shares of Common Stock not issued under such Stock Award, or forfeited to or repurchased by the Company, shall revert to and again become available for issuance under the Plan. If any shares subject to a Stock Award are not delivered to a Participant because such shares are withheld for the payment of taxes or the Stock Award is exercised through a reduction of shares subject to the Stock Award (i.e., “net exercised”) or an appreciation distribution in respect of a Stock Appreciation right is paid in shares of Common Stock, the number of shares subject to the Stock Award that are not delivered to the Participant shall remain available for subsequent issuance under the Plan. If the exercise price of any Stock Award is satisfied by tendering shares of Common Stock held by the Participant (either by actual delivery or attestation), then the number of shares so tendered shall remain available for issuance under the Plan.

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     (c) Incentive Stock Option Limit. Notwithstanding anything to the contrary in this Section 3(c), subject to the provisions of Section 10(a) relating to Capitalization Adjustments the aggregate maximum number of shares of Common Stock that may be issued pursuant to the exercise of Incentive Stock Options shall be [(i) three percent (3%) of the number of shares of Common Stock outstanding immediately following the IPO Date, less (ii) one million nine hundred twenty-five thousand (1,925,000) (pre-split)] shares of Common Stock plus the amount of any increase in the number of shares that may be available for issuance pursuant to Stock Awards pursuant to Section 3(a).

     (d) Source of Shares. The stock issuable under the Plan shall be shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Company on the open market.

4. Eligibility.

     (a) Eligibility for Specific Stock Awards. Incentive Stock Options may be granted only to employees of the Company or a “parent corporation” or “subsidiary corporation” thereof (as such terms are defined in Sections 424(e) and 424(f) of the Code). Stock Awards other than Incentive Stock Options may be granted to Employees, Directors and Consultants. Non-discretionary Options granted under the Non-Discretionary Grant Program in Section 7 may be granted only to Eligible Directors.

     (b) Ten Percent Stockholders. A Ten Percent Stockholder shall not be granted an Incentive Stock Option unless the exercise price of such Option is at least one hundred ten percent (110%) of the Fair Market Value of the Common Stock on the date of grant and the Option is not exercisable after the expiration of five (5) years from the date of grant.

     (c) Section 162(m) Limitation. Subject to the provisions of Section 10(a) relating to Capitalization Adjustments, at such time as the Company may be subject to the applicable provisions of Section 162(m) of the Code, no Employee shall be eligible to be granted during any calendar year Stock Awards whose value is determined by reference to an increase over an exercise or strike price of at least one hundred percent (100%) of the Fair Market Value of the Common Stock on the date the Stock Award is granted covering more than three million (3,000,000) (pre-split) shares of Common Stock.

     (d) Consultants. A Consultant shall be eligible for the grant of a Stock Award only if, at the time of grant, a Form S-8 Registration Statement under the Securities Act (“Form S-8”) is available to register either the offer or the sale of the Company’s securities to such Consultant.

5. Option Provisions.

     Each Option shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. All Options shall be separately designated Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and, if certificates are issued, a separate certificate or certificates shall be issued for shares of Common Stock purchased on exercise of each type of Option. If an Option is not specifically designated as an Incentive Stock Option, then the Option shall be a Nonstatutory Stock Option. The provisions of separate Options need not be identical; provided, however, that each Option Agreement shall conform to

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(through incorporation of provisions hereof by reference in the Option Agreement or otherwise) the substance of each of the following provisions:

     (a) Term. Subject to the provisions of Section 4(b) regarding Ten Percent Stockholders, no Option shall be exercisable after the expiration of ten (10) years from the date of its grant or such shorter period specified in the Option Agreement.

     (b) Exercise Price. Subject to the provisions of Section 4(b) regarding Ten Percent Stockholders, the exercise price of each Option shall be not less than one hundred percent (100%) of the Fair Market Value of the Common Stock subject to the Option on the date the Option is granted. Notwithstanding the foregoing, an Option may be granted with an exercise price lower than one hundred percent (100%) of the Fair Market Value of the Common Stock subject to the Option if such Option is granted pursuant to an assumption or substitution for another option in a manner consistent with the provisions of Section 424(a) of the Code (whether or not such options are Incentive Stock Options).

     (c) Consideration. The purchase price of Common Stock acquired pursuant to the exercise of an Option shall be paid, to the extent permitted by applicable law and as determined by the Board in its sole discretion, by any combination of the methods of payment set forth below. The Board shall have the authority to grant Options that do not permit all of the following methods of payment (or otherwise restrict the ability to use certain methods) and to grant Options that require the consent of the Company to utilize a particular method of payment. The methods of payment permitted by this Section 5(c) are:

          (i) by cash, check, bank draft or money order payable to the Company;

          (ii) pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of the stock subject to the Option, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds;

          (iii) by delivery to the Company (either by actual delivery or attestation) of shares of Common Stock;

          (iv) by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Common Stock issuable upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; provided, however, the Company shall accept a cash or other payment from the Participant to the extent of any remaining balance of the aggregate exercise price not satisfied by such reduction in the number of whole shares to be issued; provided, further, that shares of Common Stock will no longer be subject to an Option and will not be exercisable thereafter to the extent that (A) shares issuable upon exercise are reduced to pay the exercise price pursuant to the “net exercise,” (B) shares are delivered to the Participant as a result of such exercise, and (C) shares are withheld to satisfy tax withholding obligations; or

          (v) in any other form of legal consideration that may be acceptable to the Board in its sole discretion and permissible under applicable law.

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     (d) Transferability of Options. The Board may, in its sole discretion, impose such limitations on the transferability of Options as the Board shall determine. In the absence of such a determination by the Board to the contrary, the following restrictions on the transferability of Options shall apply:

          (i) Restrictions on Transfer. An Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder; provided, however, that the Board may, in its sole discretion, permit transfer of the Option in a manner that is not prohibited by applicable tax and securities laws upon the Optionholder’s request.

          (ii) Domestic Relations Orders. Notwithstanding the foregoing, an Option may be transferred pursuant to a domestic relations order, provided, however, that if an Option is an Incentive Stock Option, such Option may be deemed to be a Nonstatutory Stock Option as a result of such transfer.

          (iii) Beneficiary Designation. Notwithstanding the foregoing, the Optionholder may, by delivering written notice to the Company, in a form provided by or otherwise satisfactory to the Company and any broker designated by the Company to effect Option exercises, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option. In the absence of such a designation, the executor or administrator of the Optionholder’s estate shall be entitled to exercise the Option.

     (e) Vesting of Options Generally. The total number of shares of Common Stock subject to an Option may vest and therefore become exercisable in periodic installments that may or may not be equal. The Option may be subject to such other terms and conditions on the time or times when it may or may not be exercised (which may be based on the satisfaction of Performance Goals or other criteria) as the Board may deem appropriate. The vesting provisions of individual Options may vary. The provisions of this Section 5(e) are subject to any Option provisions governing the minimum number of shares of Common Stock as to which an Option may be exercised.

     (f) Termination of Continuous Service. In the event that an Optionholder’s Continuous Service terminates (other than for Cause or upon the Optionholder’s death or Disability), the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination of Continuous Service) but only within such period of time ending on the earlier of (i) the date three (3) months following the termination of the Optionholder’s Continuous Service (or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination of Continuous Service, the Optionholder does not exercise his or her Option within the time specified herein or in the Option Agreement (as applicable), the Option shall terminate.

     (g) Extension of Termination Date. An Optionholder’s Option Agreement may provide that if the exercise of the Option following the termination of the Optionholder’s Continuous Service (other than for Cause or upon the Optionholder’s death or Disability) would be prohibited at any time solely because the issuance of shares of Common Stock would violate

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the registration requirements under the Securities Act, then the Option shall terminate on the earlier of (i) the expiration of a period of three (3) months after the termination of the Optionholder’s Continuous Service during which the exercise of the Option would not be in violation of such registration requirements, or (ii) the expiration of the term of the Option as set forth in the Option Agreement.

     (h) Disability of Optionholder. In the event that an Optionholder’s Continuous Service terminates as a result of the Optionholder’s Disability, the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination of Continuous Service), but only within such period of time ending on the earlier of (i) the date twelve (12) months following such termination of Continuous Service (or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination of Continuous Service, the Optionholder does not exercise his or her Option within the time specified herein or in the Option Agreement (as applicable), the Option shall terminate.

     (i) Death of Optionholder. In the event that (i) an Optionholder’s Continuous Service terminates as a result of the Optionholder’s death, or (ii) the Optionholder dies within the period (if any) specified in the Option Agreement after the termination of the Optionholder’s Continuous Service for a reason other than death, then the Option may be exercised (to the extent the Optionholder was entitled to exercise such Option as of the date of death) by the Optionholder’s estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a person designated to exercise the option upon the Optionholder’s death, but only within the period ending on the earlier of (i) the date eighteen (18) months following the date of death (or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of such Option as set forth in the Option Agreement. If, after the Optionholder’s death, the Option is not exercised within the time specified herein or in the Option Agreement (as applicable), the Option shall terminate.

     (j) Termination for Cause. In the event that an Optionholder’s Continuous Service is terminated for Cause, the Option shall terminate immediately and cease to remain outstanding.

     (k) Non-Exempt Employees. No Option granted to an Employee that is a non-exempt employee for purposes of the Fair Labor Standards Act shall be first exercisable for any shares of Common Stock until at least six months following the date of grant of the Option. The foregoing provision is intended to operate so that any income derived by a non-exempt employee in connection with the exercise or vesting of an Option will be exempt from his or her regular rate of pay.

6. Provisions of Stock Awards other than Options.

     (a) Restricted Stock Awards. Each Restricted Stock Award Agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. To the extent consistent with the Company’s Bylaws, at the Board’s election, shares of Common Stock may be (x) held in book entry form subject to the Company’s instructions until any restrictions relating to the Restricted Stock Award lapse; or (y) evidenced by a certificate, which certificate shall be held in such form and manner as determined by the Board. The terms and

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conditions of Restricted Stock Award Agreements may change from time to time, and the terms and conditions of separate Restricted Stock Award Agreements need not be identical, provided, however, that each Restricted Stock Award Agreement shall conform to (through incorporation of the provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:

          (i) Consideration. A Restricted Stock Award may be awarded in consideration for (A) cash, check, bank draft or money order payable to the Company; (B) past or future services actually or to be rendered to the Company or an Affiliate; or (C) any other form of legal consideration that may be acceptable to the Board in its sole discretion and permissible under applicable law.

          (ii) Vesting. Shares of Common Stock awarded under a Restricted Stock Award Agreement may be subject to forfeiture to the Company in accordance with a vesting schedule to be determined by the Board.

          (iii) Termination of Participant’s Continuous Service. In the event a Participant’s Continuous Service terminates, the Company may receive via a forfeiture condition or a repurchase right, any or all of the shares of Common Stock held by the Participant which have not vested as of the date of termination of Continuous Service under the terms of the Restricted Stock Award Agreement.

          (iv) Transferability. Rights to acquire shares of Common Stock under the Restricted Stock Award Agreement shall be transferable by the Participant only upon such terms and conditions as are set forth in the Restricted Stock Award Agreement, as the Board shall determine in its sole discretion, so long as Common Stock awarded under the Restricted Stock Award Agreement remains subject to the terms of the Restricted Stock Award Agreement.

     (b) Restricted Stock Unit Awards. Each Restricted Stock Unit Award Agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. The terms and conditions of Restricted Stock Unit Award Agreements may change from time to time, and the terms and conditions of separate Restricted Stock Unit Award Agreements need not be identical, provided, however, that each Restricted Stock Unit Award Agreement shall conform to (through incorporation of the provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:

          (i) Consideration. At the time of grant of a Restricted Stock Unit Award, the Board will determine the consideration, if any, to be paid by the Participant upon delivery of each share of Common Stock subject to the Restricted Stock Unit Award. The consideration to be paid (if any) by the Participant for each share of Common Stock subject to a Restricted Stock Unit Award may be paid in any form of legal consideration that may be acceptable to the Board in its sole discretion and permissible under applicable law.

          (ii) Vesting. At the time of the grant of a Restricted Stock Unit Award, the Board may impose such restrictions or conditions to the vesting of the Restricted Stock Unit Award as it, in its sole discretion, deems appropriate.

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          (iii) Payment. A Restricted Stock Unit Award may be settled by the delivery of shares of Common Stock, their cash equivalent, any combination thereof or in any other form of consideration, as determined by the Board and contained in the Restricted Stock Unit Award Agreement.

          (iv) Additional Restrictions. At the time of the grant of a Restricted Stock Unit Award, the Board, as it deems appropriate, may impose such restrictions or conditions that delay the delivery of the shares of Common Stock (or their cash equivalent) subject to a Restricted Stock Unit Award to a time after the vesting of such Restricted Stock Unit Award.

          (v) Dividend Equivalents. Dividend equivalents may be credited in respect of shares of Common Stock covered by a Restricted Stock Unit Award, as determined by the Board and contained in the Restricted Stock Unit Award Agreement. At the sole discretion of the Board, such dividend equivalents may be converted into additional shares of Common Stock covered by the Restricted Stock Unit Award in such manner as determined by the Board. Any additional shares covered by the Restricted Stock Unit Award credited by reason of such dividend equivalents will be subject to all the terms and conditions of the underlying Restricted Stock Unit Award Agreement to which they relate.

          (vi) Termination of Participant’s Continuous Service. Except as otherwise provided in the applicable Restricted Stock Unit Award Agreement, such portion of the Restricted Stock Unit Award that has not vested will be forfeited upon the Participant’s termination of Continuous Service.

          (vii) Compliance with Section 409A of the Code. Notwithstanding anything to the contrary set forth herein, any Restricted Stock Unit Award granted under the Plan that is not exempt from the requirements of Section 409A of the Code shall incorporate terms and conditions necessary to avoid the consequences of Section 409A(a)(1) of the Code. Such restrictions, if any, shall be determined by the Board and contained in the Restricted Stock Unit Award Agreement evidencing such Restricted Stock Unit Award.

     (c) Stock Appreciation Rights. Each Stock Appreciation Right Agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. Stock Appreciation Rights may be granted as stand-alone Stock Awards or in tandem with other Stock Awards. The terms and conditions of Stock Appreciation Right Agreements may change from time to time, and the terms and conditions of separate Stock Appreciation Right Agreements need not be identical; provided, however, that each Stock Appreciation Right Agreement shall conform to (through incorporation of the provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:

          (i) Term. No Stock Appreciation Right shall be exercisable after the expiration of ten (10) years from the date of its grant or such shorter period specified in the Stock Appreciation Right Agreement.

          (ii) Strike Price. Each Stock Appreciation Right will be denominated in shares of Common Stock equivalents. The strike price of each Stock Appreciation Right shall

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not be less than one hundred percent (100%) of the Fair Market Value of the Common Stock equivalents subject to the Stock Appreciation Right on the date of grant.

          (iii) Calculation of Appreciation. The appreciation distribution payable on the exercise of a Stock Appreciation Right will be not greater than an amount equal to the excess of (A) the aggregate Fair Market Value (on the date of the exercise of the Stock Appreciation Right) of a number of shares of Common Stock equal to the number of share of Common Stock equivalents in which the Participant is vested under such Stock Appreciation Right, and with respect to which the Participant is exercising the Stock Appreciation Right on such date, over (B) the strike price.

          (iv) Vesting. At the time of the grant of a Stock Appreciation Right, the Board may impose such restrictions or conditions to the vesting of such Stock Appreciation Right as it, in its sole discretion, deems appropriate.

          (v) Exercise. To exercise any outstanding Stock Appreciation Right, the Participant must provide written notice of exercise to the Company in compliance with the provisions of the Stock Appreciation Right Agreement evidencing such Stock Appreciation Right.

          (vi) Payment. The appreciation distribution in respect of a Stock Appreciation Right may be paid in Common Stock, in cash, in any combination of the two or in any other form of consideration, as determined by the Board and set forth in the Stock Appreciation Right Agreement evidencing such Stock Appreciation Right.

          (vii) Termination of Continuous Service. In the event that a Participant’s Continuous Service terminates (other than for Cause), the Participant may exercise his or her Stock Appreciation Right (to the extent that the Participant was entitled to exercise such Stock Appreciation Right as of the date of termination of Continuous Service) but only within such period of time ending on the earlier of (A) the date three (3) months following the termination of the Participant’s Continuous Service (or such longer or shorter period specified in the Stock Appreciation Right Agreement), or (B) the expiration of the term of the Stock Appreciation Right as set forth in the Stock Appreciation Right Agreement. If, after termination of Continuous Service, the Participant does not exercise his or her Stock Appreciation Right within the time specified herein or in the Stock Appreciation Right Agreement (as applicable), the Stock Appreciation Right shall terminate.

          (viii) Termination for Cause. Except as explicitly provided otherwise in an Participant’s Stock Appreciation Right Agreement, in the event that a Participant’s Continuous Service is terminated for Cause, the Stock Appreciation Right shall terminate upon the termination date of such Participant’s Continuous Service, and the Participant shall be prohibited from exercising his or her Stock Appreciation Right from and after the time of such termination of Continuous Service.

          (ix) Compliance with Section 409A of the Code. Notwithstanding anything to the contrary set forth herein, any Stock Appreciation Rights granted under the Plan that are not exempt from the requirements of Section 409A of the Code shall incorporate terms and

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conditions necessary to avoid the consequences described in Section 409A(a)(1) of the Code. Such restrictions, if any, shall be determined by the Board and contained in the Stock Appreciation Right Agreement evidencing such Stock Appreciation Right.

     (d) Performance Stock Awards. A Performance Stock Award is either a Restricted Stock Award or Restricted Stock Unit Award that may be granted or may vest based upon the attainment during a Performance Period of certain Performance Goals. A Performance Stock Award may, but need not, require the completion of a specified period of Continuous Service. The length of any Performance Period, the Performance Goals to be achieved during the Performance Period, and the measure of whether and to what degree such Performance Goals have been attained shall be conclusively determined by the Committee in its sole discretion. The maximum benefit to be received by any Participant in a calendar year attributable to Performance Stock Awards described in this Section 6(d) shall not exceed the value of three million (3,000,000) (pre-split) shares of Common Stock. In addition, to the extent permitted by applicable law and the applicable Award Agreement, the Board may determine that cash may be used in payment of Performance Stock Awards.

     (e) Other Stock Awards. Other forms of Stock Awards valued in whole or in part by reference to, or otherwise based on, Common Stock may be granted either alone or in addition to Stock Awards provided for under Section 5 and the preceding provisions of this Section 6. Subject to the provisions of the Plan, the Board shall have sole and complete authority to determine the persons to whom and the time or times at which such Other Stock Awards will be granted, the number of shares of Common Stock (or the cash equivalent thereof) to be granted pursuant to such Other Stock Awards and all other terms and conditions of such Other Stock Awards.

7. Non-Discretionary Grants to Eligible Directors

     (a) General. The Non-Discretionary Grant Program in this Section 7 allows Eligible Directors to receive Nonstatutory Stock Options automatically at designated intervals over their period of Continuous Service on the Board.

     (b) Eligibility. The Stock Awards shall automatically be granted to all Eligible Directors who meet the specified criteria.

     (c) Non-Discretionary Grants.

          (i) IPO Awards. Without any further action of the Board, each person who is serving as a Non-Employee Director on the IPO Date shall automatically be granted a Nonstatutory Stock Option (the “IPO Grant”) to purchase thirty thousand (30,000) (pre-split) shares of Common Stock on the terms and conditions set forth in Section 7(d).

          (ii) Initial Awards. Without any further action of the Board, each person who after the IPO Date is elected or appointed for the first time to be a Non-Employee Director automatically shall, upon the date of his or her initial election or appointment to be a Non-Employee Director, be granted a Nonstatutory Stock Option (the “Initial Grant”) to purchase thirty thousand (30,000) (pre-split) shares of Common Stock on the terms and conditions set forth in Section 7(d).

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          (iii) Annual Awards. Without any further action of the Board, on the date of each Annual Meeting, commencing with the Annual Meeting in 2007, each person who is then a Non-Employee Director shall be granted a Nonstatutory Stock Option (the “Annual Grant”) to purchase ten thousand (10,000) (pre-split) shares of Common Stock on the terms and conditions set forth in Section 7(d).

     (d) Non-Discretionary Option Grant Provisions.

          (i) Term. No Option granted hereunder shall be exercisable after the expiration of ten (10) years from the date it was granted.

          (ii) Exercise Price. The exercise price of each Option shall be one hundred percent (100%) of the Fair Market Value of the Common Stock subject to the Option on the date the Option is granted.

          (iii) Consideration. The purchase price of Common Stock acquired pursuant to the exercise of an Option may be paid by any combination of the methods of payment set forth below.

               (1) by cash, check, bank draft or money order payable to the Company;

               (2) pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of the stock subject to the Option, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds;

               (3) by delivery to the Company (either by actual delivery or attestation) of shares of Common Stock; or

               (4) by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Common Stock issuable upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; provided, however, the Company shall accept a cash or other payment from the Participant to the extent of any remaining balance of the aggregate exercise price not satisfied by such reduction in the number of whole shares to be issued; provided, further, that shares of Common Stock will no longer be subject to an Option and will not be exercisable thereafter to the extent that (A) shares issuable upon exercise are reduced to pay the exercise price pursuant to the “net exercise,” (B) shares are delivered to the Participant as a result of such exercise, and (C) shares are withheld to satisfy tax withholding obligations (if any).

          (iv) Termination of Continuous Service. In the event that an Eligible Director’s Continuous Service terminates (other than upon the Eligible Director’s death or Disability or upon a Change in Control), the Eligible Director may exercise his or her Option (to the extent that the Eligible Director was entitled to exercise such Option as of the date of termination of Continuous Service) but only within such period of time ending on the earlier of (i) the date three (3) months following the termination of the Eligible Director’s Continuous

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Service (or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination of Continuous Service, the Eligible Director does not exercise his or her Option within the time specified herein or in the Option Agreement (as applicable), the Option shall terminate.

          (v) Extension of Termination Date. If the exercise of the Option following the termination of the Eligible Director’s Continuous Service (other than upon the Eligible Director’s death or Disability or upon a Change in Control) would be prohibited at any time solely because the issuance of shares of Common Stock would violate the registration requirements under the Securities Act, then the Option shall terminate on the earlier of (i) the expiration of a period of three (3) months after the termination of the Eligible Director’s Continuous Service during which the exercise of the Option would not be in violation of such registration requirements, or (ii) the expiration of the term of the Option as set forth in the Option Agreement.

          (vi) Disability of Eligible Director. In the event that an Eligible Director’s Continuous Service terminates as a result of the Eligible Director’s Disability, the Option shall become fully vested and exercisable and the Eligible Director may exercise his or her Option, but only within such period of time ending on the earlier of (i) the date twelve (12) months following such termination of Continuous Service, or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination, the Eligible Director does not exercise his or her Option within the time specified herein or in the Option Agreement, the Option shall terminate.

          (vii) Death of Eligible Director. In the event that (i) an Eligible Director’s Continuous Service terminates as a result of the Eligible Director’s death, or (ii) the Eligible Director dies within the three-month period after the termination of the Eligible Director’s Continuous Service for a reason other than death, then the Option shall become fully vested and exercisable and may be exercised by the Eligible Director’s estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a person designated to exercise the Option upon the Eligible Director’s death, but only within the period ending on the earlier of (i) the date eighteen (18) months following the date of death, or (ii) the expiration of the term of such Option as set forth in the Option Agreement. If, after the Eligible Director’s death, the Option is not exercised within the time specified herein, the Option shall terminate.

          (viii) Termination Upon Change in Control. In the event that an Eligible Director’s Continuous Service terminates as of, or within twelve (12) months following a Change in Control, the Eligible Director may exercise his or her Option (to the extent that the Eligible Director was entitled to exercise such Option as of the date of termination of Continuous Service) within such period of time ending on the earlier of (i) the date twelve (12) months following the effective date of the Change in Control (or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination of Continuous Service, the Eligible Director does not exercise his or her Option within the time specified herein or in the Option Agreement (as applicable), the Option shall terminate.

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          (ix) Vesting. Options granted under the Non-Discretionary Grant Program shall vest as follows:

               (1) IPO Grant. The Initial Grant shall vest in a series of forty-eight (48) successive equal monthly installments during the Eligible Director’s Continuous Service over the four (4)-year period measured from the date of grant.

               (2) Initial Grant. The Initial Grant shall vest with respect to (i) twenty-five percent (25%) of the option shares upon the Eligible Director’s completion of one year of Continuous Service measured from the date of grant, and (ii) the balance of the option shares in a series of thirty-six (36) successive equal monthly installments during the Eligible Director’s completion of each additional month of Continuous Service over the three (3)-year period measured from the first anniversary of the date of grant.

               (3) Annual Grant. The Annual Grant shall vest in a series of forty-eight (48) successive equal monthly installments during the Eligible Director’s Continuous Service over the four (4)-year period measured from the date of grant.

          (x) Early Exercise. Each Option granted under the Non-Discretionary Grant Program shall include a provision whereby the Eligible Director may elect at any time before the Eligible Director’s Continuous Service terminates to exercise the Option as to any part or all of the shares of Common Stock subject to the Option prior to the full vesting of the Option. Any unvested shares of Common Stock so purchased may be subject to a repurchase option in favor of the Company or to any other restriction the Board determines to be appropriate. The Company shall not be required to exercise its repurchase option until at least six (6) months (or such longer or shorter period of time necessary to avoid classification of the Option as a liability for financial accounting purposes) have elapsed following exercise of the Option unless the Board otherwise specifically provides in the Option.

          (xi) Corporate Transaction. In the event of a Corporate Transaction in which the surviving corporation or acquiring corporation (or its parent company) does not assume or continue outstanding Options granted under the Non-Discretionary Grant Program or substitute similar stock awards for such outstanding Options, then with respect to Options that have not been assumed, continued or substituted prior to the effective time of the Corporate Transaction, the vesting and exercisability of such Options shall (contingent upon the effectiveness of the Corporate Transaction) be accelerated in full to a date prior to the effective time of such Corporate Transaction as the Board shall determine (or, if the Board shall not determine such a date, to the date that is five (5) days prior to the effective time of the Corporate Transaction), and such Options shall terminate if not exercised at or prior to the effective time of the Corporate Transaction, and any reacquisition or repurchase rights held by the Company with respect to such Options shall lapse (contingent upon the effectiveness of the Corporate Transaction).

          (xii) Change in Control. In the event that an Eligible Director (i) is required to resign his or her position as a Non-Employee Director as a condition of a Change in Control, or (ii) is removed from his or her position as a Non-Employee Director in connection with a Change in Control, the outstanding Options held by such Eligible Director shall become fully

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vested and exercisable immediately prior to the effectiveness of such resignation or removal (and contingent upon the effectiveness of such Change in Control).

          (xiii) Remaining Terms. The remaining terms and conditions of each Option shall be as set forth in an Option Agreement in the form adopted from time to time by the Board; provided, however, that the terms of such Option Agreement shall be consistent with the terms of the Plan.

8. Covenants of the Company.

     (a) Availability of Shares. During the terms of the Stock Awards, the Company shall keep available at all times the number of shares of Common Stock required to satisfy such Stock Awards.

     (b) Securities Law Compliance. The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Stock Awards and to issue and sell shares of Common Stock upon exercise of the Stock Awards; provided, however, that this undertaking shall not require the Company to register under the Securities Act the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any such Stock Award. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority that counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell Common Stock upon exercise of such Stock Awards unless and until such authority is obtained.

     (c) No Obligation to Notify. The Company shall have no duty or obligation to any holder of a Stock Award to advise such holder as to the time or manner of exercising such Stock Award. Furthermore, the Company shall have no duty or obligation to warn or otherwise advise such holder of a pending termination or expiration of a Stock Award or a possible period in which the Stock Award may not be exercised. The Company has no duty or obligation to minimize the tax consequences of a Stock Award to the holder of such Stock Award.

9. Miscellaneous.

     (a) Use of Proceeds. Proceeds from the sale of shares of Common Stock pursuant to Stock Awards shall constitute general funds of the Company.

     (b) Corporate Action Constituting Grant of Stock Awards. Corporate action constituting a grant by the Company of a Stock Award to any Participant shall be deemed completed as of the date of such corporate action, unless otherwise determined by the Board, regardless of when the instrument, certificate, or letter evidencing the Stock Award is communicated to, or actually received or accepted by, the Participant.

     (c) Stockholder Rights. No Participant shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Common Stock subject to such Stock Award unless and until (i) such Participant has satisfied all requirements for exercise of the Stock Award pursuant to its terms, and (ii) the issuance of the Common Stock pursuant to such exercise has been entered into the books and records of the Company.

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     (d) No Employment or Other Service Rights. Nothing in the Plan, any Stock Award Agreement or other instrument executed thereunder or in connection with any Stock Award granted pursuant to the Plan shall confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Stock Award was granted or shall affect the right of the Company or an Affiliate to terminate (i) the employment of an Employee with or without notice and with or without cause, (ii) the service of a Consultant pursuant to the terms of such Consultant’s agreement with the Company or an Affiliate, or (iii) the service of a Director pursuant to the Bylaws of the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be.

     (e) Incentive Stock Option $100,000 Limitation. To the extent that the aggregate Fair Market Value (determined at the time of grant) of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by any Optionholder during any calendar year (under all plans of the Company and any Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or portions thereof that exceed such limit (according to the order in which they were granted) shall be treated as Nonstatutory Stock Options, notwithstanding any contrary provision of the applicable Option Agreement(s).

     (f) Investment Assurances. The Company may require a Participant, as a condition of exercising or acquiring Common Stock under any Stock Award, (i) to give written assurances satisfactory to the Company as to the Participant’s knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Stock Award; and (ii) to give written assurances satisfactory to the Company stating that the Participant is acquiring Common Stock subject to the Stock Award for the Participant’s own account and not with any present intention of selling or otherwise distributing the Common Stock. The foregoing requirements, and any assurances given pursuant to such requirements, shall be inoperative if (x) the issuance of the shares upon the exercise or acquisition of Common Stock under the Stock Award has been registered under a then currently effective registration statement under the Securities Act, or (y) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the Common Stock.

     (g) Withholding Obligations. Unless prohibited by the terms of a Stock Award Agreement, the Company may, in its sole discretion, satisfy any federal, state or local tax withholding obligation relating to a Stock Award by any of the following means (in addition to the Company’s right to withhold from any compensation paid to the Participant by the Company) or by a combination of such means: (i) causing the Participant to tender a cash payment; (ii) withholding shares of Common Stock from the shares of Common Stock issued or otherwise issuable to the Participant in connection with the Stock Award; provided, however, that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law (or such lower amount as may be necessary to avoid classification of the

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Stock Award as a liability for financial accounting purposes); (iii) withholding cash from a Stock Award settled in cash; (iv) withholding payment from any amounts otherwise payable to the Participant; or (v) by such other method as may be set forth in the Stock Award Agreement.

     (h) Electronic Delivery. Any reference herein to a “written” agreement or document shall include any agreement or document delivered electronically or posted on the Company’s intranet.

     (i) Deferrals. To the extent permitted by applicable law, the Board, in its sole discretion, may determine that the delivery of Common Stock or the payment of cash, upon the exercise, vesting or settlement of all or a portion of any Stock Award may be deferred and may establish programs and procedures for deferral elections to be made by Participants. Deferrals by Participants will be made in accordance with Section 409A of the Code. Consistent with Section 409A of the Code, the Board may provide for distributions while a Participant is still an employee. The Board is authorized to make deferrals of Stock Awards and determine when, and in what annual percentages, Participants may receive payments, including lump sum payments, following the Participant’s termination of employment or retirement, and implement such other terms and conditions consistent with the provisions of the Plan and in accordance with applicable law.

     (j) Compliance with Section 409A. To the extent that the Board determines that any Stock Award granted under the Plan is subject to Section 409A of the Code, the Stock Award Agreement evidencing such Stock Award shall incorporate the terms and conditions necessary to avoid the consequences described in Section 409A(a)(1) of the Code. To the extent applicable, the Plan and Stock Award Agreements shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued or amended after the Effective Date. Notwithstanding any provision of the Plan to the contrary, in the event that following the Effective Date the Board determines that any Stock Award may be subject to Section 409A of the Code and related Department of Treasury guidance (including such Department of Treasury guidance as may be issued after the Effective Date), the Board may adopt such amendments to the Plan and the applicable Stock Award Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Board determines are necessary or appropriate to (1) exempt the Stock Award from Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the Stock Award, or (2) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance.

10. Adjustments upon Changes in Common Stock; Other Corporate Events.

     (a) Capitalization Adjustments. In the event of a Capitalization Adjustment, the Board shall appropriately and proportionately adjust: (i) the class(es) and maximum number of securities subject to the Plan pursuant to Section 3(a); (ii) the class(es) and maximum number of securities that may be issued pursuant to the exercise of Incentive Stock Options pursuant to Section 3(c); (iii) the class(es) and maximum number of securities that may be awarded to any person pursuant to Section 4(c) and 6(d); (iv) the class(es) and number of securities subject to

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each Option granted under the Non-Discretionary Grant Program under Section 7; and (v) the class(es) and number of securities and price per share of stock subject to outstanding Stock Awards. The Board shall make such adjustments, and its determination shall be final, binding and conclusive.

     (b) Dissolution or Liquidation. Except as otherwise provided in a Stock Award Agreement, in the event of a dissolution or liquidation of the Company, all outstanding Stock Awards (other than Stock Awards consisting of vested and outstanding shares of Common Stock not subject to a forfeiture condition or the Company’s right of repurchase) shall terminate immediately prior to the completion of such dissolution or liquidation, and the shares of Common Stock subject to the Company’s repurchase rights may be repurchased by the Company notwithstanding the fact that the holder of such Stock Award is providing Continuous Service, provided, however, that the Board may, in its sole discretion, cause some or all Stock Awards to become fully vested, exercisable and/or no longer subject to repurchase or forfeiture (to the extent such Stock Awards have not previously expired or terminated) before the dissolution or liquidation is completed but contingent on its completion.

     (c) Corporate Transaction. The following provisions shall apply to Stock Awards (except those granted under the Non-Discretionary Grant Program) in the event of a Corporate Transaction unless otherwise provided in the instrument evidencing the Stock Award or any other written agreement between the Company or any Affiliate and the holder of the Stock Award or unless otherwise expressly provided by the Board at the time of grant of a Stock Award. Except as otherwise stated in the Stock Award Agreement, in the event of a Corporate Transaction, then, notwithstanding any other provision of the Plan, the Board shall take one or more of the following actions with respect to Stock Awards, contingent upon the closing or completion of the Corporate Transaction:

          (i) arrange for the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company) to assume or continue the Stock Award or to substitute a similar stock award for the Stock Award (including, but not limited to, an award to acquire the same consideration paid to the stockholders of the Company pursuant to the Corporate Transaction);

          (ii) arrange for the assignment of any reacquisition or repurchase rights held by the Company in respect of Common Stock issued pursuant to the Stock Award to the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company);

          (iii) accelerate the vesting of the Stock Award (and, if applicable, the time at which the Stock Award may be exercised) to a date prior to the effective time of such Corporate Transaction as the Board shall determine (or, if the Board shall not determine such a date, to the date that is five (5) days prior to the effective date of the Corporate Transaction), with such Stock Award terminating if not exercised (if applicable) at or prior to the effective time of the Corporate Transaction;

          (iv) arrange for the lapse of any reacquisition or repurchase rights held by the Company with respect to the Stock Award;

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          (v) cancel or arrange for the cancellation of the Stock Award, to the extent not vested or not exercised prior to the effective time of the Corporate Transaction, in exchange for such cash consideration as the Board, in its sole discretion, may consider appropriate; and

          (vi) the payment, in such form as may be determined by the Board equal to the excess, if any, of (A) the value of the property the holder of the Stock Award would have received upon the exercise of the Stock Award, over (B) any exercise price payable by such holder in connection with such exercise.

     The Board need not take the same action with respect to all Stock Awards or with respect to all Participants.

     (d) Change in Control. A Stock Award may be subject to additional acceleration of vesting and exercisability upon or after a Change in Control as may be provided in the Stock Award Agreement for such Stock Award or as may be provided in any other written agreement between the Company or any Affiliate and the Participant. A Stock Award may vest as to all or any portion of the shares subject to the Stock Award (i) immediately upon the occurrence of a Change in Control, whether or not such Stock Award is assumed, continued, or substituted by a surviving or acquiring entity in the Change in Control, or (ii) in the event a Participant’s Continuous Service is terminated, actually or constructively, within a designated period following the occurrence of a Change in Control. In the absence of such provisions, no such acceleration shall occur.

11. Termination or Suspension of the Plan.

     (a) Plan Term. The Board may suspend or terminate the Plan at any time. Unless terminated sooner, the Plan shall terminate on the day before the tenth (10th) anniversary of the earlier of (i) the date the Plan is adopted by the Board, or (ii) the date the Plan is approved by the stockholders of the Company. No Stock Awards may be granted under the Plan while the Plan is suspended or after it is terminated.

     (b) No Impairment of Rights. Suspension or termination of the Plan shall not impair rights and obligations under any Stock Award granted while the Plan is in effect except with the written consent of the affected Participant.

12. Effective Date of Plan.

     The Plan shall become effective on the IPO Date, but no Stock Award shall be exercised (or, in the case of a Restricted Stock Award, Restricted Stock Unit Award, or Other Stock Award shall be granted) unless and until the Plan has been approved by the Stockholders of the Company, which approval shall be within twelve (12) months before or after the date the Plan is adopted by the Board.

13. Choice of Law.

     The law of the State of Delaware shall govern all questions concerning the construction, validity and interpretation of this Plan, without regard to that state’s conflict of laws rules.

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14. Definitions.

     As used in the Plan, the following definitions shall apply to the capitalized terms indicated below:

     (a) “Affiliate” means, at the time of determination, any “parent” or “subsidiary” of the Company as such terms are defined in Rule 405 of the Securities Act. The Board shall have the authority to determine the time or times at which “parent” or “subsidiary” status is determined within the foregoing definition.

     (b) “Annual Award” means an Option granted to an Eligible Director who meets the specified criteria pursuant to Section 7(c)(iii).

     (c) “Annual Meeting” means the annual meeting of the stockholders of the Company.

     (d) “Board” means the Board of Directors of the Company.

     (e) “Capitalization Adjustment” means any change that is made in, or other events that occur with respect to, the Common Stock subject to the Plan or subject to any Stock Award after the Effective Date without the receipt of consideration by the Company (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company). Notwithstanding the foregoing, the conversion of any convertible securities of the Company shall not be treated as a transaction “without receipt of consideration” by the Company.

     (f) “Cause” means with respect to a Participant, the occurrence of any of the following events: (i) such Participant’s commission of any felony or any crime involving fraud, dishonesty or moral turpitude under the laws of the United States or any state thereof; (ii) such Participant’s attempted commission of, or participation in, a fraud or act of dishonesty against the Company; (iii) such Participant’s intentional, material violation of any contract or agreement between the Participant and the Company or of any statutory duty owed to the Company; (iv) such Participant’s unauthorized use or disclosure of the Company’s confidential information or trade secrets; or (v) such Participant’s gross misconduct. The determination that a termination of the Participant’s Continuous Service is either for Cause or without Cause shall be made by the Company in its sole discretion. Any determination by the Company that the Continuous Service of a Participant was terminated with or without Cause for the purposes of outstanding Stock Awards held by such Participant shall have no effect upon any determination of the rights or obligations of the Company or such Participant for any other purpose.

     (g) “Change in Control” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:

          (i) any Exchange Act Person becomes the Owner, directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities other than by virtue of a merger,

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consolidation or similar transaction. Notwithstanding the foregoing, a Change in Control shall not be deemed to occur (A) on account of the acquisition of securities of the Company by an investor, any affiliate thereof or any other Exchange Act Person from the Company in a transaction or series of related transactions the primary purpose of which is to obtain financing for the Company through the issuance of equity securities or (B) solely because the level of Ownership held by any Exchange Act Person (the “Subject Person”) exceeds the designated percentage threshold of the outstanding voting securities as a result of a repurchase or other acquisition of voting securities by the Company reducing the number of shares outstanding, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of voting securities by the Company, and after such share acquisition, the Subject Person becomes the Owner of any additional voting securities that, assuming the repurchase or other acquisition had not occurred, increases the percentage of the then outstanding voting securities Owned by the Subject Person over the designated percentage threshold, then a Change in Control shall be deemed to occur;

          (ii) there is consummated a merger, consolidation or similar transaction involving (directly or indirectly) the Company and, immediately after the consummation of such merger, consolidation or similar transaction, the stockholders of the Company immediately prior thereto do not Own, directly or indirectly, either (A) outstanding voting securities representing more than fifty percent (50%) of the combined outstanding voting power of the surviving Entity in such merger, consolidation or similar transaction or (B) more than fifty percent (50%) of the combined outstanding voting power of the parent of the surviving Entity in such merger, consolidation or similar transaction, in each case in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such transaction;

          (iii) the stockholders of the Company approve or the Board approves a plan of complete dissolution or liquidation of the Company, or a complete dissolution or liquidation of the Company shall otherwise occur, except for a liquidation into a parent corporation;

          (iv) there is consummated a sale, lease, exclusive license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries, other than a sale, lease, license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries to an Entity, more than fifty percent (50%) of the combined voting power of the voting securities of which are Owned by stockholders of the Company in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such sale, lease, license or other disposition; or

          (v) individuals who, on the date the Plan is adopted by the Board, are members of the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the members of the Board; provided, however, that if the appointment or election (or nomination for election) of any new Board member was approved or recommended by a majority vote of the members of the Incumbent Board then still in office, such new member shall, for purposes of the Plan, be considered as a member of the Incumbent Board.

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     For avoidance of doubt, the term Change in Control shall not include a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company.

     Notwithstanding the foregoing or any other provision of the Plan, the definition of Change in Control (or any analogous term) in an individual written agreement between the Company or any Affiliate and the Participant shall supersede the foregoing definition with respect to Stock Awards subject to such agreement; provided, however, that if no definition of Change in Control or any analogous term is set forth in such an individual written agreement, the foregoing definition shall apply.

     The Board may, in its sole discretion and without a Participant’s consent, amend the definition of “Change in Control” to conform to the definition of “Change in Control” under Section 409A of the Code, and the regulations thereunder.

     (h) “Code” means the Internal Revenue Code of 1986, as amended.

     (i) “Committee” means a committee of one (1) or more Directors to whom authority has been delegated by the Board in accordance with Section 2(d).

     (j) “Common Stock” means the common stock of the Company.

     (k) “Company” means Veraz Networks, Inc., a Delaware corporation.

     (l) “Consultant” means any person, including an advisor, who is (i) engaged by the Company or an Affiliate to render consulting or advisory services and is compensated for such services, or (ii) serving as a member of the board of directors of an Affiliate and is compensated for such services. However, service solely as a Director, or payment of a fee for such service, shall not cause a Director to be considered a “Consultant” for purposes of the Plan.

     (m) “Continuous Service” means that the Participant’s service with the Company or an Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. A change in the capacity in which the Participant renders service to the Company or an Affiliate as an Employee, Consultant or Director or a change in the entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant’s service with the Company or an Affiliate, shall not terminate a Participant’s Continuous Service; provided, however, if the Entity for which a Participant is rendering services ceases to qualify as an “Affiliate,” as determined by the Board in its sole discretion, such Participant’s Continuous Service shall be considered to have terminated on the date such Entity ceases to qualify as an Affiliate. To the extent permitted by law, the Board or the chief executive officer of the Company, in that party’s sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of: (i) any leave of absence approved by the Board of the chief executive officer of the Company, including sick leave, military leave or any other personal leave; or (ii) transfers between the Company, an Affiliate, or their successors. Notwithstanding the foregoing, a leave of absence shall be treated as Continuous Service for purposes of vesting in a Stock Award only to such extent as may be provided in the Company’s leave of absence policy, in the written terms of any leave of absence agreement or policy applicable to the Participant, or as otherwise required by law.

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     (n) “Corporate Transaction” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:

          (i) a sale or other disposition of all or substantially all, as determined by the Board in its sole discretion, of the consolidated assets of the Company and its Subsidiaries;

          (ii) a sale or other disposition of at least ninety percent (90%) of the outstanding securities of the Company;

          (iii) the consummation of a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or

          (iv) the consummation of a merger, consolidation or similar transaction following which the Company is the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other property, whether in the form of securities, cash or otherwise.

     (o) “Covered Employee” means the chief executive officer and the four (4) other highest compensated officers of the Company for whom total compensation is required to be reported to stockholders under the Exchange Act, as determined for purposes of Section 162(m) of the Code.

     (p) “Director” means a member of the Board.

     (q) “Disability” means, with respect to a Participant, the inability of such Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, as provided in Section 22(e)(3) and 409A(a)(2)(c)(i) of the Code.

     (r) “Effective Date” means the effective date of the Plan as set forth in Section 12.

     (s) “Eligible Director” means a Director who is not an Employee and is eligible to participate in the Non-Discretionary Grant Program.

     (t) “Employee” means any person employed by the Company or an Affiliate. However, service solely as a Director, or payment of a fee for such services, shall not cause a Director to be considered an “Employee” for purposes of the Plan.

     (u) “Entity” means a corporation, partnership, limited liability company or other entity.

     (v) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

     (w) “Exchange Act Person” means any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act), except that “Exchange Act Person” shall not include (i) the Company or any Subsidiary of the Company, (ii) any employee benefit

25.

plan of the Company or any Subsidiary of the Company or any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary of the Company, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, (iv) an Entity Owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their Ownership of stock of the Company; or (v) any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act) that, as of the Effective Date, is the Owner, directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities.

     (x) “Fair Market Value” means, as of any date, the value of the Common Stock determined as follows:

          (i) If the Common Stock is listed on any established stock exchange or traded on the Nasdaq Global Select Market or the Nasdaq Global Market (formerly the Nasdaq National Market), the Fair Market Value of a share of Common Stock shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange (or the exchange or market with the greatest volume of trading in the Common Stock) on the date of determination, as reported in The Wall Street Journal or such other source as the Board deems reliable.

          (ii) If the Common Stock is listed or traded on the Nasdaq Capital Market (formerly the Nasdaq Small Cap Market), the Fair Market Value of a share of Common Stock shall be the mean between the bid and asked prices for the Common Stock on the date of determination, as reported in The Wall Street Journal or such other source as the Board deems reliable. Unless otherwise provided by the Board, if there is no closing sales price (or closing bid if no sales were reported) for the Common Stock on the date of determination, then the Fair Market Value shall be the mean between the bid and asked prices for the Common Stock on the last preceding date for which such quotation exists.

          (iii) In the absence of such markets for the Common Stock, the Fair Market Value shall be determined by the Board in good faith and in a manner that complies with Section 409A of the Code.

     (y) “Incentive Stock Option” means an Option which qualifies as an “incentive stock option” within the meaning of Section 422 of the Code and the regulations promulgated thereunder.

     (z) “Initial Award” means an Option granted to an Eligible Director who meets the specified criteria pursuant to Section 7(c)(ii).

     (aa) “IPO Award” means an Option granted to an Eligible Director who meets the specified criteria pursuant to Section 7(c)(i).

     (bb) “IPO Date” means the date of the underwriting agreement between the Company and the underwriter(s) managing the initial public offering of the Common Stock, pursuant to which the Common Stock is priced for the initial public offering.

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     (cc) “Israeli Sub-Plan” means the Company’s 2003 Israeli Share Option Plan.

     (dd) “Non-Discretionary Grant Program” means the non-discretionary grant program in effect under Section 7 of the Plan.

     (ee) “Non-Employee Director” means a Director who either (i) is not a current employee or officer of the Company or an Affiliate, does not receive compensation, either directly or indirectly, from the Company or an Affiliate for services rendered as a consultant or in any capacity other than as a Director (except for an amount as to which disclosure would not be required under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act (“Regulation S-K”)), does not possess an interest in any other transaction for which disclosure would be required under Item 404(a) of Regulation S-K, and is not engaged in a business relationship for which disclosure would be required pursuant to Item 404(b) of Regulation S-K; or (ii) is otherwise considered a “non-employee director” for purposes of Rule 16b-3.

     (ff) “Nonstatutory Stock Option” means an Option that does not qualify as an Incentive Stock Option.

     (gg) “Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

     (hh) “Option” means an Incentive Stock Option or a Nonstatutory Stock Option to purchase shares of Common Stock granted pursuant to the Plan.

     (ii) “Option Agreement” means a written agreement between the Company and an Optionholder evidencing the terms and conditions of an Option grant. Each Option Agreement shall be subject to the terms and conditions of the Plan.

     (jj) “Optionholder” means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.

     (kk) “Other Stock Award” means an award based in whole or in part by reference to the Common Stock which is granted pursuant to the terms and conditions of Section 6(d).

     (ll) “Other Stock Award Agreement” means a written agreement between the Company and a holder of an Other Stock Award evidencing the terms and conditions of an Other Stock Award grant. Each Other Stock Award Agreement shall be subject to the terms and conditions of the Plan.

     (mm) “Outside Director” means a Director who either (i) is not a current employee of the Company or an “affiliated corporation” (within the meaning of Treasury Regulations promulgated under Section 162(m) of the Code), is not a former employee of the Company or an “affiliated corporation” who receives compensation for prior services (other than benefits under a tax-qualified retirement plan) during the taxable year, has not been an officer of the Company or an “affiliated corporation,” and does not receive remuneration from the Company or an “affiliated corporation,” either directly or indirectly, in any capacity other than as a Director, or (ii) is otherwise considered an “outside director” for purposes of Section 162(m) of the Code.

27.

     (nn) “Own,” “Owned,” “Owner,” “Ownership” A person or Entity shall be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to have acquired “Ownership” of securities if such person or Entity, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power, which includes the power to vote or to direct the voting, with respect to such securities.

     (oo) “Participant” means a person to whom a Stock Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Stock Award.

     (pp) “Performance Criteria” means the one or more criteria that the Board shall select for purposes of establishing the Performance Goals for a Performance Period. The Performance Criteria that shall be used to establish such Performance Goals may be based on any one of, or combination of, the following: (i) earnings per share; (ii) earnings before interest, taxes and depreciation; (iii) earnings before interest, taxes, depreciation and amortization (EBITDA); (iv) total stockholder return; (v) return on equity; (vi) return on assets, investment, or capital employed; (vii) operating margin; (viii) gross margin; (ix) operating income; (x) net income (before or after taxes); (xi) net operating income; (xii) net operating income after tax; (xiii) pre- and after-tax income; (xiv) pre-tax profit; (xv) operating cash flow; (xvi) sales or revenue targets; (xvii) orders and revenue; (xviii) increases in revenue or product revenue; (xix) expenses and cost reduction goals; (xx) improvement in or attainment of expense levels; (xxi) improvement in or attainment of working capital levels; (xxii) economic value added (or an equivalent metric); (xxiii) market share; (xxiv) cash flow; (xxv) cash flow per share; (xxvi) share price performance; (xxvii) debt reduction; (xxviii) implementation or completion of projects or processes; (xxix) customer satisfaction; (xxx) stockholders’ equity; (xxxi) quality measures; and (xxxii) to the extent that a Stock Award is not intended to comply with Section 162(m) of the Code, other measures of performance selected by the Board. Partial achievement of the specified criteria may result in the payment or vesting corresponding to the degree of achievement as specified in the Stock Award Agreement. The Board shall, in its sole discretion, define the manner of calculating the Performance Criteria it selects to use for such Performance Period.

     (qq) “Performance Goals” means, for a Performance Period, the one or more goals established by the Board for the Performance Period based upon the satisfaction of the Performance Criteria. Performance Goals may be based on a Company-wide basis, with respect to one or more business units, divisions, Affiliates, or business segments, and in either absolute terms or relative to the performance of one or more comparable companies or the performance of one or more relevant indices. At the time of the grant of any Stock Award, the Board is authorized to determine whether, when calculating the attainment of Performance Goals for a Performance Period: (i) to exclude restructuring and/or other nonrecurring charges; (ii) to exclude exchange rate effects, as applicable, for non-U.S. dollar denominated net sales and operating earnings; (iii) to exclude the effects of changes to generally accepted accounting standards required by the Financial Accounting Standards Board; (iv) to exclude the effects of any statutory adjustments to corporate tax rates; and (v) to exclude the effects of any “extraordinary items” as determined under generally accepted accounting principles. In addition, the Board retains the discretion to reduce or eliminate the compensation or economic benefit due upon attainment of Performance Goals.

28.

     (rr) “Performance Period” means one or more periods of time, which may be of varying and overlapping duration, as the Committee may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to and the payment of a Performance Stock Award.

     (ss) “Performance Stock Award” means an award of shares of Common Stock which is granted pursuant to the terms and conditions of Section 6(d).

     (tt) “Plan” means this Veraz Networks, Inc. 2006 Equity Incentive Plan.

     (uu) “Prior Plan” means the Company’s 2001 Equity Incentive Plan as in effect immediately prior to the Effective Date.

     (vv) “Restricted Stock Award” means an award of shares of Common Stock which is granted pursuant to the terms and conditions of Section 6(a).

     (ww) “Restricted Stock Award Agreement” means a written agreement between the Company and a holder of a Restricted Stock Award evidencing the terms and conditions of a Restricted Stock Award grant. Each Restricted Stock Award Agreement shall be subject to the terms and conditions of the Plan.

     (xx) “Restricted Stock Unit Award” means a right to receive shares of Common Stock which is granted pursuant to the terms and conditions of Section 6(b).

     (yy) “Restricted Stock Unit Award Agreement” means a written agreement between the Company and a holder of a Restricted Stock Unit Award evidencing the terms and conditions of a Restricted Stock Unit Award grant. Each Restricted Stock Unit Award Agreement shall be subject to the terms and conditions of the Plan.

     (zz) “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect from time to time.

     (aaa) “Securities Act” means the Securities Act of 1933, as amended.

     (bbb) “Stock Appreciation Right” means a right to receive the appreciation on Common Stock that is granted pursuant to the terms and conditions of Section 6(c).

     (ccc) “Stock Appreciation Right Agreement” means a written agreement between the Company and a holder of a Stock Appreciation Right evidencing the terms and conditions of a Stock Appreciation Right grant. Each Stock Appreciation Right Agreement shall be subject to the terms and conditions of the Plan.

     (ddd) “Stock Award” means any right to receive Common Stock granted under the Plan, including an Option, a Restricted Stock Award, a Restricted Stock Unit Award, a Stock Appreciation Right, a Performance Stock Award, or any Other Stock Award.

29.

     (eee) “Stock Award Agreement” means a written agreement between the Company and a Participant evidencing the terms and conditions of a Stock Award grant. Each Stock Award Agreement shall be subject to the terms and conditions of the Plan.

     (fff) “Subsidiary” means, with respect to the Company, (i) any corporation of which more than fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company, and (ii) any partnership, limited liability company or other entity in which the Company has a direct or indirect interest (whether in the form of voting or participation in profits or capital contribution) of more than fifty percent (50%) .

     (ggg) “Ten Percent Stockholder” means a person who Owns (or is deemed to Own pursuant to Section 424(d) of the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Affiliate.

30.

Non-Discretionary Grant Program

Veraz Networks, Inc.
2006 Equity Incentive Plan

Option Agreement
(Nonstatutory Stock Option)

     Pursuant to your Option Grant Notice (“Grant Notice”) and this Option Agreement, Veraz Networks, Inc. (the “Company”) has granted you an option pursuant to the Non-Discretionary Grant Program under its 2006 Equity Incentive Plan (the “Plan”) to purchase the number of shares of the Company’s Common Stock indicated in your Grant Notice at the exercise price indicated in your Grant Notice. Defined terms not explicitly defined in this Option Agreement but defined in the Plan shall have the same definitions as in the Plan.

     The details of your option are as follows:

     1. Vesting. Subject to the limitations contained herein, your option will vest as provided in your Grant Notice, provided that vesting will cease upon the termination of your Continuous Service.

     2. Number of Shares and Exercise Price. The number of shares of Common Stock subject to your option and your exercise price per share referenced in your Grant Notice may be adjusted from time to time for Capitalization Adjustments.

     3. Method of Payment. Payment of the exercise price is due in full upon exercise of all or any part of your option. You may elect to make payment of the exercise price in cash or by check or in any other manner permitted by your Grant Notice, which may include one or more of the following:

          (a) Provided that at the time of exercise the Common Stock is publicly traded and quoted regularly in The Wall Street Journal, pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of Common Stock, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds.

          (b) Provided that at the time of exercise the Common Stock is publicly traded and quoted regularly in The Wall Street Journal, by delivery to the Company (either by actual delivery or attestation) of already-owned shares of Common Stock either that you have held for the period required to avoid classification of the option as a liability for financial accounting purposes (generally six (6) months) or that you did not acquire, directly or indirectly from the Company, that are owned free and clear of any liens, claims, encumbrances or security interests, and that are valued at Fair Market Value on the date of exercise. “Delivery” for these purposes, in the sole discretion of the Company at the time you exercise your option, shall include delivery to the Company of your attestation of ownership of such shares of Common Stock in a form approved by the Company. Notwithstanding the foregoing, you may not exercise your option by tender to the Company of Common Stock to the extent such tender would violate the provisions of any law, regulation or agreement restricting the redemption of the Company’s stock.

1.

          (c) By a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Common Stock issued upon exercise of your option by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; provided, however, the Company shall accept a cash or other payment from you to the extent of any remaining balance of the aggregate exercise price not satisfied by such reduction in the number of whole shares to be issued; provided, however, shares of Common Stock will no longer be outstanding under your option and will not be exercisable thereafter to the extent that (i) shares are used to pay the exercise price pursuant to the “net exercise,” (ii) shares are delivered to you as a result of such exercise, and (iii) shares are withheld to satisfy tax withholding obligations.

     4. Whole Shares. You may exercise your option only for whole shares of Common Stock.

     5. Securities Law Compliance. Notwithstanding anything to the contrary contained herein, you may not exercise your option unless the shares of Common Stock issuable upon such exercise are then registered under the Securities Act or, if such shares of Common Stock are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. The exercise of your option also must comply with other applicable laws and regulations governing your option, and you may not exercise your option if the Company determines that such exercise would not be in material compliance with such laws and regulations.

     6. Term. You may not exercise your option before the commencement or after the expiration of its term. The term of your option commences on the Date of Grant and expires upon the earliest of the following:

          (a) three (3) months after the termination of your Continuous Service for any reason other than your Disability or death or upon a Change in Control, provided that if during any part of such three (3) month period your option is not exercisable solely because of the condition set forth in Section 5, your option shall not expire until the earlier of the Expiration Date or until it shall have been exercisable for an aggregate period of three (3) months after the termination of your Continuous Service;

          (b) twelve (12) months after the termination of your Continuous Service due to your Disability;

          (c) eighteen (18) months after your death if you die either during your Continuous Service or within three (3) months after your Continuous Service terminates;

          (d) twelve (12) months after the effective date of a Change in Control if termination occurs as of, or within twelve (12) months following the effective date of such a Change in Control;

          (e) the Expiration Date indicated in your Grant Notice; or

          (f) the day before the tenth (10th) anniversary of the Date of Grant.

2.

     7. Exercise.

          (a) You may exercise the vested portion of your option (and the unvested portion of your option if your Grant Notice so permits) during its term by delivering a Notice of Exercise (in a form designated by the Company) together with the exercise price to the Secretary of the Company, or to such other person as the Company may designate, during regular business hours, together with such additional documents as the Company may then require.

          (b) By exercising your option you agree that, as a condition to any exercise of your option, the Company may require you to enter into an arrangement providing for the payment by you to the Company of any tax withholding obligation of the Company arising by reason of (i) the exercise of your option, (ii) the lapse of any substantial risk of forfeiture to which the shares of Common Stock are subject at the time of exercise, or (iii) the disposition of shares of Common Stock acquired upon such exercise.

     8. Transferability. Your option is transferable only by will or by the laws of descent and distribution and is exercisable only by you during your lifetime. However, you may transfer your option for no consideration upon written consent of the Board (i) if, at the time of transfer, a Form S-8 registration statement under the Securities Act is available for the issuance of shares by the Company upon the exercise of such transferred option, or (ii) the transfer is to your employer at the time of transfer or an affiliate of your employer at the time of transfer. Any such transfer is subject to such limits as the Board may establish, and subject to the transferee agreeing to remain subject to all the terms and conditions applicable to your option prior to such transfer. The forgoing right to transfer your option shall apply to the right to consent to amendments to the Option Agreement for such option. In addition, until you transfers the option, you may, by delivering written notice to the Company, in a form provided by or otherwise satisfactory to the Company, designate a third party who, in the event of your death, shall thereafter be entitled to exercise your option.

     9. Change in Control.

          (a) In the event that you are required to resign your position as a Non-Employee Director as a condition of a Change in Control or you are removed from your position as a Non-Employee Director in connection with a Change in Control, your option shall become fully vested and exercisable immediately prior to the effectiveness of such resignation or removal (and contingent upon the effectiveness of such Change in Control).

          (b) If any payment or benefit you would receive pursuant to a Change in Control from the Company or otherwise (“Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the Company shall cause to be determined, before any amounts of the Payment are paid to you, which of the following two alternative forms of payment would maximize your after-tax proceeds: (i) payment in full of the entire amount of the Payment (a “Full Payment”), or (ii) payment of only a part of the Payment so that you receive the largest payment possible without the imposition of the Excise Tax (a “Reduced Payment”), whichever amount results in your receipt, on an after-tax basis, of the greater amount of the Payment notwithstanding that all or some portion of the

3.

Payment may be subject to the Excise Tax. For purposes of determining whether to make a Full Payment or a Reduced Payment, the Company shall cause to be taken into account all applicable federal, state and local income and employment taxes and the Excise Tax (all computed at the highest applicable marginal rate, net of the maximum reduction in federal income taxes which could be obtained from a deduction of such state and local taxes). If a Reduced Payment is made, (i) the Payment shall be paid only to the extent permitted under the Reduced Payment alternative, and you shall have no rights to any additional payments and/or benefits constituting the Payment, and (ii) reduction in payments and/or benefits shall occur in the following order unless you elect in writing a different order (provided, however, that such election shall be subject to Company approval if made on or after the date on which the event that triggers the Payment occurs): (1) reduction of cash payments; (2) cancellation of accelerated vesting of equity awards other than stock options; (3) cancellation of accelerated vesting of stock options; and (4) reduction of other benefits paid to you. In the event that acceleration of compensation from your equity awards is to be reduced, such acceleration of vesting shall be canceled in the reverse order of the date of grant unless you elect in writing a different order for cancellation.

          (c) The accounting firm engaged by the Company for general tax purposes as of the day prior to the effective date of the Change in Control shall perform the foregoing calculations. If the accounting firm so engaged by the Company is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, the Company shall appoint a nationally recognized accounting firm to make the determinations required hereunder. The Company shall bear all expenses with respect to the determinations by such accounting firm required to be made hereunder.

          (d) The accounting firm engaged to make the determinations hereunder shall provide its calculations, together with detailed supporting documentation, to you and the Company within fifteen (15) calendar days after the date on which your right to a Payment is triggered (if requested at that time by you or the Company) or such other time as requested by you or the Company. If the accounting firm determines that no Excise Tax is payable with respect to a Payment, either before or after the application of the Reduced Amount, it shall furnish you and the Company with an opinion reasonably acceptable to you that no Excise Tax will be imposed with respect to such Payment. Any good faith determinations of the accounting firm made hereunder shall be final, binding and conclusive upon you and the Company.

     10. Option not a Service Contract. Your option is not an employment or service contract, and nothing in your option shall be deemed to create in any way whatsoever any obligation on your part to continue in the employ of the Company or an Affiliate, or of the Company or an Affiliate to continue your employment. In addition, nothing in your option shall obligate the Company or an Affiliate, their respective stockholders, Boards of Directors, Officers or Employees to continue any relationship that you might have as a Director or Consultant for the Company or an Affiliate.

     11. Withholding Obligations.

          (a) At the time you exercise your option, in whole or in part, or at any time thereafter as requested by the Company, you hereby authorize withholding from payroll and any other amounts payable to you, and otherwise agree to make adequate provision for (including by

4.

means of a “cashless exercise” pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board to the extent permitted by the Company), any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or an Affiliate, if any, which arise in connection with the exercise of your option.

          (b) Upon your request and subject to approval by the Company, in its sole discretion, and compliance with any applicable legal conditions or restrictions, the Company may withhold from fully vested shares of Common Stock otherwise issuable to you upon the exercise of your option a number of whole shares of Common Stock having a Fair Market Value, determined by the Company as of the date of exercise, not in excess of the minimum amount of tax required to be withheld by law (or such lower amount as may be necessary to avoid classification of your option as a liability for financial accounting purposes). If the date of determination of any tax withholding obligation is deferred to a date later than the date of exercise of your option, share withholding pursuant to the preceding sentence shall not be permitted unless you make a proper and timely election under Section 83(b) of the Code, covering the aggregate number of shares of Common Stock acquired upon such exercise with respect to which such determination is otherwise deferred, to accelerate the determination of such tax withholding obligation to the date of exercise of your option. Notwithstanding the filing of such election, shares of Common Stock shall be withheld solely from fully vested shares of Common Stock determined as of the date of exercise of your option that are otherwise issuable to you upon such exercise. Any adverse consequences to you arising in connection with such share withholding procedure shall be your sole responsibility.

          (c) You may not exercise your option unless the tax withholding obligations of the Company and/or any Affiliate are satisfied. Accordingly, you may not be able to exercise your option when desired even though your option is vested, and the Company shall have no obligation to issue a certificate for such shares of Common Stock or release such shares of Common Stock from any escrow provided for herein unless such obligations are satisfied.

     12. Notices. Any notices provided for in your option or the Plan shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five (5) days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company.

     13. Governing Plan Document. Your option is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your option, and is further subject to all interpretations, amendments, rules and regulations, which may from time to time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of your option and those of the Plan, the provisions of the Plan shall control.

5.

Non-Discretionary Grant Program

Veraz Networks, Inc.
2006 Equity Incentive Plan

Option Grant Notice
([IPO] [Initial] [Annual] Grant)

Veraz Networks, Inc. (the “Company”), pursuant to its 2006 Equity Incentive Plan (the “Plan”), hereby grants to Optionholder an option to purchase the number of shares of the Company’s Common Stock set forth below. This option is subject to all of the terms and conditions as set forth herein and in the Option Agreement, the Plan, and the Notice of Exercise, all of which are attached hereto and incorporated herein in their entirety.

Optionholder:

Date of Grant:

Number of Shares Subject to Option:

Exercise Price (Per Share):

Total Exercise Price:

Expiration Date:

Type of Grant:	Nonstatutory Stock Option
Exercise Schedule:	þ     Early Exercise Permitted
Vesting Schedule:	[IPO Grant: The shares vest in a series of forty-eight (48) successive equal monthly installments over the four (4)-year period measured from the Date of Grant.]
	[Initial Grant: Twenty five percent (25%) of the shares shall vest on the first year anniversary of the date Optionholder was elected or appointed to the Board and the balance shall vest in a series of thirty-six (36) successive equal monthly installments over the three (3)-year period measured from the first anniversary of the date Optionholder was elected or appointed to the Board.]
	[Annual Grant: The shares vest in a series of forty-eight (48) successive equal monthly installments over the four (4)-year period measured from the Date of Grant.]
Payment:	By one or a combination of the following items (described in the Option Agreement):
	þ     By cash or check
	þ     Pursuant to a Regulation T Program if the Shares are publicly traded
	þ     By delivery of already-owned shares if the Shares are publicly traded
	o     By net exercise

Additional Terms/Acknowledgements: The undersigned Optionholder acknowledges receipt of, and understands and agrees to, this Option Grant Notice, the Option Agreement, and the Plan. Optionholder further acknowledges that as of the Date of Grant, this Option Grant Notice, the Option Agreement, and the Plan set forth the entire understanding between Optionholder and the Company regarding the acquisition of stock in the Company and supersede all prior oral and written agreements on that subject with the exception of (i) options previously granted and delivered to Optionholder under the Plan, and (ii) the following agreements only:

Other Agreements:

Non-Discretionary Grant Program

Veraz Networks, Inc.		Optionholder:
By:
	Signature	Signature
Title:		Date:
Date:

Attachments: Option Agreement, 2006 Equity Incentive Plan, and Notice of Exercise

Non-Discretionary Grant Program

Attachment I

Option Agreement

Non-Discretionary Grant Program

Attachment II

2006 Equity Incentive Plan

Non-Discretionary Grant Program

Attachment III

NOTICE OF EXERCISE

Veraz Networks, Inc.
2006 Equity Incentive Plan

Option Agreement
(Incentive Stock Option or Nonstatutory Stock Option)

     Pursuant to your Option Grant Notice (“Grant Notice”) and this Option Agreement, Veraz Networks, Inc. (the “Company”) has granted you an option under its 2006 Equity Incentive Plan (the “Plan”) to purchase the number of shares of the Company’s Common Stock indicated in your Grant Notice at the exercise price indicated in your Grant Notice. Defined terms not explicitly defined in this Option Agreement but defined in the Plan shall have the same definitions as in the Plan.

     The details of your option are as follows:

     1. Vesting. Subject to the limitations contained herein, your option will vest as provided in your Grant Notice, provided that vesting will cease upon the termination of your Continuous Service.

     2. Number of Shares and Exercise Price. The number of shares of Common Stock subject to your option and your exercise price per share referenced in your Grant Notice may be adjusted from time to time for Capitalization Adjustments.

     3. Exercise Restriction for Non-Exempt Employees. In the event that you are an Employee eligible for overtime compensation under the Fair Labor Standards Act of 1938, as amended (i.e., a “Non-Exempt Employee”), you may not exercise your option until you have completed at least six (6) months of Continuous Service measured from the Date of Grant specified in your Grant Notice, notwithstanding any other provision of your option.

     4. Method of Payment. Payment of the exercise price is due in full upon exercise of all or any part of your option. You may elect to make payment of the exercise price in cash or by check or in any other manner permitted by your Grant Notice, which may include one or more of the following:

          (a) Provided that at the time of exercise the Common Stock is publicly traded and quoted regularly in The Wall Street Journal, pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of Common Stock, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds.

          (b) Provided that at the time of exercise the Common Stock is publicly traded and quoted regularly in The Wall Street Journal, by delivery to the Company (either by actual delivery or attestation) of already-owned shares of Common Stock either that you have held for the period required to avoid classification of your option as a liability for financial accounting purposes (generally six (6) months) or that you did not acquire, directly or indirectly from the

1.

Company, that are owned free and clear of any liens, claims, encumbrances or security interests, and that are valued at Fair Market Value on the date of exercise. “Delivery” for these purposes, in the sole discretion of the Company at the time you exercise your option, shall include delivery to the Company of your attestation of ownership of such shares of Common Stock in a form approved by the Company. Notwithstanding the foregoing, you may not exercise your option by tender to the Company of Common Stock to the extent such tender would violate the provisions of any law, regulation or agreement restricting the redemption of the Company’s stock.

     5. Whole Shares. You may exercise your option only for whole shares of Common Stock.

     6. Securities Law Compliance. Notwithstanding anything to the contrary contained herein, you may not exercise your option unless the shares of Common Stock issuable upon such exercise are then registered under the Securities Act or, if such shares of Common Stock are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. The exercise of your option also must comply with other applicable laws and regulations governing your option, and you may not exercise your option if the Company determines that such exercise would not be in material compliance with such laws and regulations.

     7. Term. You may not exercise your option before the commencement or after the expiration of its term. The term of your option commences on the Date of Grant and expires upon the earliest of the following:

          (a) three (3) months after the termination of your Continuous Service for any reason other than your Disability or death; provided, however, that (i) if during any part of such three (3) month period your option is not exercisable solely because of the condition set forth in Section 6, your option shall not expire until the earlier of the Expiration Date or until it shall have been exercisable for an aggregate period of three (3) months after the termination of your Continuous Service and (ii) if (x) you are a Non-Exempt Employee, (y) you terminate your Continuous Service within six (6) months after the Date of Grant specified in your Grant Notice, and (z) you have vested in a portion of your option at the time of your termination of Continuous Service, your option shall not expire until the earlier of (A) the later of the date that is seven (7) months after the Date of Grant specified in your Grant Notice or the date that is three (3) months after the termination of your Continuous Service, or (B) the Expiration Date;

          (b) twelve (12) months after the termination of your Continuous Service due to your Disability;

          (c) eighteen (18) months after your death if you die either during your Continuous Service or within three (3) months after your Continuous Service terminates;

          (d) the Expiration Date indicated in your Grant Notice; or

          (e) the day before the tenth (10th) anniversary of the Date of Grant.

     If your option is an Incentive Stock Option, note that to obtain the federal income tax advantages associated with an Incentive Stock Option, the Code requires that at all times

2.

beginning on the date of grant of your option and ending on the day three (3) months before the date of your option’s exercise, you must be an employee of the Company or an Affiliate, except in the event of your death or Disability. The Company has provided for extended exercisability of your option under certain circumstances for your benefit but cannot guarantee that your option will necessarily be treated as an Incentive Stock Option if you continue to provide services to the Company or an Affiliate as a Consultant or Director after your employment terminates or if you otherwise exercise your option more than three (3) months after the date your employment with the Company or an Affiliate terminates.

     8. Exercise.

          (a) You may exercise the vested portion of your option during its term by delivering a Notice of Exercise (in a form designated by the Company) together with the exercise price to the Secretary of the Company, or to such other person as the Company may designate, during regular business hours, together with such additional documents as the Company may then require.

          (b) By exercising your option you agree that, as a condition to any exercise of your option, the Company may require you to enter into an arrangement providing for the payment by you to the Company of any tax withholding obligation of the Company arising by reason of (i) the exercise of your option, or (ii) the disposition of shares of Common Stock acquired upon such exercise.

          (c) If your option is an Incentive Stock Option, by exercising your option you agree that you will notify the Company in writing within fifteen (15) days after the date of any disposition of any of the shares of the Common Stock issued upon exercise of your option that occurs within two (2) years after the date of your option grant or within one (1) year after such shares of Common Stock are transferred upon exercise of your option.

     9. Transferability. Your option is not transferable, except by will or by the laws of descent and distribution, and is exercisable during your life only by you. Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, you may designate a third party who, in the event of your death, shall thereafter be entitled to exercise your option. In addition, you may transfer your option to a trust if you are considered to be the sole beneficial owner (determined under Section 671 of the Code and applicable state law) while the option is held in the trust, provided that you and the trustee enter into transfer and other agreements required by the Company.

     10. Option not a Service Contract. Your option is not an employment or service contract, and nothing in your option shall be deemed to create in any way whatsoever any obligation on your part to continue in the employ of the Company or an Affiliate, or of the Company or an Affiliate to continue your employment. In addition, nothing in your option shall obligate the Company or an Affiliate, their respective stockholders, Boards of Directors, Officers or Employees to continue any relationship that you might have as a Director or Consultant for the Company or an Affiliate.

3.

     11. Withholding Obligations.

          (a) At the time you exercise your option, in whole or in part, or at any time thereafter as requested by the Company, you hereby authorize withholding from payroll and any other amounts payable to you, and otherwise agree to make adequate provision for (including by means of a “cashless exercise” pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board to the extent permitted by the Company), any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or an Affiliate, if any, which arise in connection with the exercise of your option.

          (b) Upon your request and subject to approval by the Company, in its sole discretion, and compliance with any applicable legal conditions or restrictions, the Company may withhold from fully vested shares of Common Stock otherwise issuable to you upon the exercise of your option a number of whole shares of Common Stock having a Fair Market Value, determined by the Company as of the date of exercise, not in excess of the minimum amount required to be withheld by law (or such lower amount as may be necessary to avoid classification of your option as a liability for financial accounting purposes). Any adverse consequences to you arising in connection with such share withholding procedure shall be your sole responsibility.

          (c) You may not exercise your option unless the tax withholding obligations of the Company and/or any Affiliate are satisfied. Accordingly, you may not be able to exercise your option when desired even though your option is vested, and the Company shall have no obligation to issue a certificate for such shares of Common Stock or release such shares of Common Stock from any escrow provided for herein unless such obligations are satisfied.

     12. Notices. Any notices provided for in your option or the Plan shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five (5) days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company.

     13. Governing Plan Document. Your option is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your option, and is further subject to all interpretations, amendments, rules and regulations, which may from time to time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of your option and those of the Plan, the provisions of the Plan shall control.

4.

Veraz Networks, Inc.
2006 Equity Incentive Plan

Option Grant Notice

Veraz Networks, Inc. (the “Company”), pursuant to its 2006 Equity Incentive Plan (the “Plan”), hereby grants to Optionholder an option to purchase the number of shares of the Company’s Common Stock set forth below. This option is subject to all of the terms and conditions as set forth herein and in the Option Agreement, the Plan, and the Notice of Exercise, all of which are attached hereto and incorporated herein in their entirety.

Optionholder:

Date of Grant:

Vesting Commencement Date:

Number of Shares Subject to Option:

Exercise Price (Per Share):

Total Exercise Price:

Expiration Date:

Type of Grant:	o     Incentive Stock Option1                    o     Nonstatutory Stock Option
Exercise Schedule:	[Initial Grant: 1/4th of the shares vest and become exercisable one year after the Vesting Commencement Date; the balance of the shares vest and become exercisable in a series of thirty-six (36) successive equal monthly installments measured from the first anniversary of the Vesting Commencement Date.]
	[Refresher Grant: The shares vest and become exercisable in a series of forty-eight (48) successive equal monthly installments over the four (4)-year period measured from the Vesting Commencement Date.]
Payment:	By one or a combination of the following items (described in the Option Agreement):
	þ     By cash or check
	þ     Pursuant to a Regulation T Program if the Shares are publicly traded
	þ     By delivery of already-owned shares if the Shares are publicly traded
	o     By net exercise2

Additional Terms/Acknowledgements: The undersigned Optionholder acknowledges receipt of, and understands and agrees to, this Option Grant Notice, the Option Agreement, and the Plan. Optionholder further acknowledges that as of the Date of Grant, this Option Grant Notice, the Option Agreement, and the Plan set forth the entire understanding between Optionholder and the Company regarding the acquisition of stock in the Company and supersede all prior oral and written agreements on that subject with the exception of (i) options previously granted and delivered to Optionholder under the Plan, and (ii) the following agreements only:

Other Agreements:

1	If this is an Incentive Stock Option, it (plus other outstanding Incentive Stock Options) cannot be first exercisable for more than $100,000 in value (measured by exercise price) in any calendar year. Any excess over $100,000 is a Nonstatutory Stock Option.
2	An Incentive Stock Option may not be exercised by a net exercise arrangement.

Veraz Networks, Inc.		Optionholder:
By:
	Signature	Signature
Title:		Date:
Date:

Attachments: Option Agreement, 2006 Equity Incentive Plan, and Notice of Exercise

Attachment I

Option Agreement

Attachment II

2006 Equity Incentive Plan

Attachment III

Notice of Exercise

EX-10.17

Exhibit 10.17

Veraz Networks, Inc.

2006 Employee Stock Purchase Plan

Adopted by the Board of Directors: June 29, 2006
Approved by the Stockholders: ___, 2006

1. General.

     (a) The purpose of the Plan is to provide a means by which Employees of the Company and certain designated Related Corporations may be given an opportunity to purchase shares of the Common Stock of the Company.

     (b) The Company, by means of the Plan, seeks to retain the services of such Employees, to secure and retain the services of new Employees and to provide incentives for such persons to exert maximum efforts for the success of the Company and its Related Corporations.

     (c) The Company intends that the Purchase Rights be considered options issued under an Employee Stock Purchase Plan.

2. Administration.

     (a) The Board shall administer the Plan unless and until the Board delegates administration of the Plan to a Committee, as provided in Section 2(c).

     (b) The Board shall have the power, subject to, and within the limitations of, the express provisions of the Plan:

          (i) To determine when and how Purchase Rights to purchase shares of Common Stock shall be granted and the provisions of each Offering of such Purchase Rights (which need not be identical).

          (ii) To designate from time to time which Related Corporations of the Company shall be eligible to participate in the Plan.

          (iii) To construe and interpret the Plan and Purchase Rights, and to establish, amend and revoke rules and regulations for its administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan, in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective.

          (iv) To adopt such procedures and sub-plans as are necessary or appropriate to permit participation in the Plan by Employees who are foreign nationals or employed outside the United States.

          (v) To amend the Plan as provided in Section 13.

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          (vi) Generally, to exercise such powers and to perform such acts as it deems necessary or expedient to promote the best interests of the Company and its Related Corporations and to carry out the intent that the Plan be treated as an Employee Stock Purchase Plan.

     (c) The Board may delegate some or all of the administration of the Plan to a Committee or Committees. If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board that have been delegated to the Committee, including the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board shall thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may retain the authority to concurrently administer the Plan with the Committee and may, at any time, revest in the Board some or all of the powers previously delegated.

     (d) All determinations, interpretations and constructions made by the Board in good faith shall not be subject to review by any person and shall be final, binding and conclusive on all persons.

3. Shares of Common Stock Subject to the Plan.

     (a) Subject to the provisions of Section 12(a) relating to Capitalization Adjustments, the shares of Common Stock that may be sold pursuant to Purchase Rights shall not exceed in the aggregate seven hundred fifty thousand (750,000) (pre-split) shares of Common Stock. In addition, the number of shares of Common Stock available for issuance under the Plan shall automatically increase on January 1st of each year, commencing in 2007 and ending on (and including) January 1, 2016, in an amount equal to the lesser of (i) one percent (1%) of the total number of shares of Common Stock outstanding on December 31st of the preceding calendar year, or (ii) one million five hundred thousand (1,500,000) (pre-split) shares of Common Stock. Notwithstanding the foregoing, the Board may act prior to the first day of any calendar year, to provide that there shall be no increase in the share reserve for such calendar year or that the increase in the share reserve for such calendar year shall be a lesser number of shares of Common Stock than would otherwise occur pursuant to the preceding sentence.

     (b) If any Purchase Right granted under the Plan shall for any reason terminate without having been exercised, the shares of Common Stock not purchased under such Purchase Right shall again become available for issuance under the Plan.

     (c) The stock purchasable under the Plan shall be shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Company on the open market.

4. Grant of Purchase Rights; Offering.

     (a) The Board may from time to time grant or provide for the grant of Purchase Rights to purchase shares of Common Stock under the Plan to Eligible Employees in an Offering (consisting of one or more Purchase Periods) on an Offering Date or Offering Dates selected by the Board. Each Offering shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate, which shall comply with the requirement of Section 423(b)(5)

2.

of the Code that all Employees granted Purchase Rights shall have the same rights and privileges. The terms and conditions of an Offering shall be incorporated by reference into the Plan and treated as part of the Plan. The provisions of separate Offerings need not be identical, but each Offering shall include (through incorporation of the provisions of this Plan by reference in the document comprising the Offering or otherwise) the period during which the Offering shall be effective, which period shall not exceed twenty-seven (27) months beginning with the Offering Date, and the substance of the provisions contained in Sections 5 through 8, inclusive.

     (b) If a Participant has more than one Purchase Right outstanding under the Plan, unless he or she otherwise indicates in agreements or notices delivered hereunder: (i) each agreement or notice delivered by that Participant shall be deemed to apply to all of his or her Purchase Rights under the Plan, and (ii) a Purchase Right with a lower exercise price (or an earlier-granted Purchase Right, if different Purchase Rights have identical exercise prices) shall be exercised to the fullest possible extent before a Purchase Right with a higher exercise price (or a later-granted Purchase Right if different Purchase Rights have identical exercise prices) shall be exercised.

     (c) The Board shall have the discretion to structure an Offering so that if the Fair Market Value of the shares of Common Stock on the first day of a new Purchase Period within that Offering is less than or equal to the Fair Market Value of the shares of Common Stock on the Offering Date, then (i) that Offering shall terminate immediately, and (ii) the Participants in such terminated Offering shall be automatically enrolled in a new Offering beginning on the first day of such new Purchase Period.

5. Eligibility.

     (a) Purchase Rights may be granted only to Employees of the Company or, as the Board may designate as provided in Section 2(b), to Employees of a Related Corporation. Except as provided in Section 5(b), an Employee shall not be eligible to be granted Purchase Rights under the Plan unless, on the Offering Date, such Employee has been in the employ of the Company or the Related Corporation, as the case may be, for such continuous period preceding such Offering Date as the Board may require, but in no event shall the required period of continuous employment be greater than two (2) years. In addition, the Board may provide that no Employee shall be eligible to be granted Purchase Rights under the Plan unless, on the Offering Date, such Employee’s customary employment with the Company or the Related Corporation is more than twenty (20) hours per week and more than five (5) months per calendar year or such other criteria as the Board may determine consistent with Section 423 of the Code.

     (b) The Board may provide that each person who, during the course of an Offering, first becomes an Eligible Employee shall, on a date or dates specified in the Offering which coincides with the day on which such person becomes an Eligible Employee or which occurs thereafter, receive a Purchase Right under that Offering, which Purchase Right shall thereafter be deemed to be a part of that Offering. Such Purchase Right shall have the same characteristics as any Purchase Rights originally granted under that Offering, as described herein, except that:

3.

          (i) the date on which such Purchase Right is granted shall be the “Offering Date” of such Purchase Right for all purposes, including determination of the exercise price of such Purchase Right;

          (ii) the period of the Offering with respect to such Purchase Right shall begin on its Offering Date and end coincident with the end of such Offering; and

          (iii) the Board may provide that if such person first becomes an Eligible Employee within a specified period of time before the end of the Offering, he or she shall not receive any Purchase Right under that Offering.

     (c) No Employee shall be eligible for the grant of any Purchase Rights under the Plan if, immediately after any such Purchase Rights are granted, such Employee owns stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or of any Related Corporation. For purposes of this Section 5(c), the rules of Section 424(d) of the Code shall apply in determining the stock ownership of any Employee, and stock which such Employee may purchase under all outstanding Purchase Rights and options shall be treated as stock owned by such Employee.

     (d) As specified by Section 423(b)(8) of the Code, an Eligible Employee may be granted Purchase Rights under the Plan only if such Purchase Rights, together with any other rights granted under all Employee Stock Purchase Plans of the Company and any Related Corporations, do not permit such Eligible Employee’s rights to purchase stock of the Company or any Related Corporation to accrue at a rate which exceeds twenty five thousand dollars ($25,000) of Fair Market Value of such stock (determined at the time such rights are granted, and which, with respect to the Plan, shall be determined as of their respective Offering Dates) for each calendar year in which such rights are outstanding at any time.

     (e) Officers of the Company and any designated Related Corporation, if they are otherwise Eligible Employees, shall be eligible to participate in Offerings under the Plan. Notwithstanding the foregoing, the Board may provide in an Offering that Employees who are highly compensated Employees within the meaning of Section 423(b)(4)(D) of the Code shall not be eligible to participate.

6. Purchase Rights; Purchase Price.

     (a) On each Offering Date, each Eligible Employee, pursuant to an Offering made under the Plan, shall be granted a Purchase Right to purchase up to that number of shares of Common Stock purchasable either with a percentage or with a maximum dollar amount, as designated by the Board, but in either case not exceeding fifteen percent (15%) of such Employee’s earnings (as defined by the Board in each Offering) during the period that begins on the Offering Date (or such later date as the Board determines for a particular Offering) and ends on the date stated in the Offering, which date shall be no later than the end of the Offering.

     (b) The Board shall establish one (1) or more Purchase Dates during an Offering as of which Purchase Rights granted pursuant to that Offering shall be exercised and purchases of shares of Common Stock shall be carried out in accordance with such Offering.

4.

     (c) In connection with each Offering made under the Plan, the Board may specify a maximum number of shares of Common Stock that may be purchased by any Participant on any Purchase Date during such Offering. In connection with each Offering made under the Plan, the Board may specify a maximum aggregate number of shares of Common Stock that may be purchased by all Participants pursuant to such Offering. In addition, in connection with each Offering that contains more than one Purchase Date, the Board may specify a maximum aggregate number of shares of Common Stock that may be purchased by all Participants on any Purchase Date under the Offering. If the aggregate purchase of shares of Common Stock issuable upon exercise of Purchase Rights granted under the Offering would exceed any such maximum aggregate number, then, in the absence of any Board action otherwise, a pro rata allocation of the shares of Common Stock available shall be made in as nearly a uniform manner as shall be practicable and equitable.

     (d) The purchase price of shares of Common Stock acquired pursuant to Purchase Rights shall be not less than the lesser of:

          (i) an amount equal to eighty-five percent (85%) of the Fair Market Value of the shares of Common Stock on the Offering Date; or

          (ii) an amount equal to eighty-five percent (85%) of the Fair Market Value of the shares of Common Stock on the applicable Purchase Date.

7. Participation; Withdrawal; Termination.

     (a) A Participant may elect to authorize payroll deductions pursuant to an Offering under the Plan by completing and delivering to the Company, within the time specified in the Offering, an enrollment form (in such form as the Company may provide). Each such enrollment form shall authorize an amount of Contributions expressed as a percentage of the submitting Participant’s earnings (as defined in each Offering) during the Offering (not to exceed the maximum percentage specified by the Board). Each Participant’s Contributions shall be credited to a bookkeeping account for such Participant under the Plan and shall be deposited with the general funds of the Company except where applicable law requires that Contributions be deposited with a third party. To the extent provided in the Offering, a Participant may begin such Contributions after the beginning of the Offering. To the extent provided in the Offering, a Participant may thereafter reduce (including to zero) or increase his or her Contributions. To the extent specifically provided in the Offering, in addition to making Contributions by payroll deductions, a Participant may make Contributions through the payment by cash or check prior to each Purchase Date of the Offering.

     (b) During an Offering, a Participant may cease making Contributions and withdraw from the Offering by delivering to the Company a notice of withdrawal in such form as the Company may provide. Such withdrawal may be elected at any time prior to the end of the Offering, except as provided otherwise in the Offering. Upon such withdrawal from the Offering by a Participant, the Company shall distribute to such Participant all of his or her accumulated Contributions (reduced to the extent, if any, such Contributions have been used to acquire shares of Common Stock for the Participant) under the Offering, and such Participant’s Purchase Right in that Offering shall thereupon terminate. A Participant’s withdrawal from an Offering shall

5.

have no effect upon such Participant’s eligibility to participate in any other Offerings under the Plan, but such Participant shall be required to deliver a new enrollment form in order to participate in subsequent Offerings.

     (c) Purchase Rights granted pursuant to any Offering under the Plan shall terminate immediately upon a Participant ceasing to be an Employee for any reason or for no reason (subject to any post-employment participation period required by law) or other lack of eligibility. The Company shall distribute to such terminated or otherwise ineligible Employee all of his or her accumulated Contributions (reduced to the extent, if any, such Contributions have been used to acquire shares of Common Stock for the terminated or otherwise ineligible Employee) under the Offering.

     (d) Purchase Rights shall not be transferable by a Participant except by will, the laws of descent and distribution, or by a beneficiary designation as provided in Section 10. During a Participant’s lifetime, Purchase Rights shall be exercisable only by such Participant.

     (e) Unless otherwise specified in an Offering, the Company shall have no obligation to pay interest on Contributions.

8. Exercise of Purchase Rights.

     (a) On each Purchase Date during an Offering, each Participant’s accumulated Contributions shall be applied to the purchase of shares of Common Stock up to the maximum number of shares of Common Stock permitted pursuant to the terms of the Plan and the applicable Offering, at the purchase price specified in the Offering. No fractional shares shall be issued upon the exercise of Purchase Rights unless specifically provided for in the Offering.

     (b) If any amount of accumulated Contributions remains in a Participant’s account after the purchase of shares of Common Stock and such remaining amount is less than the amount required to purchase one share of Common Stock on the final Purchase Date of an Offering, then such remaining amount shall be held in such Participant’s account for the purchase of shares of Common Stock under the next Offering under the Plan, unless such Participant withdraws from such next Offering, as provided in Section 7(b), or is not eligible to participate in such Offering, as provided in Section 5, in which case such amount shall be distributed to such Participant after the final Purchase Date, without interest. If the amount of Contributions remaining in a Participant’s account after the purchase of shares of Common Stock is at least equal to the amount required to purchase one (1) whole share of Common Stock on the final Purchase Date of the Offering, then such remaining amount shall be distributed in full to such Participant at the end of the Offering without interest.

     (c) No Purchase Rights may be exercised to any extent unless the shares of Common Stock to be issued upon such exercise under the Plan are covered by an effective registration statement pursuant to the Securities Act and the Plan is in material compliance with all applicable federal, state, foreign and other securities and other laws applicable to the Plan. If on a Purchase Date during any Offering hereunder the shares of Common Stock are not so registered or the Plan is not in such compliance, no Purchase Rights or any Offering shall be exercised on such Purchase Date, and the Purchase Date shall be delayed until the shares of

6.

Common Stock are subject to such an effective registration statement and the Plan is in such compliance, except that the Purchase Date shall not be delayed more than twelve (12) months and the Purchase Date shall in no event be more than twenty-seven (27) months from the Offering Date. If, on the Purchase Date under any Offering hereunder, as delayed to the maximum extent permissible, the shares of Common Stock are not registered and the Plan is not in such compliance, no Purchase Rights or any Offering shall be exercised and all Contributions accumulated during the Offering (reduced to the extent, if any, such Contributions have been used to acquire shares of Common Stock) shall be distributed to the Participants without interest.

9. Covenants of the Company.

     The Company shall seek to obtain from each federal, state, foreign or other regulatory commission or agency having jurisdiction over the Plan such authority as may be required to issue and sell shares of Common Stock upon exercise of the Purchase Rights. If, after commercially reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority that counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell Common Stock upon exercise of such Purchase Rights unless and until such authority is obtained.

10. Designation of Beneficiary.

     (a) A Participant may file a written designation of a beneficiary who is to receive any shares of Common Stock and/or cash, if any, from the Participant’s account under the Plan in the event of such Participant’s death subsequent to the end of an Offering but prior to delivery to the Participant of such shares of Common Stock or cash. In addition, a Participant may file a written designation of a beneficiary who is to receive any cash from the Participant’s account under the Plan in the event of such Participant’s death during an Offering. Any such designation shall be on a form provided by or otherwise acceptable to the Company.

     (b) The Participant may change such designation of beneficiary at any time by written notice to the Company. In the event of the death of a Participant and in the absence of a beneficiary validly designated under the Plan who is living at the time of such Participant’s death, the Company shall deliver such shares of Common Stock and/or cash to the executor or administrator of the estate of the Participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its sole discretion, may deliver such shares of Common Stock and/or cash to the spouse or to any one or more dependents or relatives of the Participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate.

11. Miscellaneous Provisions.

     (a) The Plan and Offering do not constitute an employment contract. Nothing in the Plan or in the Offering shall in any way alter the at will nature of a Participant’s employment or be deemed to create in any way whatsoever any obligation on the part of any Participant to continue in the employ of the Company or a Related Corporation, or on the part of the Company or a Related Corporation to continue the employment of a Participant.

7.

     (b) The provisions of the Plan shall be governed by the laws of the State of Delaware without resort to that state’s conflicts of laws rules.

     (c) Proceeds from the sale of shares of Common Stock pursuant to Purchase Rights shall constitute general funds of the Company.

     (d) A Participant shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to, shares of Common Stock subject to Purchase Rights unless and until the Participant’s shares of Common Stock acquired upon exercise of Purchase Rights are recorded in the books of the Company (or its transfer agent).

12. Adjustments upon Changes in Common Stock; Corporate Transactions.

     (a) In the event of a Capitalization Adjustment, the Board shall appropriately and proportionately adjust: (i) the class(es) and maximum number of securities subject to the Plan pursuant to Section 3(a), (ii) the class(es) and maximum number of securities by which the share reserve is to increase automatically each year pursuant to Section 3(a), (iii) the class(es) and number of securities subject to outstanding Purchase Rights, and (iv) the class(es) and number of securities imposed by purchase limits under each ongoing Offering. The Board shall make such adjustments, and its determination shall be final, binding and conclusive.

     (b) In the event of a Corporate Transaction, then: (i) any surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company) may assume or continue Purchase Rights outstanding under the Plan or may substitute similar rights (including a right to acquire the same consideration paid to the stockholders in the Corporate Transaction) for those outstanding under the Plan, or (ii) if any surviving or acquiring corporation (or its parent company) does not assume or continue such Purchase Rights or does not substitute similar rights for Purchase Rights outstanding under the Plan, then the Participants’ accumulated Contributions shall be used to purchase shares of Common Stock within ten (10) business days prior to the Corporate Transaction under any ongoing Offerings, and the Participants’ Purchase Rights under the ongoing Offerings shall terminate immediately after such purchase.

13. Amendment of the Plan.

     (a) The Board at any time, and from time to time, may amend the Plan. However, except as provided in Section 12(a) relating to Capitalization Adjustments and except as to amendments solely to benefit the administration of the Plan, to take account of a change in legislation or to obtain or maintain favorable tax, exchange control or regulatory treatment for Participants or the Company or any Related Corporation, no amendment shall be effective unless approved by the stockholders of the Company to the extent stockholder approval is necessary for the Plan to satisfy the requirements of Section 423 of the Code or other applicable laws or regulations.

     (b) It is expressly contemplated that the Board may amend the Plan in any respect the Board deems necessary or advisable to provide Employees with the maximum benefits provided or to be provided under the provisions of the Code and the regulations promulgated thereunder

8.

relating to Employee Stock Purchase Plans and/or to bring the Plan and/or Purchase Rights into compliance therewith.

     (c) The rights and obligations under any Purchase Rights granted before amendment of the Plan shall not be impaired by any amendment of the Plan except: (i) with the consent of the person to whom such Purchase Rights were granted, or (ii) as necessary to comply with any laws or governmental regulations (including, without limitation, the provisions of the Code and the regulations promulgated thereunder relating to Employee Stock Purchase Plans).

14. Termination or Suspension of the Plan.

     (a) The Board may suspend or terminate the Plan at any time. Unless sooner terminated, the Plan shall terminate at the time that all of the shares of Common Stock reserved for issuance under the Plan, as increased and/or adjusted from time to time, have been issued under the terms of the Plan. No Purchase Rights may be granted under the Plan while the Plan is suspended or after it is terminated.

     (b) Any benefits, privileges, entitlements and obligations under any Purchase Rights while the Plan is in effect shall not be impaired by suspension or termination of the Plan except (i) as expressly provided in the Plan or with the consent of the person to whom such Purchase Rights were granted, (ii) as necessary to comply with any laws, regulations or listing requirements, or (iii) as necessary to ensure that the Plan and/or Purchase Rights comply with the requirements of Section 423 of the Code.

15. Effective Date of Plan.

     The Plan shall become effective on the IPO Date, but no Purchase Rights shall be exercised unless and until the Plan has been approved by the stockholders of the Company, which approval shall be within twelve (12) months before or after the date the Plan is adopted by the Board.

16. Definitions.

     As used in the Plan, the following definitions shall apply to the capitalized terms indicated below:

     (a) “Board” means the Board of Directors of the Company.

     (b) “Capitalization Adjustment” means any change that is made in, or other events that occur with respect to, the Common Stock subject to the Plan or subject to any Purchase Right after the Effective Date without the receipt of consideration by the Company (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company). Notwithstanding the foregoing, the conversion of any convertible securities of the Company shall not be treated as a transaction “without receipt of consideration” by the Company.

9.

     (c) “Code” means the Internal Revenue Code of 1986, as amended.

     (d) “Committee” means a committee of one (1) or more members of the Board to whom authority has been delegated by the Board in accordance with Section 2(c).

     (e) “Common Stock” means the common stock of the Company.

     (f) “Company” means Veraz Networks, Inc., a Delaware corporation.

     (g) “Contributions” means the payroll deductions and other additional payments specifically provided for in the Offering, that a Participant contributes to fund the exercise of a Purchase Right. A Participant may make additional payments into his or her account, if specifically provided for in the Offering, and then only if the Participant has not already had the maximum permitted amount withheld during the Offering through payroll deductions.

     (h) “Corporate Transaction” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:

          (i) a sale or other disposition of all or substantially all, as determined by the Board in its sole discretion, of the consolidated assets of the Company and its Subsidiaries;

          (ii) a sale or other disposition of at least ninety percent (90%) of the outstanding securities of the Company;

          (iii) the consummation of a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or

          (iv) the consummation of a merger, consolidation or similar transaction following which the Company is the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other property, whether in the form of securities, cash or otherwise.

     (i) “Director” means a member of the Board.

     (j) “Eligible Employee” means an Employee who meets the requirements set forth in the Offering for eligibility to participate in the Offering, provided that such Employee also meets the requirements for eligibility to participate set forth in the Plan.

     (k) “Employee” means any person, including Officers and Directors, who is employed for purposes of Section 423(b)(4) of the Code by the Company or a Related Corporation. However, service solely as a Director, or payment of a fee for such services, shall not cause a Director to be considered an “Employee” for purposes of the Plan.

     (l) “Employee Stock Purchase Plan” means a plan that grants Purchase Rights intended to be options issued under an “employee stock purchase plan,” as that term is defined in Section 423(b) of the Code.

10.

     (m) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

     (n) “Fair Market Value” means, as of any date, the value of the Common Stock determined as follows:

          (i) If the Common Stock is listed on any established stock exchange or traded on the Nasdaq Global Select Market or the Nasdaq Global Market (formerly the Nasdaq National Market), the Fair Market Value of a share of Common Stock shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange (or the exchange or market with the greatest volume of trading in the Common Stock) on the date of determination, as reported in The Wall Street Journal or such other source as the Board deems reliable.

          (ii) If the Common Stock is listed or traded on the Nasdaq Capital Market (formerly the Nasdaq Small Cap Market), the Fair Market Value of a share of Common Stock shall be the mean between the bid and asked prices for the Common Stock on the date of determination, as reported in The Wall Street Journal or such other source as the Board deems reliable. Unless otherwise provided by the Board, if there is no closing sales price (or closing bid if no sales were reported) for the Common Stock on the date of determination, then the Fair Market Value shall be the mean between the bid and asked prices for the Common Stock on the last preceding date for which such quotation exists.

          (iii) In the absence of such markets for the Common Stock, the Fair Market Value shall be determined by the Board in good faith.

     (o) “IPO Date” means the date of the underwriting agreement between the Company and the underwriter(s) managing the initial public offering of the Common Stock, pursuant to which the Common Stock is priced for the initial public offering.

     (p) “Offering” means the grant of Purchase Rights to purchase shares of Common Stock under the Plan to Eligible Employees.

     (q) “Offering Date” means a date selected by the Board for an Offering to commence.

     (r) “Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

     (s) “Participant” means an Eligible Employee who holds an outstanding Purchase Right granted pursuant to the Plan.

     (t) “Plan” means this Veraz Networks, Inc. 2006 Employee Stock Purchase Plan.

     (u) “Purchase Date” means one or more dates during an Offering established by the Board on which Purchase Rights shall be exercised and as of which purchases of shares of Common Stock shall be carried out in accordance with such Offering.

11.

     (v) “Purchase Period” means a period of time specified within an Offering beginning on the Offering Date or on the next day following a Purchase Date within an Offering and ending on a Purchase Date. An Offering may consist of one or more Purchase Periods.

     (w) “Purchase Right” means an option to purchase shares of Common Stock granted pursuant to the Plan.

     (x) “Related Corporation” means any “parent corporation” or “subsidiary corporation” of the Company whether now or subsequently established, as those terms are defined in Sections 424(e) and 424(f), respectively, of the Code.

     (y) “Securities Act” means the Securities Act of 1933, as amended.

     (z) “Trading Day” means any day on which the exchange(s) or market(s) on which shares of Common Stock are listed, whether it be an established stock exchange, the Nasdaq Global Select Market or the Nasdaq Global Market (formerly the Nasdaq National Market), the Nasdaq Capital Market (formerly the Nasdaq Small Cap Market), or otherwise, is open for trading.

12.

EX-10.18

Exhibit 10.18

November 17, 2004

Doug Sabella

Re:     Offer of Employment with Veraz Networks, Inc.

Dear Doug:

Veraz Networks, Inc. (the “Company”) is pleased to offer you employment as the Company’s President and Chief Executive Officer on the terms and conditions set forth in this letter agreement (the “Agreement”). If you agree to the terms and conditions set forth herein, please initial the bottom of each page and sign where indicated below. Your employment with the Company pursuant to this Agreement will begin on December 1, 2004 (the “Commencement Date”).

     1. Duties. You will be responsible for all aspects of the Company and shall perform such duties as are ordinary, customary and necessary in your role as the President and Chief Executive Officer. You will report directly to the Board of Directors of the Company (the “Board”). You shall devote your best efforts and your full business time, skill and attention to the performance of your duties. You will also be expected to adhere to the general employment policies and practices of the Company that may be in effect from time to time, except that when the terms of this Agreement conflict with the Company’s general employment policies or practices, this Agreement will control.

     2. Compensation. You will be paid an annual base salary of $250,000 per year, less applicable deductions and withholdings, to be paid semi-monthly in accordance with the Company’s payroll practices, as may be in effect from time to time.

     3. Benefits. The Company will provide you with medical, dental, life, supplemental life, disability benefits, sick leave, vacation and many other Company-sponsored programs on the same terms and conditions as such benefits are generally available to its executive officers. The Company may, from time to time, change these benefits. Additional information regarding these benefits is available for your review upon request.

     4. Stock Option. Upon Board approval, the Company will grant you a stock option to purchase a number of shares of the Company’s common stock (the “Shares”) that is equal to four percent (4%) of the capital stock of the Company calculated on a fully-diluted basis, which calculation shall mean the number of outstanding shares of the Company’s common stock, the number of outstanding shares of the Company’s preferred stock, and the number of shares issuable upon the exercise of all outstanding options and warrants or available for issuance under the Company’s equity incentive plans. The Shares shall be issued pursuant to the terms and conditions of the Company’s 2001 Equity Incentive Plan (the “Plan”) and the per share exercise

Initialed:       DS       

Doug Sabella
January 10, 2003
Page 2

price shall be the fair market value of the Company’s common stock on the date of grant as determined by the Board. The Shares shall vest over a four-year period, with one quarter (1/4) of the Shares vesting on the one year anniversary of your Commencement Date, and the remaining portion of the Shares vesting equally over the next 36 months of continuous service thereafter. Except as otherwise set forth herein, all terms, conditions and limitations of the Shares shall be governed by the Plan and related documents.

     5. Performance Bonuses. You will be eligible to receive an annual bonus of up to forty percent (40%) of your annual base salary which shall become payable upon the achievement of certain milestones mutually agreed upon by you and the Board. Such milestones shall be outlined in writing and agreed upon within forty-five (45) days of your Commencement Date.

     6. Board Seat. The Company shall cause you to be elected or appointed to the Board. You agree to immediately resign your position on the Board upon the termination of your employment as Chief Executive Officer for any reason, or upon the Company’s earlier request.

     7. Change of Control Termination. Subject to the terms and conditions set forth in this paragraph 7, if your employment with the Company is terminated by the Company without Cause (as defined herein) or you resign for Good Reason (as defined herein), and either such event occurs within twelve (12) months after a Change of Control (as defined herein), then, as of the date of termination, the vesting of one hundred percent (100%) of the Shares that remain subject to vesting shall be accelerated in full.

          (a) Change of Control. “Change of Control” shall mean the consummation of any one of the following events: (a) a sale, lease or other disposition of all or substantially all of the assets of the Company; (b) a consolidation or merger of the Company with or into any other corporation or other entity or person, or any other corporate reorganization, in which the shareholders of the Company immediately prior to such consolidation, merger or reorganization, own less than 50% of the Company’s outstanding voting power of the surviving entity (or its parent) following the consolidation, merger or reorganization or (c) any transaction (or series of related transactions involving a person or entity, or a group of affiliated persons or entities) in which in excess of fifty percent (50%) of the Company’s outstanding voting power is transferred (excluding (i) any consolidation or merger effected exclusively to change the domicile of the Company, or (ii) any transaction or series of transactions principally for bona fide equity financing purposes in which cash is received by the Company or any successor or indebtedness of the Company is cancelled or converted or a combination thereof).

          (b) Cause. For purposes of this Agreement, “Cause” shall mean one or more of the following: (a) Executive’s conviction of a felony; (b) Executive commission of any act of fraud with respect to the Company; (c) any intentional misconduct by Executive that has a materially adverse effect upon the Company’s business that is not cured by Executive within thirty (30) days of written notice given by the Company identifying such misconduct; (d) a breach by Executive of any of Executive’s fiduciary obligations as an officer of the Company that has a materially adverse effect upon the Company’s business that is not cured by Executive

Initialed:       DS       

Doug Sabella
January 10, 2003
Page 3

within thirty (30) days of written notice given by the Company identifying such breach; (e) Executive’s willful misconduct or gross negligence in performance of his duties hereunder, including Executive’s refusal to comply in any material respect with the legal directives of the Board so long as such directives are not inconsistent with Executive’s position and duties, that are not cured by Executive within thirty (30) days of written notice given by the Company identifying such misconduct or negligence.

          (c) Good Reason. For the purposes of this Agreement, “Good Reason” shall mean any one of the following events which occurs on or after the commencement of Executive’s employment without Executive’s consent: (i) any reduction of Executive’s then current annual base salary; (ii) any material diminution of the Executive’s duties, responsibilities, or authority to a level below that of an officer of the Company, excluding for this purpose (1) an isolated or inadvertent action not taken in bad faith which is remedied by the Company immediately after notice thereof is given by the Executive, and (2) any change in Executive’s title, duties, responsibilities or authority if Executive is given or retains other officer level duties within the Company; or (iii) any requirement that the Executive relocate to a work site more than twenty five (25) miles from the Company’s current location.

          (d) Release Requirements. To receive the Change of Control accelerated vesting benefits set forth above, you must (i) first sign and deliver to the Company a general release of claims, in a form acceptable to the Company, within sixty (60) days of the date your employment with the Company ends; and (ii) not be in breach of the Proprietary Information and Inventions Agreement at the time of the receipt of such benefits.

     8. Severance

          (a) Termination without Cause or Resignation for Good Reason. Subject to the terms and conditions set forth in this paragraph 8, in the event that the Company terminates you without Cause or you resign for Good Reason, the Company shall provide you with: (i) a lump sum payment equal to six (6) months of your base salary then in effect; and (ii) the payment of any and all bonuses that are due or payable at the time of such termination.

          (b) Release Requirements. To receive the Severance benefits set forth in this Section 8, you must (i) first sign and deliver to the Company a general release of claims, in a form acceptable to the Company, within sixty (60) days of the date your employment with the Company ends; and (ii) not be in breach of the Proprietary Information and Inventions Agreement at the time of such payment.

     9. Confidentiality Obligations.

          (a) Proprietary Information. As the President and Chief Executive Officer of the Company, you will be privy to extremely sensitive, confidential and valuable commercial information and trade secrets belonging to the Company, the use and disclosure of which information and secrets would greatly harm the Company. Accordingly, as a condition of your

Initialed:       DS       

Doug Sabella
January 10, 2003
Page 4

employment, you must sign and abide by the Company’s Employee Proprietary Information and Inventions Agreement, a copy of which is attached hereto as Exhibit A.

          (b) Exclusive Property. You agree that all business procured by you and all Company-related business opportunities and plans made known to you while you are employed by the Company, shall remain the permanent and exclusive property of the Company.

          (c) No Adverse Business Activities. Throughout the term of your employment with the Company, you agree not to, directly or indirectly, without the prior written consent of the Company own, manage, operate, join, control, finance or participate in the ownership, management, operation, control or financing of, or be connected as an officer, director, executive, partner, employee, principal, agent, representative, consultant, licensor, licensee or otherwise with, any business or enterprise engaged in any business which is competitive with or which is reasonably anticipated to be competitive with the business of the Company (“Competitive Activity”). Notwithstanding the above, you will not be deemed to be engaged directly or indirectly in any Competitive Activity if you participate in any such business solely as a passive investor in up to one percent (1%) of the equity securities of a company or partnership, the securities of which are publicly traded. During your employment with the Company, you agree not to acquire, assume or participate in, directly or indirectly, any position, investment or interest known to be adverse or antagonistic to the Company, its business or prospects, financial or otherwise.

          (d) Nonsolicitation. Throughout your employment with the Company and for one (1) year thereafter, you agree not to, without first obtaining the prior written approval of the Company, directly or indirectly solicit, induce, persuade or entice, or attempt to do so, or otherwise cause, or attempt to cause, any employee, independent contractor, customer or prospective customer of the Company to terminate his, her or its employment, contracting or other business relationship with the Company to become an employee or independent contractor to, or customer of, any other person or entity.

     10. At-Will Employment. Your employment with Company will be “at-will.” This means that, subject to complying with any severance or vesting acceleration provisions set forth herein, either you or Company may terminate your employment at any time, with or without Cause or Good Reason, and with or without advance notice.

     11. Arbitration. Any dispute, controversy or claim arising out of or in respect of the terms of this Agreement (or its validity, interpretation or enforcement), the subject matter hereof or your employment relationship with the Company shall be settled by binding arbitration in the State of California before JAMS, in accordance with JAMS’ then-governing rules and procedures applicable to employment disputes. The JAMS arbitrator shall issue a written award setting forth his or her decision and the basis therefor. The Company shall bear all arbitration forum costs. Notwithstanding the foregoing, you or the Company shall each be free to seek injunctive relief in court if necessary to prevent irreparable harm pending the completion of any arbitration.

Initialed:DS

Doug Sabella
January 10, 2003
Page 5

     12. Miscellaneous. This Agreement is the complete and exclusive statement of all of the terms and conditions of your employment with the Company, and supercedes and replaces any and all prior agreements or representations with regard to the subject matter hereof, whether written or oral. It is entered into without reliance on any promise or representation other than those expressly contained herein, and it cannot be modified, amended or extended except in a writing signed by you and a duly authorized member of the Board. This Agreement is intended to bind and inure to the benefit of and be enforceable by you and the Company, and our respective successors, assigns, heirs, executors and administrators, except that you may not assign any of your duties or rights hereunder without the express written consent of the Company. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced as if such invalid, illegal or unenforceable provisions had never been contained herein. This Agreement and the terms of your employment with the Company shall be governed in all aspects by the laws of the State of California.

As required by law, this offer is subject to satisfactory proof of your right to work in the United States, and satisfactory completion of a Company-required background check.

Initialed:DS

Doug Sabella
January 10, 2003
Page 6

We look forward to having you join us. If you wish to accept this offer under the terms and conditions described above, please sign and date this letter and return it to me. If you have any questions about this Agreement, please do not hesitate to call me to discuss our offer at your earliest convenience.

Best regards,

Veraz Networks, Inc.

/s/ Promod Haque Promod Haque

Chairman of the Board of Directors

Accepted and agreed:

/s/ Doug Sabella Doug Sabella

Date: 11/18/04

Initialed:  DS  

EX-10.19

Exhibit 10.19

     April 21, 2006

Mr. Doug Sabella
C/O Veraz Networks, Inc.
926 Rock Avenue, Suite 20
San Jose, CA 95131

Re: Amendment to Offer of Employment with Veraz Networks, Inc. dated November 17, 2004

Dear Doug:

Veraz Networks, Inc. (the “Company”) is pleased to offer you the following amendment to your employment letter dated November 17, 2004 (“Employment Agreement”). Except as otherwise set forth herein, the terms and conditions of the Employment Agreement remain in full force and effect without any modification.

Commencing March 1, 2006, the annual base salary set forth in Paragraph 2 of the Employment Agreement shall be deemed to be $280,000.

As of March 1, 2006, the following language contained in Paragraph 8(a) of the Employment Agreement:

“in the event that the Company terminates you without Cause or your resign for Good Reason, the Company shall provide you with: (i) a lump sum payment equal to six (6) months of your base salary then in effect”

shall be amended to read as follows:

“in the event that the Company terminates you without Cause or your resign for Good Reason, the Company shall provide you with: (i) a lump sum payment equal to twelve (12) months of your base salary then in effect.”

If you agree to the terms and conditions set forth herein, please sign where indicated below.

Best Regards

Veraz Networks, Inc.

/s/ Denise Pierre Denise Pierre

Vice President, Global Human Resources

Accepted and agreed:

/s/ Doug Sabella Doug Sabella

Date: 4/21/06

1.

EX-10.20

Exhibit 10.20

SOFTSWITCH ENTERPRISES, INC.

EMPLOYMENT AGREEMENT

     This Employment Agreement (“Agreement”) is entered into as of November 20, 2001, by and between Amit Chawla (“Executive”) and Softswitch Enterprises, Inc. (the “Company”), a Delaware corporation.

     Whereas, the Company desires to employ Executive to provide personal services to the Company, and wishes to provide Executive with certain compensation and benefits in return for his services;

     Whereas, Executive wishes to be employed by the Company and to provide personal services to the Company in return for certain compensation and benefits;

     Now, Therefore, in consideration of the mutual promises and covenants contained herein, it is hereby agreed by and between the parties hereto as follows:

     1. Employment by the Company.

          1.1 Title and Responsibilities. Subject to the terms set forth herein, the Company agrees to employ Executive in the position of Chief Executive Officer and Vice President of Marketing, and Executive hereby accepts such employment effective November 20, 2001 (the “Effective Date”). During his employment with the Company, Executive will devote his best efforts and substantially all of his business time and attention (except for vacation periods and reasonable periods of illness or other incapacity permitted by the Company’s general employment policies) to the business of the Company.

          1.2 Executive Position. Executive will serve in an executive capacity and shall perform the duties of Executive’s office as required by the Board of Directors of the Company (the “Board”) and the Chief Executive Officer of the Company (the “CEO”).

          1.3 Company Employment Policies. The employment relationship between the parties shall be governed by the general employment policies and procedures of the Company, including those relating to the protection of confidential information and assignment of inventions, except that when the terms of this Agreement differ from or are in conflict with the Company’s general employment policies or procedures, this Agreement shall control.

     2. Compensation.

          2.1 Salary. Executive shall receive for services to be rendered hereunder a base salary at an annualized rate of $171,000, payable on a bi-monthly basis

1.

($7,125 per pay period). Executive will be considered for annual increases in base salary in accordance with Company policy and subject to review and approval by the Board.

          2.2 Incentive Bonus. Executive shall also be eligible to participate in the Company’s executive level incentive bonus plan throughout the duration of Executive’s employment with the Company. All bonus compensation shall be subject to applicable payroll withholdings and employment taxes. The amount of Executive’s bonus will be determined by Executive’s performance with respect to certain measurable goals and performance objectives established jointly by the CEO, the Board and the Executive, such as attainment by the Company of its planned financial objectives for the applicable bonus period (the “Performance Objectives”). The Board will, in its sole discretion determine whether Executive achieved the Performance Objectives, and the amount of Executive’s bonus, if any.

          2.3 Stock Purchase. You will be eligible to purchase shares of the Company’s Common Stock (the “Stock”) pursuant to a Founders’ Stock Purchase Agreement which shall include vesting provisions and such other terms as approved by the Board.

          2.4 Standard Company Benefits. Executive shall be entitled to all rights and benefits for which he is eligible under the terms and conditions of the standard Company benefits and compensation plans which may be in effect from time to time and provided by the Company to its executives, including but not limited to medical, dental and vacation.

     3. Confidential Information, Rights and Duties.

          3.1 Agreement.

               (a) Confidential Information. Executive shall be required as a condition of employment to sign and abide by the Company’s Employee Proprietary Information and Inventions Agreement (the “Confidentiality Agreement”) (attached hereto as Exhibit A).

               (b) Exclusive Property. Executive agrees that all Company-related business procured by the Executive, and all Company-related business opportunities and plans made known to Executive, while employed by the Company are and shall remain the permanent and exclusive property of the Company.

     4. Outside Activities.

          4.1 Activities. Except with the prior written consent of the Board, Executive will not during his employment with the Company undertake or engage in any other employment, occupation or business enterprise, other than ones in which Executive is a passive investor. Executive may engage in civic and not-for-profit activities so long as such activities do not materially interfere with the performance of his duties hereunder. Subject to the limitations of Sections 4.2 and 4.3 of this Agreement and with the prior written consent of the Board, Executive may serve as a director of other corporations and

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may devote a reasonable amount of his time to other types of business or public activities not expressly mentioned in this paragraph. The Board may rescind its consent to Executive’s service as a director of other corporations or participation in other business or public activities if the Board, in its sole discretion, determines that such activities materially compromise or threaten to materially compromise the Company’s business interests.

          4.2 Investments and Interests. Executive agrees not to acquire, assume or participate in, directly or indirectly, any position, investment or interest known by him to be adverse or antagonistic to the Company, its business or prospects, financial or otherwise.

          4.3 Non-Competition. During his employment by the Company, except on behalf of the Company, Executive will not directly or indirectly, whether as an officer, director, stockholder, partner, proprietor, associate, representative, consultant, or in any capacity whatsoever engage in, become financially interested in, be employed by or have any business connection with any other person, corporation, firm, partnership or other entity whatsoever known by him to compete directly with the Company, anywhere in the world, in any line of business engaged in (or planned to be engaged in) by the Company; provided, however, that the Executive may purchase or otherwise acquire up to (but not more than) five percent (5%) of any class of securities of any enterprise (but without participating in the activities of such enterprise) if such securities are listed on any national or regional securities exchange or have been registered under Section 12(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

     5. Termination Of Employment.

          5.1 Termination With or Without Cause.

               (a) At-Will Employment. Executive’s relationship with the Company is at-will. The Company shall have the right to terminate Executive’s employment with the Company at any time with or without Cause (as defined below), and with or without notice. Executive may be removed from any position he holds in the manner specified by the Bylaws of the Company and applicable law.

                    (i) Definition of Cause. For purposes of this Agreement, “Cause” shall mean one or more of the following: (a) Executive’s conviction of a felony; (b) Executive commission of any act of fraud with respect to the Company; (c) any intentional misconduct by Executive that has a materially adverse effect upon the Company’s business that is not cured by Executive within thirty (30) days of written notice given by the Company identifying such misconduct; (d) a breach by Executive of any of Executive’s fiduciary obligations as an officer of the Company that has a materially adverse effect upon the Company’s business that is not cured by Executive within thirty (30) days of written notice given by the Company identifying such breach; (e) Executive’s willful misconduct or gross negligence in performance of his duties hereunder, including Executive’s refusal to comply in any material respect with the legal directives of the Board so long as such directives are not inconsistent with Executive’s position and duties, that are

3.

not cured by Executive within thirty (30) days of written notice given by the Company identifying such misconduct or negligence.

                    (ii) Definition of Disability. For purposes of this Agreement, to the Company may terminate Executive’s employment based on Executive’s physical or mental disability shall exist if any illness, disability or other incapacity renders the Executive physically or mentally unable regularly to perform his duties hereunder for a period in excess of ninety (90) consecutive days or more than one hundred twenty (120) days in any consecutive twelve (12) month period. The Board shall make a good faith determination of whether Executive is physically or mentally unable to regularly perform his duties, subject to its review and consideration of any physical and/or mental health information provided to it by Executive. If Executive is terminated for disability or death, the Company shall provide the benefits set forth in section 5.1(c) herein to Executive or his estate.

               (b) Termination for Cause. If the Company terminates Executive’s employment at any time for Cause, Executive’s salary shall cease on the date of termination, and Executive will not be entitled to severance pay, pay in lieu of notice or any other such compensation, other than payment of accrued salary and such other benefits as expressly required in such event by applicable law or the terms of any applicable Company benefit plans. The Stock, all stock options and other stock awards held by Executive shall cease vesting as of the date of termination, and shall be exercisable thereafter only pursuant to the terms of the applicable stock option plans and agreements.

               (c) Termination Without Cause. If the Company terminates Executive’s employment at any time without Cause, (i) the Company shall pay to Executive severance in an aggregate amount equal to six (6) months of Executive’s then current base salary, subject to withholdings and deductions, such sum payable in monthly installments in accordance with the Company’s standard payroll practices, (ii) the Company shall continue to provide health, dental and vision benefits for a period of six (6) months commencing on the date of termination and at the same coverage terms as provided to Executive at the date of termination, and (iii) the vesting of the Stock, all stock options and other stock awards held by Executive shall immediately accelerate with respect to the number of shares that would otherwise vest if the Executive was to remain employed by the Company over the six (6) month period following the date of such termination. Executive shall not be entitled to this severance pay and vesting acceleration unless and until the release requirements set forth in Section 8 of this Agreement are satisfied and the period for revocation of such release has expired.

          5.2 Resignation With or Without Good Reason.

               (a) Executive’s Resignation. Executive may resign from his employment with the Company at any time, with or without notice, and with or without Good Reason (as defined below).

               (b) Executive’s Resignation Without Good Reason. In the event that Executive resigns his employment without Good Reason, Executive will not be

4.

entitled to severance pay, pay in lieu of notice or any other such compensation other than payment of accrued salary and such other benefits as expressly required in such event by applicable law or the terms of any applicable Company benefit plans. The Stock, all stock options and any other stock awards held by Executive shall cease vesting as of the date Executive’s resignation, other than for Good Reason, becomes effective and shall be exercisable thereafter only pursuant to the terms of the applicable stock option plans and agreements.

               (c) Executive’s Resignation for Good Reason. Executive may resign his employment for Good Reason (as defined below) so long as Executive tenders his resignation to the Company within thirty (30) days after the occurrence of the event which forms the basis for his resignation for Good Reason. In the event that Executive resigns his employment for Good Reason, (i) the Company shall pay to Executive severance in an aggregate amount equal to six (6) months of Executive’s then current base salary, subject to withholdings and deductions, such sum payable in monthly installments in accordance with the Company’s standard payroll practices, (ii) the Company shall continue to provide health, dental and vision benefits for a period of six (6) months commencing on the date of termination and at the same coverage terms as provided to Executive at the date of termination and (iii) the vesting of the Stock, all stock options and other stock awards held by Executive shall immediately accelerate with respect to the number of shares that would otherwise vest if the Executive was to remain employed by the Company over the six (6) month period following the date of such termination. Executive shall not be entitled to any of this severance pay and vesting acceleration unless and until the release requirements set forth in Section 8 of this Agreement are satisfied and the period for revocation of such release has expired.

               (d) Definition of Good Reason. For the purposes of this Agreement, “Good Reason” shall mean any one of the following events which occurs on or after the commencement of Executive’s employment without Executive’s consent: (i) any reduction of Executive’s then current annual base salary; (ii) any material diminution of the Executive’s duties, responsibilities, or authority to a level below that of an officer of the Company, excluding for this purpose (1) an isolated or inadvertent action not taken in bad faith which is remedied by the Company immediately after notice thereof is given by the Executive, and (2) any change in Executive’s title, duties, responsibilities or authority if Executive is given or retains other officer level duties within the Company; or (iii) any requirement that the Executive relocate to a work site more than twenty five (25) miles from the Company’s current location. Notwithstanding the foregoing, Executive acknowledges that in the event that the Company hires a new CEO, the change in Executive’s title and the transfer of the duties typically associated with the CEO position from Executive to the CEO shall not constitute Good Reason provided that Executive is given or retains other officer level duties within the Company.

5.

          5.3 Cessation of Severance Benefits. If Executive violates any provision of Sections 3, 7 or 8 of this Agreement, any severance payments or other benefits being provided to Executive will cease immediately, and Executive will not be entitled to any further compensation and benefits from the Company.

     6. Change of Control.

          6.1 Definition. For purposes of this Agreement, Change of Control means the occurrence of any of the following: (i) a sale, lease, or other disposition of all or substantially all of the assets of the Company; (ii) a merger or consolidation in which the Company is not the surviving corporation; (iii) a reverse merger involving the Company in which the Company is the surviving corporation but the shares of common stock of the Company (the “Common Stock”) outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise; (iv) an acquisition by any person, entity or group within the meaning of Section 13(d) or 14(d) of the Exchange Act or any comparable successor provisions (excluding any employee benefit plan, or related trust, sponsored or maintained by the Company or an Affiliate of the Company) of the beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act, or comparable successor rules) of securities of the Company representing at least fifty percent (50%) of the combined voting power entitled to vote in the election of directors; or, (v) in the event that the individuals who, as of the Effective Date, are members of the Board (the “Incumbent Board”), cease for any reason to constitute at least fifty percent (50%) of the Company’s Board of Directors. (If the election, or nomination for election by the Company’s shareholders, of any new member of the Company’s Board of Directors is approved by a vote of at least fifty percent (50%) of the Incumbent Board, such new member of the Board of Directors shall be considered as a member of the Incumbent Board.) Notwithstanding the foregoing, for the purposes of this Agreement and with respect to any and all clauses of this Section of this Agreement, an initial public offering of the securities of the Company (an “IPO”) or any transactions or events constituting part of an IPO shall not be deemed to constitute or in any way effect a Change of Control.

          6.2 Change of Control Termination. In the event Executive’s employment with the Company is involuntarily terminated without Cause by the Company or its successor as Cause is defined in section 5.1(c) herein, or Executive resigns for Good Reason, and such termination or resignation occurs within eighteen (18) months following a Change of Control, Executive shall be entitled to: (a) the Company shall pay to Executive severance in an aggregate amount equal to six (6) months of Executive’s then current base salary, subject to withholdings and deductions, such sum payable in monthly installments in accordance with the Company’s standard payroll practices; (b) health, dental and vision benefits for a period of six (6) months commencing on the date of termination and at the same coverage terms as provided to Executive at the date of termination and (c) the immediate acceleration of vesting on all stock, stock options and other stock awards held by Executive in an amount of shares equal to 100% of the then unvested shares; provided, however, that if Executive’s employment is terminated following a Change in Control due to Executive’s willful and continued failure to substantially perform assigned duties after there is delivered to Executive by Executive’s

6.

supervisor a written demand for substantial performance which sets forth in detail the specific respects in which such supervisor believes Executive has not substantially performed his duties, Executive shall not be entitled to the benefit described in clause (c) above, but rather will be entitled to the immediate acceleration of vesting on all stock, stock options and other stock awards held by Executive in an amount of shares equal to 50% of the then unvested shares. After a Change of Control, Executive will continue to fulfill his duty of loyalty to the Company, or its successor, by using his best efforts to perform his job duties satisfactorily. Executive’s receipt of the severance payment and vesting acceleration provided in this Section 6.2 shall be conditioned on Executive’s full compliance with the release requirements set forth in Section 8 of this Agreement and the period for revocation of such release has expired. Notwithstanding anything contained in this Agreement to the contrary, if Executive receives the benefits pursuant to this Section 6.2, he shall not entitled to any other benefits under this Agreement, including without limitation, Sections 5.1(c) and 5.2(c).

     7. Nonsolicitation. In the event Executive’s employment with the Company is terminated by the Company or the Executive, with or without Cause or Good Reason, then for one (1) year immediately following the termination date, Executive shall not, without first obtaining the prior written approval of the Company directly or indirectly solicit, induce, persuade or entice, or attempt to do so, or otherwise cause, or attempt to cause, any employee or independent contractor of the Company to terminate his or her employment or contracting relationship in order to become an employee, or independent contractor to or for any person or entity.

     8. Release. As a condition of receiving the severance benefits under this Agreement to which Executive would not otherwise be entitled, Executive shall execute a release in the form attached hereto as Exhibit B (the “Release”). Unless the Release is executed by Executive and delivered to the Company within twenty-one (21) days after the termination of Executive’s employment with the Company, Executive shall not receive any severance benefits (including severance payments and vesting acceleration) provided for under this Agreement. Such benefits shall not commence until such time as all period of revocation of such release have expired.

9. General Provisions.

          9.1 Notices. Any notices provided hereunder must be in writing and shall be deemed effective upon the earlier of personal delivery (including, personal delivery by facsimile transmission), delivery by express delivery service (e.g. Federal Express), or the third day after mailing by first class mail, to the Company at its primary office location and to Executive at his address as listed on the Company payroll (which address may be changed by written notice).

          9.2 Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but such

7.

invalid, illegal or unenforceable provision will be reformed, construed and enforced in such jurisdiction so as to render it valid, legal, and enforceable consistent with the intent of the parties insofar as possible.

          9.3 Waiver. If either party should waive any breach of any provisions of this Agreement, he or it shall not thereby be deemed to have waived any preceding or succeeding breach of the same or any other provision of this Agreement.

          9.4 Entire Agreement. This Agreement, including all Exhibits, constitutes the entire agreement between Executive and the Company regarding the subject matter hereof and it supersedes any prior agreement, promise, representation, written or otherwise, between Executive and the Company with regard to this subject matter. It is entered into without reliance on any agreement, or promise, or representation, other than those expressly contained or incorporated herein, and it cannot be modified or amended except in a writing signed by Executive and a duly authorized officer of the Company.

          9.5 Counterparts. This Agreement may be executed in separate counterparts, any one of which need not contain signatures of more than one party, but all of which taken together will constitute one and the same Agreement. Signatures transmitted via facsimile shall be deemed the equivalent of originals.

          9.6 Headings and Construction. The headings of the sections hereof are inserted for convenience only and shall not be deemed to constitute a part hereof or to affect the meaning thereof. For purposes of construction of this Agreement, any ambiguities shall not be construed against either party as the drafter.

          9.7 Successors and Assigns. This Agreement is intended to bind and inure to the benefit of and be enforceable by Executive, the Company and their respective successors, assigns, heirs, executors and administrators, except that Executive may not assign any of his duties hereunder and he may not assign any of his rights hereunder without the written consent of the Company.

          9.8 Attorney Fees. If either party hereto brings any action to enforce his or its rights hereunder, the prevailing party in any such action shall be entitled to recover his or its reasonable attorneys’ fees and costs incurred in connection with such action.

          9.9 Arbitration. To provide a mechanism for rapid and economical dispute resolution, Executive and the Company agree that any and all disputes, claims, or causes of action, in law or equity, arising from or relating to this Agreement (including the Release) or its enforcement, performance, breach, or interpretation, or to Executive’s employment with the Company or the termination of Executive’s employment with the Company, will be resolved, to the fullest extent permitted by law, by final, binding, and confidential arbitration held in Santa Clara County, California and conducted by Judicial Arbitration & Mediation Services (“JAMS”), under its then-existing Rules and Procedures. Executive understands and agrees that under this Section 9.9 of the Agreement, Executive is waiving his right to a jury trial and his right to file any administrative agency charge

8.

with regard to any such disputes, claims or causes of action, including, but not limited to, all federal and state statutory and common law claims, claims related to Executive’s employment with the Company or to the termination of that employment, claims related to any breach of contract, tort, wrongful termination, discrimination, wages or benefits, or claims for any form of equity or compensation. Notwithstanding the provisions of this Section 9.9, any and all disputes, claims or causes of action, in law or in equity, arising from or relating to the Confidentiality Agreement will not be subject to mandatory arbitration, but may be resolved in the courts of the State of California as set forth in Section 10 of the Confidentiality Agreement. Nothing in this Section 9.9 of this Agreement is intended to prevent either the Executive or the Company from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration.

          9.10 Governing Law. All questions concerning the construction, validity and interpretation of this Agreement shall be governed by the law of the State of California as applied to contracts made and to be performed entirely within California.

          9.11 Exhibits.

Exhibit A – Proprietary Information and Inventions Agreement

Exhibit B – Release Agreement

[Remainder of page intentionally left blank]

9.

     In Witness Whereof, the parties have executed this Agreement effective as of the Effective Date above written.

Softswitch Enterprises, Inc.
By:	/s/   Milledge Hart
Print Name:	Milledge Hart
Title:	President
Amit Chawla
	/s/  Amit Chawla

10.

Exhibit A

Proprietary Information and Inventions Agreement

EXHIBIT B

Release Agreement

I understand that my position with Softswitch Enterprises, Inc. (the “Company”) terminated effective                                         ,                      (the “Separation Date”). The Company has agreed that if I choose to sign this Release, the Company will pay me certain severance benefits (minus the standard withholdings and deductions) pursuant to the terms of the Employment Agreement (the “Agreement”) entered into as of                                         , 2000, between myself and the Company, and any agreements incorporated therein by reference. I understand that I am not entitled to such severance benefits unless I sign this Release. I understand that, regardless of whether I sign this Release, the Company will pay me all of my accrued salary and vacation through the Separation Date, to which I am entitled by law.

In consideration for the severance benefits I am receiving under the Agreement, I hereby release the Company and its officers, directors, agents, attorneys, employees, shareholders, parents, subsidiaries, and affiliates from any and all claims, liabilities, demands, causes of action, attorneys’ fees, damages, or obligations of every kind and nature, whether they are now known or unknown, arising at any time prior to the date I sign this Release. This general release includes, but is not limited to: all federal and state statutory and common law claims, claims related to my employment or the termination of my employment or related to breach of contract, tort, wrongful termination, discrimination, wages or benefits, or claims for any form of equity or compensation. Notwithstanding the release in the preceding sentence, I am not releasing any right of indemnification I may have for any liabilities arising from my actions within the course and scope of my employment with the Company or within the course and scope of my role as a member of the Board of Directors of the Company.

In releasing claims unknown to me at present, I am waiving all rights and benefits under Section 1542 of the California Civil Code, and any law or legal principle of similar effect in any jurisdiction: “A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor.”

If I am forty (40) years of age or older as of the Separation Date, I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have under the federal Age Discrimination in Employment Act of 1967, as amended (“ADEA”). I also acknowledge that the consideration given for the waiver in the above paragraph is in addition to anything of value to which I was already entitled. I have been advised by this writing, as required by the ADEA that: (a) my waiver and release do not apply to any claims that may arise after my signing of this Release; (b) I should consult with an attorney prior to executing this Release; (c) I have twenty-one (21) days within which to consider this Release (although I may choose to voluntarily execute this Release earlier); (d) I have seven (7) days following the execution of this release to revoke the Release; and (e) this Release will not be effective until the eighth day after this Release has been signed both by me and by the Company (“Effective Date”).

Agreed:
Date	Executive Name
	SOFTSWITCH ENTERPRISES, INC.
	By:
	Name:
	Title:

2.

EXHIBIT A

EMPLOYEE PROPRIETARY INFORMATION
AND INVENTIONS AGREEMENT

     In consideration of my employment or continued employment by NEXVERSE NETWORKS, INC. (the “Company”), and the compensation now and hereafter paid to me, I hereby agree as follows:

1. Nondisclosure

     1.1 Recognition of Company’s Rights; Nondisclosure. At all times during my employment and thereafter, I will hold in strictest confidence and will not disclose, use, lecture upon or publish any of the Company’s Proprietary Information (defined below), except as such disclosure, use or publication may be required in connection with my work for the Company, or unless an officer of the Company expressly authorizes such in writing. I will obtain Company’s written approval before publishing or submitting for publication any material (written, verbal, or otherwise) that relates to my work at Company and/or incorporates any Proprietary Information. I hereby assign to the Company any rights I may have or acquire in such Proprietary Information and recognize that all Proprietary Information shall be the sole property of the Company and its assigns. I have been informed and acknowledge that the unauthorized taking of the Company’s trade secrets could result in a civil liability under California Civil Code Section 3426, and that, if willful, could result in an award for double the amount of the Company’s damages and attorneys’ fees; and is a crime under California Penal Code Section 444(c), punishable by imprisonment for a time not exceeding one (1) year, or by a fine not exceeding five thousand dollars ($5,000), or by both.

     1.2 Proprietary Information. The term “Proprietary Information” shall mean any and all confidential and/or proprietary knowledge, data or information of the Company. By way of illustration but not limitation, “Proprietary Information” includes (a) trade secrets, inventions, mask works, ideas, processes, formulas, source and object codes, data, programs, other works of authorship, know-how, improvements, discoveries, developments, designs and techniques (hereinafter collectively referred to as “Inventions”); and (b) information regarding plans for research, development, new products, marketing and selling, business plans, budgets and unpublished financial statements, licenses, prices and costs, suppliers and customers; and (c) information regarding the skills and compensation of other employees of the Company.

     1.3 Third Party Information. I understand, in addition, that the Company has received and in the future will receive from third parties confidential or proprietary information (“Third Party Information”) subject to a duty on the Company’s part to maintain the confidentiality of such information and to use it only for certain limited purposes. During the term of my employment and thereafter, I will hold Third Party Information in the strictest confidence and will not disclose to anyone (other than Company personnel who need to know such information in connection with their work for the Company) or use, except in connection with my work for the Company, Third Party Information unless expressly authorized by an officer of the Company in writing.

     1.4 No Improper Use of Information of Prior Employers and Others. During my employment by the Company I will not improperly use or disclose any confidential information or trade secrets, if any, of any former employer or any other person to whom I have an obligation of confidentiality, and I will not bring onto the premises of the Company any unpublished documents or any property belonging to any former employer or any other person to whom I have an obligation of confidentiality unless consented to in writing by that former employer or person. I will use in the performance of my duties only information which is generally known and used by persons with training and experience comparable to my own, which is common knowledge in the industry or otherwise legally in the public domain, or which is otherwise provided or developed by the Company.

2. Assignment of Inventions.

     2.1 Proprietary Rights. The term “Proprietary Rights” shall mean all trade secret, patent, copyright, mask work and other intellectual property rights throughout the world.

     2.2 Prior Inventions. Inventions, if any, patented or unpatented, which I made prior to the commencement of my employment with the Company are excluded from the scope of this Agreement. To

1.

preclude any possible uncertainty, I have set forth on Exhibit A-2 (Previous Inventions) attached hereto a complete list of all Inventions that I have, alone or jointly with others, conceived, developed or reduced to practice or caused to be conceived, developed or reduced to practice prior to the commencement of my employment with the Company, that I consider to be my property or the property of third parties and that I wish to have excluded from the scope of this Agreement (collectively referred to as “Prior Inventions”). If disclosure of any such Prior Invention would cause me to violate any prior confidentiality agreement, I understand that I am not to list such Prior Inventions in Exhibit A-2 but am only to disclose a cursory name for each such invention, a listing of the party(ies) to whom it belongs and the fact that full disclosure as to such inventions has not been made for that reason. A space is provided on Exhibit A-2 for such purpose. If no such disclosure is attached, I represent that there are no Prior Inventions. If, in the course of my employment with the Company, I incorporate a Prior Invention which I own or have rights to into a Company product, process or machine, the Company is hereby granted and shall have a nonexclusive, royalty-free, irrevocable, perpetual, worldwide license (with rights to sublicense through multiple tiers of sublicensees) to make, have made, modify, use and sell such Prior Invention. Notwithstanding the foregoing, I agree that I will not incorporate, or permit to be incorporated, Prior Inventions in any Company Inventions without the Company’s prior written consent.

     2.3 Assignment of Inventions. Subject to Sections 2.4, and 2.6, I hereby assign and agree to assign in the future (when any such Inventions or Proprietary Rights are first reduced to practice or first fixed in a tangible medium, as applicable) to the Company all my right, title and interest in and to any and all Inventions (and all Proprietary Rights with respect thereto) whether or not patentable or registrable under copyright or similar statutes, made or conceived or reduced to practice or learned by me, either alone or jointly with others, during the period of my employment with the Company. Inventions assigned to the Company, or to a third party as directed by the Company pursuant to this Section 2, are hereinafter referred to as “Company Inventions.”

     2.4 Nonassignable Inventions. This Agreement does not apply to an Invention which qualifies fully as a nonassignable Invention under Section 2870 of the California Labor Code (hereinafter “Section 2870”). I have reviewed the notification on Exhibit A-1 (Limited Exclusion Notification) and agree that my signature acknowledges receipt of the notification.

     2.5 Obligation to Keep Company Informed. During the period of my employment with the Company, I will promptly disclose to the Company fully and in writing all Inventions authored, conceived or reduced to practice by me, either alone or jointly with others. In addition, during the period ending six (6) months after termination of my employment with the Company I will promptly disclose to the Company fully and in writing all Inventions authored, conceived or reduced to practice by me, either alone or jointly with others that are related to the business of the Company. In addition, I will promptly disclose to the Company all patent applications filed by me or on my behalf within a year after termination of employment. If disclosure under the foregoing sentence would cause me to violate any confidentiality agreement I enter into after termination of my employment with the Company, I understand that I am not required to disclose such Inventions but am only required to disclose a cursory name for each such invention, a listing of the party(ies) to whom it belongs and the fact that full disclosure as to such inventions has not been made for that reason. At the time of each such disclosure, I will advise the Company in writing of any Inventions that I believe fully qualify for protection under Section 2870; and I will at that time provide to the Company in writing all evidence necessary to substantiate that belief. The Company will keep in confidence and will not use for any purpose or disclose to third parties without my consent any confidential information disclosed in writing to the Company pursuant to this Agreement relating to Inventions that qualify fully for protection under the provisions of Section 2870. I will preserve the confidentiality of any Invention that does not fully qualify for protection under Section 2870.

     2.6 Government or Third Party. I also agree to assign all my right, title and interest in and to any particular Company Invention to a third party, including without limitation the United States, as directed by the Company.

     2.7 Works for Hire. I acknowledge that all original works of authorship which are made by me (solely or jointly with others) within the scope of my employment and which are protectable by copyright are “works made for hire,” pursuant to United States Copyright Act (17 U.S.C., Section 101).

     2.8 Enforcement of Proprietary Rights. I will assist the Company in every proper and reasonable way to obtain, and from time to time enforce, United States and foreign Proprietary Rights

2.

relating to Company Inventions in any and all countries. To that end I will execute, verify and deliver such documents and perform such other acts (including appearances as a witness) as the Company may reasonably request for use in applying for, obtaining, perfecting, evidencing, sustaining and enforcing such Proprietary Rights and the assignment thereof. In addition, I will execute, verify and deliver assignments of such Proprietary Rights to the Company or its designee. My obligation to assist the Company with respect to Proprietary Rights relating to such Company Inventions in any and all countries shall continue beyond the termination of my employment, but the Company shall compensate me at a reasonable rate after my termination for the time actually spent by me at the Company’s request on such assistance.

In the event the Company is unable for any reason, after reasonable effort, to secure my signature on any document needed in connection with the actions specified in the preceding paragraph, I hereby irrevocably designate and appoint the Company and its duly authorized officers and agents as my agent and attorney in fact, which appointment is coupled with an interest, to act for and in my behalf to execute, verify and file any such documents and to do all other lawfully permitted acts to further the purposes of the preceding paragraph with the same legal force and effect as if executed by me. I hereby waive and quitclaim to the Company any and all claims, of any nature whatsoever, which I now or may hereafter have for infringement of any Proprietary Rights assigned hereunder to the Company.

3. Records. I agree to keep and maintain adequate and current records (in the form of notes, sketches, drawings and in any other form that may be required by the Company) of all Proprietary Information developed by me and all Inventions made by me during the period of my employment at the Company, which records shall be available to and remain the sole property of the Company at all times.

4. Additional Activities. I agree that during the period of my employment by the Company I will not, without the Company’s express written consent, engage in any employment or business activity related to my activities for the Company or the Company’s business, other than for the Company. I agree further that for the period of my employment by the Company and for one (l) year after the date of termination of my employment by the Company I will not, either directly or through others, solicit or attempt to solicit any employee, independent contractor or consultant of the company to terminate his or her relationship with the Company in order to become an employee, consultant or independent contractor to or for any other person or entity. I agree further that for the period of my employment by the Company and for one (1) year after the date of termination of my employment by the Company I shall not solicit any customer of the Company or licensee of the Company’s products, in each case, that are known to me, with respect to any business, products or services that are directly competitive to the products or services offered by the Company or under development as of the date of termination of my employment with the Company.

5. No Conflicting Obligation. I represent that my performance of all the terms of this Agreement and as an employee of the Company does not and will not breach any agreement to keep in confidence information acquired by me in confidence or in trust prior to my employment by the Company. I have not entered into, and I agree I will not enter into, any agreement either written or oral in conflict herewith.

6. Return of Company Documents. When I leave the employ of the Company, I will deliver to the Company any and all drawings, notes, memoranda, specifications, devices, formulas, and documents, together with all copies thereof, and any other material containing or disclosing any Company Inventions, Third Party Information or Proprietary Information of the Company. I further agree that any property situated on the Company’s premises and owned by the Company, including disks and other storage media, filing cabinets or other work areas, is subject to inspection by Company personnel at any time with or without notice. Prior to leaving, I will cooperate with the Company in completing and signing the Company’s termination statement.

7. Legal and Equitable Remedies. Because my services are personal and unique and because I may have access to and become acquainted with the Proprietary Information of the Company, the Company shall have the right to enforce this Agreement and any of its provisions by injunction, specific performance or other equitable relief, without bond and without prejudice to any other rights and remedies that the Company may have for a breach of this Agreement.

8. Notices. Any notices required or permitted hereunder shall be given to the appropriate party at the address specified below or at such other address as the party shall specify in writing. Such notice shall be deemed given upon personal delivery to the

3.

appropriate address or if sent by certified or registered mail, three (3) days after the date of mailing.

9. Notification of New Employer. In the event that I leave the employ of the Company, I hereby consent to the notification of my new employer of my rights and obligations under this Agreement.

10. General Provisions.

     10.1 Governing Law; Consent to Personal Jurisdiction. This Agreement will be governed by and construed according to the laws of the State of California, as such laws are applied to agreements entered into and to be performed entirely within California between California residents. I hereby expressly consent to the personal jurisdiction of the state and federal courts located in Santa Clara County, California for any lawsuit filed there against me by Company arising from or related to this Agreement.

     10.2 Severability. In case any one or more of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect the other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. If moreover, any one or more of the provisions contained in this Agreement shall for any reason be held to be excessively broad as to duration, geographical scope, activity or subject, it shall be construed by limiting and reducing it, so as to be enforceable to the extent compatible with the applicable law as it shall then appear.

     10.3 Successors and Assigns. This Agreement will be binding upon my heirs, executors, administrators and other legal representatives and will be for the benefit of the Company, its successors, and its assigns.

     10.4 Survival. The provisions of this Agreement shall survive the termination of my employment and the assignment of this Agreement by the Company to any successor in interest or other assignee.

     10.5 Employment. I agree and understand that nothing in this Agreement shall confer any right with respect to continuation of employment by the Company, nor shall it interfere in any way with my right or the Company’s right to terminate my employment at any time, with or without cause.

     10.6 Waiver. No waiver by the Company of any breach of this Agreement shall be a waiver of any preceding or succeeding breach. No waiver by the Company of any right under this Agreement shall be construed as a waiver of any other right. The Company shall not be required to give notice to enforce strict adherence to all terms of this Agreement.

     10.7 Advice of Counsel. I ACKNOWLEDGE THAT, IN EXECUTING THIS AGREEMENT, I HAVE HAD THE OPPORTUNITY TO SEEK THE ADVICE OF INDEPENDENT LEGAL COUNSEL, AND I HAVE READ AND UNDERSTOOD ALL OF THE TERMS AND PROVISIONS OF THIS AGREEMENT. THIS AGREEMENT SHALL NOT BE CONSTRUED AGAINST ANY PARTY BY REASON OF THE DRAFTING OR PREPARATION HEREOF.

     10.8 Entire Agreement. The obligations pursuant to Sections 1 and 2 of this Agreement shall apply to any time during which I was previously employed, or am in the future employed, by the Company as a consultant if no other agreement governs nondisclosure and assignment of inventions during such period. This Agreement is the final, complete and exclusive agreement of the parties with respect to the subject matter hereof and supersedes and merges all prior discussions between us. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in writing and signed by the party to be charged. Any subsequent change or changes in my duties, salary or compensation will not affect the validity or scope of this Agreement.

     This Agreement shall be effective as of the first day of my employment with the Company, namely:                                         , 200_.

     I have read this Agreement carefully and understand its terms. I have completely filled out Exhibit A-2 to this Agreement.

Dated:

(Signature)

(Printed Name)

4.

Accepted and Agreed To:

NEXVERSE NETWORKS, INC.

By:

Title:

(Address)

Dated:

5.

Exhibit A-1

LIMITED EXCLUSION NOTIFICATION

     This is to notify you in accordance with Section 2872 of the California Labor Code that the foregoing Agreement between you and the Company does not require you to assign or offer to assign to the Company any invention that you developed entirely on your own time without using the Company’s equipment, supplies, facilities or trade secret information except for those inventions that either:

11. Relate at the time of conception or reduction to practice of the invention to the Company’s business, or actual or demonstrably anticipated research or development of the Company; or

12. Result from any work performed by you for the Company.

     To the extent a provision in the foregoing Agreement purports to require you to assign an invention otherwise excluded from the preceding paragraph, the provision is against the public policy of this state and is unenforceable.

     This limited exclusion does not apply to any patent or invention covered by a contract between the Company and the United States or any of its agencies requiring full title to such patent or invention to be in the United States.

     I acknowledge receipt of a copy of this notification.

By:
	(Printed Name of Employee)
Date:

Witnessed by:

(Printed Name of Representative)

A-1.

Exhibit A-2

TO:	NEXVERSE NETWORKS, INC.
FROM:
DATE:
SUBJECT:	Previous Inventions

     1. Except as listed in Section 2 below, the following is a complete list of all inventions or improvements relevant to the subject matter of my employment by NEXVERSE NETWORKS, INC. (the “Company”) that have been made or conceived or first reduced to practice by me alone or jointly with others prior to my engagement by the Company:

o No inventions or improvements. Initial here:                     

o See below:

o       Additional sheets attached.

     2. Due to a prior confidentiality agreement, I cannot complete the disclosure under Section 1 above with respect to inventions or improvements generally listed below, the proprietary rights and duty of confidentiality with respect to which I owe to the following party(ies):

	Invention or Improvement	Party(ies)	Relationship
1.
2.
3.
o	Additional sheets attached.

EX-10.21

EXHIBIT 10.21

April 13, 2005

Mr. Al Wood
C/O Veraz Networks, Inc.
926 Rock Avenue, Suite 20
San Jose, CA 95131

Re: Offer of Employment with Veraz Networks, Inc.

Dear Al:

Veraz Networks, Inc. (the “Company”) is pleased to offer you employment as the Company’s Chief Financial Officer on the terms and conditions set forth in this letter agreement (the “Agreement”).

     1. Duties. You will be responsible for all financial operations of the Company and shall perform such duties as are ordinary, customary and necessary in the Chief Financial Officer role. You will report to the Company’s Chief Executive Officer (“CEO”). You shall devote your best efforts and full business time, skill and attention to the performance of your duties. You will also be expected to adhere to the general employment policies and practices of the Company that may be in effect from time to time, except that when the terms of this Agreement conflict with the Company’s general employment policies or practices, this Agreement will control. The Company may change your position, duties, work location and compensation from time to time in its discretion.

     2. Compensation. You will be paid an annual base salary of $210,000, less applicable deductions and withholdings, to be paid semi-monthly in accordance with the Company’s payroll practices, as may be in effect from time to time. You will also receive a sign-on bonus equal to two months of your base salary, payable on the first regularly-scheduled payroll date following your first day of employment. If, prior to the first anniversary of your hire, your employment terminates at your request, or the Company terminates your employment for Cause (as defined below), and neither your resignation nor termination occurs following a Change of Control (as defined herein), then you must repay a portion of this bonus, prorated based on your actual length of employment during the period from your start date through one year after your hire date.

     3. Benefits. The Company will provide you with medical, dental, life, supplemental life, and disability insurance, as well as sick leave, paid vacation and other Company-sponsored benefits and programs on the same terms and conditions as such benefits are generally available to its executive officers. The Company may, from time to time, change these benefits in its discretion. Additional information regarding these benefits is available for your review upon request.

Initialed : AJW

Al Wood
Page 2

     4. Stock Option. Subject to approval by the Company’s Board of Directors (the “Board”), the Company will grant you a stock option to purchase one hundred fifty thousand (150,000) shares of the Company’s common stock (the “Option”). The Option shall be issued pursuant to the terms and conditions of the Company’s 2001 Equity Incentive Plan (the “Plan”) and the per share exercise price shall be the fair market value of the Company’s common stock on the date of grant as determined by the Board. The Option shall vest over a four-year period, with one quarter (1/4) of the shares subject to the Option vesting on the one year anniversary of your Commencement Date (as defined herein), and the remaining portion of the shares vesting equally over the following 36 months of continuous service thereafter. Except as otherwise set forth herein, all terms, conditions and limitations of the Options shall be governed by the Plan and related documents.

     5. Performance Bonuses. Each year, you will be eligible for an annual incentive bonus equal to thirty percent (30%) of your annual base salary. Whether you receive such a bonus, and the amount of any such bonus, shall be determined by the Board in its sole discretion, and shall be based on achievement of annualized objectives to be established by the Board and the CEO. Bonuses are generally paid at the end of the first quarter of the following year and are subject to standard payroll deductions and withholdings. You must be employed on the day that your bonus (if any) is paid in order to earn the bonus. Therefore, if your employment is terminated either by you or the Company for any reason prior to the bonus being paid, you will not have earned the bonus and no partial or prorated bonus will be paid.

     6. Change of Control Termination. Subject to the terms and conditions set forth in this paragraph 6, if your employment with the Company is terminated by the Company without Cause (as defined herein) or you resign for Good Reason (as defined herein), and either such event occurs within twelve (12) months after a Change of Control (as defined herein), then, as of the date of termination, the vesting of one hundred percent (100%) of the shares subject to the Option that remain subject to vesting shall be accelerated in full. Additionally, if your termination is effective after the end of a calendar year, but before you have been paid your performance bonus for that preceding year, then the Company will pay you, as severance, your performance bonus for the preceding year.

          (a) Change of Control. “Change of Control” shall mean the consummation of any one of the following events: (a) a sale, lease or other disposition of all or substantially all of the assets of the Company; (b) a consolidation or merger of the Company with or into any other corporation or other entity or person, or any other corporate reorganization, in which the shareholders of the Company immediately prior to such consolidation, merger or reorganization, own less than 50% of the Company’s outstanding voting power of the surviving entity (or its parent) following the consolidation, merger or reorganization or (c) any transaction (or series of related transactions involving a person or entity, or a group of affiliated persons or entities) in which in excess of fifty percent (50%) of the Company’s outstanding voting power is transferred (excluding (i) any consolidation or merger effected exclusively to change the domicile of the Company, or (ii) any transaction or series of transactions principally for bona fide equity financing purposes in which cash is received by the Company or any successor or indebtedness of the Company is cancelled or converted or a combination thereof).

Initialed : AJW

AL Wood
Page 3

          (b) Cause. For purposes of this Agreement, “Cause” shall mean one or more of the following: (a) your conviction of a felony; (b) your commission of any act of fraud with respect to the Company; (c) any intentional misconduct by you that has a material adverse effect upon the Company’s business that is not cured by you within thirty (30) days after written notice is given to you by the Company identifying such misconduct; (d) your breach of any fiduciary or contractual obligation that you owe to the Company that has a material adverse effect upon the Company’s business and is not cured by you within thirty (30) days after written notice is given to you by the Company identifying such breach; (e) willful misconduct or gross negligence in the performance of your duties hereunder, including (without limitation) your refusal to comply in any material respect with the legal directives of the Board or the CEO, so long as such directives are not inconsistent with your position and duties, that are not cured by you within thirty (30) days after written notice is given to you by the Company identifying such misconduct or negligence.

          (c) Good Reason. For the purposes of this Agreement, “Good Reason” shall mean any one of the following events which occurs on or after the commencement of your employment without your consent: (i) any reduction of your then current annual base salary; (ii) any material diminution of your duties, responsibilities, or authority to a level below that of an officer of the Company, excluding for this purpose (1) an isolated or inadvertent action not taken in bad faith that is remedied by the Company immediately after notice thereof is given by you, and (2) any change in your title, duties, responsibilities or authority if you are given or you retain other officer level duties within the Company; or (iii) any requirement that you relocate to a work site more than twenty five (25) miles from the Company’s current location.

          (d) Release Requirements. To receive the Change of Control accelerated vesting benefits and bonus payment set forth above, you must (i) first sign and deliver to the Company a general release of claims, in a form acceptable to the Company, within thirty (30) days after the date your employment with the Company ends, and allow that release to become effective; and (ii) not be in breach of any agreement between you and the Company at the time of the receipt of such benefits.

     7. Severance for Termination without Cause or Resignation for Good Reason. Subject to the terms and conditions set forth in this paragraph 7, if at any time the Company terminates your employment without Cause or you resign for Good Reason, then the Company shall provide you with a lump sum severance payment equal to six (6) months of your base salary then in effect, less applicable deductions and withholdings. To receive this severance payment, you must (i) first sign and deliver to the Company a general release of claims, in a form acceptable to the Company, within thirty (30) days after the date your employment with the Company ends, and allow that release to become effective; and (ii) not be in breach of any agreement between you and the Company at the time of such payment. The severance payment will be paid to you within ten (10) days after the date you return your signed release to the Company.

Initialed : AJW

Al Wood
Page 4

     8. Confidentiality Obligations.

          (a) Proprietary Information. As the Chief Financial Officer of the Company, you will be privy to extremely sensitive, confidential and valuable commercial information and trade secrets belonging to the Company, the improper use and disclosure of which would greatly harm the Company. Accordingly, as a condition of your employment, you must sign and abide by the Company’s Employee Proprietary Information and Inventions Agreement, a copy of which is attached hereto as Exhibit A.

          (b) Exclusive Property. You agree that all business procured by you and all Company-related business opportunities and plans made known to you while you are employed by the Company, shall remain the permanent and exclusive property of the Company.

          (c) No Adverse Business Activities. Throughout the term of your employment with the Company, you agree not to, directly or indirectly, without the prior written consent of the Company, own, manage, operate, join, control, finance or participate in the ownership, management, operation, control or financing of, or be connected as an officer, director, executive, partner, employee, principal, agent, representative, consultant, licensor, licensee or otherwise with, any business or enterprise engaged in any business that is competitive with or is reasonably anticipated to be competitive with the business of the Company (“Competitive Activity”). Notwithstanding the above, you will not be deemed to be engaged directly or indirectly in any Competitive Activity if you participate in any such business solely as a passive investor in up to one percent (1%) of the equity securities of a company or partnership, the securities of which are publicly traded. During your employment with the Company, you agree not to acquire, assume or participate in, directly or indirectly, any position, investment or interest known to be adverse or antagonistic to the Company, its business or prospects, financial or otherwise.

          (d) Nonsolicitation. Throughout your employment with the Company and for one (1) year thereafter, you agree not to, without first obtaining the prior written approval of the Company, directly or indirectly solicit, induce, persuade or entice, or attempt to do so, or otherwise cause, or attempt to cause, any employee, independent contractor, customer or prospective customer of the Company to terminate his, her or its employment, contracting or other business relationship with the Company to become an employee or independent contractor to, or customer of, any other person or entity.

     9. At-Will Employment. Your employment with Company will be “at-will.” This means that either you or Company may terminate your employment at any time, with or without Cause or Good Reason, and with or without advance notice.

     10. Arbitration. To ensure the rapid and economical resolution of disputes that may arise in connection with your employment with the Company, you and the Company agree that any and all disputes, claims, or causes of action, in law or equity, arising from or relating to the enforcement, breach, performance, or interpretation of this Agreement, your employment with the Company, or the termination of your employment, shall be resolved, to the fullest extent permitted by law, by final, binding and confidential arbitration in San Jose, California by JAMS,

Initialed : AJW

A1 Wood
Page 5

Inc. (“JAMS”) or its successor, under JAMS’ then applicable rules and procedures. You acknowledge that by agreeing to this arbitration procedure, both you and the Company waive the right to resolve any such dispute through a trial by jury or judge or administrative proceeding. You will have the right to be represented by legal counsel at any arbitration proceeding. The arbitrator shall: (a) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be permitted by law; and (b) issue a written statement signed by the arbitrator regarding the disposition of each claim and the relief, if any, awarded as to each claim, the reasons for the award, and the arbitrator’s essential findings and conclusions on which the award is based. The arbitrator shall be authorized to award all relief that you or the Company would be entitled to seek in a court of law. The Company shall pay all JAMS arbitration fees in excess of the administrative fees that you would be required to pay if the dispute were decided in a court of law. Nothing in this Agreement is intended to prevent either you or the Company from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration.

     11. Miscellaneous. This Agreement is the complete and exclusive statement of all of the terms and conditions of your employment with the Company, and supercedes and replaces any and all prior agreements or representations with regard to the subject matter hereof, whether written or oral. It is entered into without reliance on any promise or representation other than those expressly contained herein, and it cannot be modified, amended or extended except in a writing signed by you and a duly authorized member of the Board. This Agreement is intended to bind and inure to the benefit of and be enforceable by you and the Company, and our respective successors, assigns, heirs, executors and administrators, except that you may not assign any of your duties or rights hereunder without the express written consent of the Company. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced as if such invalid, illegal or unenforceable provisions had never been contained herein. This Agreement and the terms of your employment with the Company shall be governed in all aspects by the laws of the State of California.

This offer is subject to satisfactory proof of your right to work in the United States and satisfactory completion of a Company-required background check. If you agree to the terms and conditions set forth herein, please initial the bottom of each page and sign where indicated on the last page. Your employment with the Company pursuant to this Agreement will begin on April 20, 2005 (the “Commencement Date”).

Initialed : AJW

A1 Wood
Page 6

We look forward to having you join us. If you have any questions about this Agreement, please do not hesitate to call me.

Best regards,

Veraz Networks, Inc.

/s/ Denise Pierre

Denise Pierre

Vice President, Global Human Resources

Veraz Networks, Inc.

Accepted and agreed:

/s/ Al Wood

Al Wood

Date: 4/18/05

Initialed :                     

EXHIBIT A

EMPLOYEE PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT

NONDISCLOSURE AGREEMENT

     THIS AGREEMENT is made as of the date Written below between Veraz Networks, Inc., a Delaware corporation (“Veraz”), and the individual or entity signing below (“Reviewer”).

     1. Purpose. In connection with a possible business transaction or relationship between Veraz and Reviewer (the “Transaction”), Reviewer may receive certain Confidential Information (as defined below) of Veraz. Veraz is willing to provide such Confidential Information to Reviewer only subject to the terms set forth in this Agreement.

     2. Definition of Confidential Information. “Confidential Information” means any information, technical data, trade secrets or know-how of Veraz (whether disclosed before or after the date of this Agreement), including, but not limited to, information relating to business and product or service plans, financial projections, patents, patent applications, computer object or source code, research, inventions, processes, designs, drawings, engineering, marketing or finance, which information is designated in writing to he confidential or proprietary or which information would, under the circumstances, appear to a reasonable person to he confidential or proprietary. Confidential Information does not include information, technical data or know-how which (i) is in the possession of Reviewer at the time of disclosure (as shown by Reviewer’s files and records immediately prior to the time of disclosure); (ii) becomes part of the public knowledge or literature, not as a result of any improper inaction or action of Reviewer; (iii) is subsequently disclosed to Reviewer by a party having the legal right to make such disclosure; or (iv) is approved by Veraz, in writing, for release.

     3. Non-Disclosure of Confidential information. Reviewer agrees to use Confidential Information only for the purpose of evaluating the Transaction, and not for any other purpose. Reviewer will not disclose or permit disclosure of any Confidential Information to any third party, other than employees of Reviewer who need access to such information in connection with the Transaction. Reviewer agrees that it will take all reasonable measures to protect the secrecy of the Confidential Information in order to prevent it from falling into the public domain or the possession of persons other than those persons authorized hereunder to have any such information. Such measures shall include the highest degree of care that Reviewer utilizes to protect its own Confidential Information of a similar nature, which shall he no less than reasonable care. Any materials or documents containing Confidential Information which have been or may be furnished by Veraz to Reviewer or reproduced or developed by Reviewer based on Confidential Information will be promptly returned to Veraz upon written request.

     4. No Rights Granted. Nothing in this Agreement is intended to grant any rights under any patent or copyright of Veraz nor shall this Agreement grant Reviewer any rights in or to the Confidential Information, except the limited right to use such Confidential Information in connection with the proposed Transaction.

A1 Wood
Page 9

     5. Survival. The commitments of each party hereunder shall survive any termination of the Transaction between the parties, and shall remain in effect until, and to the extent that, Confidential Information shall enter the public domain through no default by the receiving party of its obligations hereunder.

     6. Miscellaneous. Failure to enforce any provision of this Agreement by a party shall not constitute a waiver of any term hereof by such party. This Agreement shall be governed by California law, without reference to conflicts of laws rules. This Agreement may he executed in two or more counterparts (which may be delivered by facsimile), each of which shall be deemed an original and all of which together shall constitute one instrument.

     7. Remedies. Reviewer agrees that any violation or threatened violation of this Agreement will cause irreparable injury to Veraz and that, in addition to any other available remedies, Veraz shall be entitled to obtain injunctive relief against the breach or threatened breach of this Agreement by Reviewer, without the necessity of proving actual damages,

     The parties have executed and delivered this Agreement as of the date below.

Date:   4/18/05                                

Veraz Networks, Inc.		REVIEWER
Signature:	/s/ Denise Pierre	Signature:	/s/ Al Wood
Name:	Denise Pierre	Name:	Al Wood
Title:	vice President Human Resources	Title:	CEO

EX-10.22

Exhibit 10.22

April 21, 2006

Mr. Al Wood
C/O Veraz Networks, Inc.
926 Rock Avenue, Suite 20
San Jose, CA 95131

Re: Amendment to Offer of Employment with Veraz Networks, Inc. dated April 13, 2005

Dear Al:

Veraz Networks, Inc. (the “Company”) is pleased to offer you the following amendment to your employment letter dated April 13, 2005 (“Employment Agreement”). Except as otherwise set forth herein, the terms and conditions of the Employment Agreement remain in full force and effect without any modification.

Commencing March 1, 2006, the annual base salary set forth in the paragraph numbered 2 of the Employment Agreement shall be $225,000.

As of March 1, 2006, the following language contained in Paragraph 7 of the Employment Agreement:

“then the Company shall provide you with a lump sum severance payment equal to six (6) months of your base salary then in effect” shall be amended to read as follows:

“then the Company shall provide you with a lump sum severance payment equal to twelve (12) months of your base salary then in effect.”

If you agree to the terms and conditions set forth herein, please sign where indicated below.

Best Regards

Veraz Networks, Inc.

/s/ Denise Pierre Denise Pierre

Vice President, Global Human Resources

Accepted and agreed:

/s/Al Wood Al Wood

Date: 4/21/06

1.

EX-10.23

Exhibit 10.23

Date: 1.1.2003

Full Name: Israel Zohar

ID No: 52577013

Dear Madam/Sir,

               Re:           Your Employment with Veraz Networks Ltd.

We are pleased to confirm to you in this agreement and the appendices hereto, your terms of employment with Veraz Networks Ltd. (A private regd. Co. No. 513044537, hereinafter: “Veraz” or “the Company”) and wish you every success in your new position.

A. The Position

1.	You have been accepted to the position of General Manager at Veraz networks (hereinafter: “the Position”) in the general division subordinate to the Board of Directors and the CEO of the Veraz Networks Company Inc., or as a result of a change to the control of the Company, as defined in Section J of Appendix A (Change of Control), to another position with similar powers and responsibilities as the Company may decide and shall instruct as such, provided that the conditions of Section J in Appendix A remain intact – the Terms of Employment.
2.	Your employment with the Company is for a period of time which has not been limited in advance, commencing on 1.1.03.
B.	Position of Personal Trust
3.	You acknowledge and agree, without reservation that:

3.1	As there is no supervision on your hours of work and rest and your position belongs to those positions which require a special measure of personal trust, as defined in the Hours of Work and Rest Law, 5718 – 1951, the provisions of this law shall not apply to you, and you shall not receive any recompense for overtime work.
3.2	The Position for the purpose of work require work during flexible hours, work beyond regular working hours and even on irregular days.

C.	The Salary
4.	Your salary shall be at the rate of N.I.S. 42,569 gross monthly (hereinafter: “the Salary”) and shall be updated according to the cost of living increase as shall be paid from time to time to workers in the marketplace. The above Salary includes the cost of living increment which was paid prior to the signing of this agreement.
5.	Your Salary shall include a monthly payment, at the rate of 10% (ten percent) of the Salary owing to you for that month – as special consideration for your undertaking to limit competition against the Company as specified in Appendix A, attached hereto (hereinafter: “the Special Consideration”), provided that you do not breach the above mentioned undertaking.
6.	Your Salary will be paid to you on the 1st of every month, and in any event no later than by the 9th of every month.
7.	Furthermore, you shall be entitled to be included within the framework of senior rewards as agreed upon between you and the Company with the approval of the Company’s board. The terms of the program and the goals shall be agreed upon by no later than the end of January.
D.	Annual Vacation, Sick Leave, Recuperation Payments and Military Reserve Duty.
8.	You are entitled to annual vacation eave of 21 work days for your 1st year’s work with the Company (hereinafter: “the Initial Vacation Quota”).
9.	After your 1st year’s work, for any additional year’s work with the Company — one work day shall be added to the Initial Vacation Quota up to a maximum annual vacation ceiling of 21 (twenty one) annual work days.
10.	You shall be entitled to accumulate to your credit the unutilized balance of vacation contract days – up to a ceiling of 600 work hours. The accumulated vacation hours above and beyond this ceiling shall be redeemed by the Company in your regular Salary. The redemption of your Salary shall be done without the payment of social welfare and other rights. You must effectively and actually utilize at least five (5) consecutive work days as annual vacation leave.

11.	You shall be entitled to be absent form work with payment due to illness 1.5 days every month which may be accumulated up to a maximum ceiling of 90 days. Payment for sick leave shall be made subject to the providing of a duly issued sick note excepting for two non consecutive sick days annually which you may utilize without the said sick note. There is no redemption of sick days which have not been utilized.
12.	At the end of the work year, you shall be paid recuperation leave according to 12 days a year. The tariff per each day’s recuperation shall be according to law, in the amount as acceptable at the Company and as shall be updated from time to time.
13.	You shall be entitled to receive a full salary from the Company due to absence as a result of military reserve duty (miluim) against provision of certification of the Israel Defense Force Authorities regarding the length of the service. The National Insurance Institute payments which shall be made for your military reserve duty shall belong to the Company.
E.	Comprehensive Insurance and Provident Fund (Kupat Gemmel) and/or Executive Insurance Policy (Bituach Minhalim)
14.	Upon commencement of your work you are given the possibility of choosing between insurance under a comprehensive insurance policy and a provident fund (kupat gemmel) and insurance under an executive insurance policy (Bituach minhalim) and/or an integration thereof. The rate of payments made by the Company and made by you from your Salary are detailed as below:
15.	Pension Fund: The Company shall make payments and deductions for you to the                                                        pension fund (“the Fund”) according to that as specified below:

15.1	6% of your Salary for severance pay compensation;
15.2	6% of your salary for pension recompense;
15.3	Similarly, the Company shall pay 2.33% of your Salary and shall transfer such to “            ” Provident Fund for severance pay;
15.4	The Company shall deduct 5.5% from your Salary and shall transfer such to the Fund.

16. Payments made by the Company as specified above shall be instead of the full severance pay compensation, if such are owing to you, pursuant to Section 14 of the Severance Pay Compensation Law, 5723 – 1963, and pursuant to the general confirmation of the Minister of Labour and Welfare regarding employers’ payments to pension funds and insurance funds instead of severance pay compensation, attached to this document as Appendix B.

and/or

17. ‘Executive Insurance’ (Bituach minhalim): The Company shall make payments and deductions for you to the executive insurance policy at the Clal Bit Insurance Company (“The Policy”). The Policy shall be owned by the Company and shall be managed in your name, pursuant to that stipulated below:

17.1	8.33% of your Salary for severance pay compensation;
17.2	5% of your Salary for (insurance) recompense;
17.3	The Company shall deduct 5% of your Salary for (insurance) recompense and shall forward them to the Policy.

18.	The Company shall also make payments to secure monthly income in the event of the loss of the ability to work, at the rate required to guarantee 75% of your Salary, or payments at the rate of 2.5% of your Salary, according to the lower between them.
19.	The allocations made by the Company for the Policy shall be instead of the full severance pay compensation, if such is owing, pursuant to Section 14 of the Severance Pay Compensation Law, 5723 – 1963 and pursuant to the general confirmation of the Minister of Labour and Welfare regarding employer’s payments to a pension fund and an insurance fund instead of severance pay compensation attached to this document as Appendix B.
20.	In order to alleviate any doubt it is hereby clarified that the Company waives its right to a refund of monies paid to the pension fund and/or the provident fund and/or the Policy, unless such right to severance pay compensation has been negated and disallowed following a court judgement, and if such is disallowed, or if funds are withdrawn from the Policy due to an occurrence

	which is not an “entitling event”. In this matter “entitling event” shall mean: death, disability or retirement at the age of 60 years old or more.
21.	In order to alleviate any doubt it is emphasized that in any event the basic salary for payments, allocations and deductions to the Pension Fund and/or the Provident Fund and/or the Executive Insurance shall each, separately and/or jointly, in any form and manner whatsoever, not exceed the rate of the Salary as defined above.
F.	Sabbatical Fund (Keren Hishtalmut)
22.	At the start of your work and subject to your presenting an appropriate certificate from the human resources administration, you will join the Kinneret Sabbatical Fund (hereinafter: “the Sabbatical Fund”). The Company shall make monthly allocations at the rate of 7.5% of your Salary and shall deduct 2.5% from your Salary and shall transfer these sums to the Sabbatical Fund.
23.	The amounts to be accumulated in the Sabbatical Fund will be made available to you according to the regulations of the Sabbatical Fund and the tax regulations in force from time to time.
G.	Additional Benefits
24.	Company Car: During the period of your work for the Company a car shall be made available for your use of the model and manufacture year at the discretion of the Company and in accordance with its procedures (hereinafter: “the Car”). The Company shall bear reasonable fuel costs for the Car. The value of the use of the Car, according to the income tax regulations, as shall be in force from time to time, shall be debited against you and taxes shall be deducted from your Salary as required by law. The making of the Car available for your use, as stated, covers and substitutes payment of travel expenses under the general expansion order in the economy.
25.	Cell Phone: The Company shall make a cell phone available to you of the model and network at the discretion of the Company (hereinafter: “the Cell Phone”), and shall cover all Cell Phone expenses. The Company shall deduct any tax and/or levy and/or any other payment from your salary and

	transfer it to the competent authorities where it is obligated to make such deduction in law for the Cell Phone.
26.	Annual Health Review – The employee shall be entitled to undergo an annual health check at an institute to be determined by the Company.
27.	The Options Program: The Company (or the Parent company) shall act to adopt an options program (or some other reward program), during January 2003. The Company shall grant you options according to the policy of the Company (or the Parent company) as shall be formulated from time to time vis-à-vis employees of your status. Every grant or benefit as stated is subject to the exclusive discretion of the board of directors of the Company and subject to its approval.
H.	The Work Term and Termination Thereof
28.	As has been stated above, the agreement of employment is for a non defined period of time. Each party shall be entitled to terminate the agreement by prior written notice to the other party of 90 (ninety) days. Should the termination of the agreement be as a result of the change of control, as detailed in Section J of Appendix A, the terms of Section J of Appendix A shall apply to the termination of the Agreement.
29.	During the prior notice period you must continue to carry out your work in a full and proper manner and to transfer your position to your replacement as is necessary and as shall be required.
30.	The Company may waive your actual work during the prior notice period, fully or partially, consecutively or alternatively.
31.	The Company may immediately terminate the labour relations between the parties prior to the end of the prior notice period, fully or partially, provided that you are given compensation at the rate of your Salary (as defined above) for the period for which you have not been given prior notice under this Agreement and you may keep the Car and the Cell Phone throughout the prior notice period.
32.	Notwithstanding the above said the Company may dismiss you without providing prior notice, under those circumstances where the Company is

entitled to dismiss you, in law, without providing prior notice, including each one of the following cases:

32.1	Reasonable suspicion of the Company of a criminal offence having being committed connected to your work in the Company and/or the committing of an offence which contains an element of infamy.
32.2	The breach of your duty of trust towards the Company and/or committing an action in conflict of interests.
32.3	The breach of your undertakings to maintain confidentiality, non competition, non harming the reputation and intellectual property, as detailed in the Appendix of this Agreement, which has not been amended within 10 (ten) days from the date at which you have been given written notice.
32.4	Causing damage maliciously to the property of the Company or causing damage to the Company’s property as a result of a grossly negligent act. In such a case you also agree that the Company shall legally deduct amounts from your Salary to cover the expenses and the costs of the damage, fully or partially.

33.	Upon termination of employment, for any reason whatsoever, you must return any property, asset, equipment, document and information you may hold and which has been given to you during your work with the Company to the Company and you shall have no right of lien or stay or any other right over such.
I	General
34.	Under Company policy, the terms of your employment, including the extent of your Salary and ancillary benefits, are personal and privileged information and you are requested not to disclose it to the other Company employees and/or to any third party unless you are required to so in law. Nothing stipulated in this Agreement shall derogate from any right vested in you in any law, extension order, collective agreement or employment agreement.
35.	The Appendices: “The Terms of Employment” and “The General Confirmation Pursuant to Section 14 of the Severance Pay Compensation

Law” — are an integral part of this Agreement. By your signing on this Agreement you confirm your consent of the stipulations of the Agreement and the appendices and that you will act in accordance therewith.

The Management of the Company is pleased to have you join the staff and wishes you every success in
your position and we hope to see you integrate well into the work team.

Yours Faithfully,
(Signed)
Veraz Networks Ltd.
Human Resources

I hereby confirm my consent to everything stated in this Agreement and the appendices to it.

1/1/2003	Israel Zohar	/s/ Israel Zohar
Date	Employee’s Name	Employee’s Signature

Attachments:	Appendix A – Terms of Employment
	Appendix B – General Confirmation Pursuant to Section 14 of the Severance Pay Compensation Law.

Appendix A – Terms of Employment

A.	Preamble
1.	This Appendix constitutes an integral part of the personal agreement of employment dated 1.1.2003 (hereinafter: “the Agreement”).
2.	The Agreement is written in the male person for the sake of convenience only and it refers both to men and women as one.
B.	The Singularity of the Agreement
3.	This Agreement is a personal agreement and the terms and conditions of employment for the Employee shall only be pursuant to that stated in this Agreement and the Appendices thereto. No provisions of any collective agreement, collective arrangement or custom of any sort whatsoever, if and when such should apply, shall apply to the relations between the parties save for the provisions applicable in law.
4.	This Agreement expresses and exhausts all the understandings between the Employee and the Company and all arrangements, representations, letters or understandings during the negotiations for the Employee joining the Company, which have not been explicitly expressed in this Agreement are void and shall be of no force.
C.	Absence of Limitations on the Employee’s Work
5.	The Employee declares, confirms and undertakes that he is entitled to enter into this Agreement and to take upon himself all the undertakings and obligations under the agreement, that there is no limitation, contractual or otherwise, for his entering into this agreement and to be employed by the Company and that his entering into this agreement is not in breach of any other agreement or undertaking to which he is party or to which he was party.

6.	The Employee hereby declares that he has no medical or other problems which are likely to prevent him from fulfilling his undertakings to work for the Company. The Employee shall notify the Company about any change which shall occur to his state of health and which is relevant to his functioning.
D.	The Employee’s Position and Duty
7.	Throughout his period of employment with the Company the Employee will act towards the Company honestly, faithfully, with expertise and trust. The Employee undertakes to devote all his working ability and the best of his skills and expertise in order to promote the business and affairs of the Company, to execute the policies of the Company and the working arrangements, to faithfully and fully fulfill all other decisions of the Company, the management and his superiors, both in Israel and abroad, to comply with the Company’s procedures, as such stand from time to time, to fulfill, at all times, all positions imposed upon him and to always act in trust towards the Company, any corporation connected with it and any corporation or individual which has business ties with the Company.
8.	The Employee shall, at all times, act in an appropriate fashion as is befitting his position and status in the Company. Without derogating from the above said, the Employee undertakes not to make use of the computer, internet or electronic mail for inappropriate goals, including receiving and transferring pornographic material, or any other material which is not connected to his work and which is likely to harm the Company, other employees or any other third party whatsoever, and not to make use of illegal software or any other external software.
9.	The Employee is aware of the provisions of the regulations for the prevention of sexual harassment as exist in the Company and undertakes to view these regulations which are located in the human resources department.

10.	The Employee shall not work in any other work, whether with another employer or independently, whether for wages or not, whether as a self employed person, salaried person or consultant, and shall not take upon himself any position in any other party whatsoever, including a public body, unless the Company has provided prior written consent.
11.	The Employee undertakes to notify the Company, immediately and without delay, about any matter or subject in which he has a personal interest and/or which is likely to create a conflict of interest with his positions in the Company.
12.	The Employee undertakes to assist the Company and any corporation affiliated or connected to the Company, and to be available to the Company, even after the termination of the employment relations with the Company for any reason whatsoever including for the purpose of providing any information relating to his employment or his actions as undertaken by him and including in the management of disputes including legal proceedings or quassi legal proceedings. Should the Company require the services of the Employee after the termination of the employment relations with him for any reason whatsoever, the Employee shall be refunded his expenses for the fulfillment of the provisions of this section.
13.	Immediately upon the termination of his employment in the Company for any reason whatsoever, the Employee shall deliver and/or return to the Company any documents, notes, lists, formulae and any other material, disks or any other magnetic media and shall carry out his leaving the Company in coordination with the people in charge of him including the transfer of his position according to an organized timetable which shall be determined by his superiors and he shall transfer his position in an organized fashion in accordance with the Company procedures including the documents and all matters he has handled to that party so ordered by the Company and all to the satisfaction of the Company.

14.	After the termination of the employment relations between the Employee and the Company the Employee shall deliver to his new employer a notice regarding his duties, obligations and rights under this Appendix. Likewise, the Employee hereby permits the Company to deliver such notice, provided that there is a reasonable apprehension that the Employee has breached any of his undertakings under this Appendix.
E.	Confidentiality
15.	The Employee declares that he is aware and that he agrees that during the course of his employment and within the framework of the relations of trust he is exposed and shall be exposed to professional – commercial information of great value in matters relating to the business of the Company and its commercial ties and especially in everything relating to the business of the Company in the following fields: development, manufacture, marketing, sales and service of the products and communication solutions including, inter alia, products of DCME and VOIP products separately as well as integrated with SoftSwitch products. The products include condensing and transfer of telephony signals (including, inter alia, speech, modem, fax and video) and the conversion of the signals and the transfer thereof over TDM networks or Packets networks (including, inter alia, ATM, IP and Ethernet). (Hereinafter: “the Company’s Field of Business”). This information is the exclusive property of the Company and its disclosure to any entity or the use thereof by the Employee is likely to seriously harm and damage the Company.
16.	Therefore, the Employee declares and undertakes that as an employee of the Company and even after the termination of his employment for any reason whatsoever he shall maintain confidentiality and shall not disclose or deliver to any person or any body whatsoever, save for employees of the Company within the framework of their work and according to need, and he shall not publish in any form whatsoever and shall not make use by

himself or in favour of a third party, directly and/or indirectly, regardless of whether the secrets, information and documents as detailed below, reached him as a result of his employment in the Company, directly or indirectly:

16.1 Commercial secrets and/or other secrets of the Company, information directly or indirectly related to the property, business, affairs, customers and suppliers of the Company and of the people and/or bodies connected to the Company, including information in the field of business of the Company, as defined above, and any information relating to and/or connected to the aforesaid, including, but without derogating from the generality of the above said, any information which reached and/or shall reach the Employee and/or come to his attention, directly and/or indirectly, during the course of his employment in the Company, including information relating to customers of the Company and its suppliers and/or its manufacturing setup and/or marketing setup of the Company or confidential information of third parties which the Company has received from the said third parties, or information relating to ties of the Company and/or companies connected to it, controlling, controlled by or affiliated with it, effectively and actually, with any third parties whatsoever, including customers, suppliers, banking institutions, government bodies, private entities, quassi public and public bodies of any sort whatsoever and any other financial, business, commercial information, financial statements and balance sheet prior to the publication thereof, any inside information whatsoever which can influence the value of the Company shares,

	formulae, data, programs, software, patents, processes, inventions, discoveries, innovations, improvements, researches, and any methods whatsoever, developments and scientific and technical developments, economic, commercial or other developments, and any information which the Company is likely to engage in, provided that such is not in the public domain or which has not come into the public domain following the breach of any of the obligations and undertakings of the Employee pursuant to this document or in law, regardless of whether the aforementioned information and secrets reached the Employee due to his employment in the Company or by any other means (hereinafter: “the Secrets/Confidential Information”), accordingly;
16.2	As well as any document, memorandum, note, report, summary, plans, letters, drafts, documents of applications for patents, prototypes, models, pictures, descriptions, sketches or other documents of the Company including computer software and encrypted information and/or confidential information in any media whatsoever regarding the above detailed Confidential Information and Secrets, fully or partially, whether made by the Employee or by anyone else (hereinafter: “the Documents”).
16.3	The Employee undertakes not to make any use, including duplication, manufacture, sale, transfer, copying and dissemination of the Confidential Information and Secrets and Documents as defined above which is not for the purposes of the success of the Company and shall not undertake any other action which may harm the Company’s reputation.

17.	The Employee confirms that all the Confidential Information and Secrets or Documents as mentioned above are within the ambit of essential business information and the property of the Company, that it is not in the public domain and that it cannot easily be discovered by others and that the confidentiality thereof grants a business advantage to the Company over its competitors and the Company takes all reasonable measures to maintain the confidentiality thereof.
18.	The abovementioned undertakings shall not apply to the delivery of information with the consent of the board of directors or with the consent of anyone authorized by the board of directors to approve the transfer of the said information and the delivery of the information to those authorities where the disclosure thereof is required under any law.
G.	Restriction of Competition and Non Solicitation
19.	Likewise, for so long as the employment relations between the Company and the Employee continue, the Employee undertakes not to compete with the Company and/or with a company under its control and/or with any enterprises and/or activities whatsoever in which the Company is involved, directly or indirectly, whether by himself or through anyone on his behalf, whether as an employee, consultant, partner, contractor, distributor, shareholder and/or in any other service whatsoever, whether at his initiative or at the initiative of another person, and whether by any other means whatsoever, including the Employee undertaking not to solicit, not to contract and not to employ, whether directly or indirectly, whether at his initiative or at the initiative of any other person whatsoever, with any employees of the Company, past employees, customers, past customers, suppliers and past suppliers of the Company and/or agents with whom the Company has conducted negotiations for the creating of a contract at the termination date of his employment with the Company or beforehand, whether in Israel or countries in which the Company is active, in order to

	leave the Company and/or to compete with the Company, directly and/or indirectly and/or which is not for the purpose of carrying out his position under this contract without receiving the prior written consent of the Company.
20.	Further to that stipulated in Section 19 above, the Employee undertakes, that so long as the employment relations between the Company and the Employee prevails, he will not solicit or attempt to solicit, whether directly or indirectly, an employee, consultant, or service provider of the Company to terminate their relations with the Company with the aim of granting their services to the Employee for that other party.
21.	In light of the special status of the Employee in the Company and in light of his expertise, knowledge, ties and special experience in the field of the Company’s operations, the limitations and restrictions in Sections 19 and 20 above shall also apply to the Employee for twelve (12) months after the termination of the employment relations between the Employee and the Company even if his employment has terminated at the initiative of the Company.
G.	Intellectual Property Rights, Copyrights and Patents
22.	The copyright on any invention and/or patent and/or commercial secret and/or professional secret and/or innovation whatsoever invented by the Employee and any of the employees of the Company subordinate to him during the duration of his employment at the Company and/or following his employment at the Company is the exclusive intellectual property right of the Company and the Employee hereby assigns any matter he might have in that invention and/or patent and/or commercial secret and/or professional secret and/or innovation whatsoever, in favour of the Company and waives any right in the said intellectual property right, without any further consideration provided that he will not be required to incur any expenses whatsoever involved

	with the said assignment. The Company may defend any invention and/or patent and/or commercial secret and/or professional secret and/or innovation whatsoever as stated above by means of registration and/or any other means whatsoever, whether in Israel or anywhere else in the world.
23.	The Employee undertakes that whenever he is required to do so, including after the termination of his employment for any reason whatsoever, he will sign on any document which at the discretion of the Company is required in order to submit an application for patents or copyrights under Israeli law and/or under the law of any other foreign country in order to protect the matters of the Company in the invention and/or patent and/or commercial secret and/or professional secret and/or any innovation whatsoever as stated above. In the case where the Company cannot, for any reason whatsoever, after reasonable attempts, receive the signature of the Employee in connection with the said actions as stated in Section 22 above and in this Section, the Employee hereby empowers and authorizes the Company and the office bearers of the Company as his attorneys to sign and act in his name on the documents required in order to execute the actions as described in Section 22 above and in this section.
24.	The Employee undertakes to record notes, pursuant to the Company procedures, of any invention and/or patent and/or commercial secret developed by him and to notify the Company in writing about any invention and/or patent and/or commercial secret and/or any innovation whatsoever invented and/or to be invented by the Company employees subordinate to the Employee, immediately upon such discovery.
25.	The Employee declares that apart from that stipulated in Appendix A attached hereto, he holds no ownership in any matter in a patent and/or patent application whatsoever and/or in the research activities at the stage of the submitting of the registration of the patent nor any material under copyright.

26.	The obligations of the Employee under this chapter shall remain in force also after the termination of his employment with the Company and/or those substituting him also with respect of inventions made by him during the period of his employment or as a result of his employment with the Company.
27.	That stated in this Section shall also apply to inventions which the Employee discovers, develops or invents after the relations between him and the Company have terminated for any reason whatsoever, if the Employee makes use of and is assisted by Confidential Information or material reaching him or his knowledge within the framework of his employment in the Company.
28.	In order to alleviate any doubt it is hereby clarified that the Employee shall not be entitled to make use, and the Employee undertakes that he shall not make use, during his employment, of any intellectual property right or classified information of any third party whatsoever (if any) unless such use is legal.
29.	The provisions of this Section shall also bind anyone coming instead of the Employee, his estate, his heirs, his successors and family members.
30.	Prohibition of using the Company’s name: The Employee undertakes that he will not make any use of the Company name or any other name contained in the name in connection with products and/or services and/or the promoting of products on his behalf and/or any other use thereof, whether directly or indirectly, save for mentioning the mere fact that he was employed by the Company, whether by himself or through others, both during the period of his employment in the Company for purposes which are not for his work purposes and after the termination of his employment with the Company, unless this has been expressly permitted to him in writing by the Company.

H.	The Employee Declares and Confirms That:
31.	His undertaking to maintain confidentiality, restriction of competition, non harming of the reputation and intellectual property rights under this document shall:

31.1	Apply towards the Company and towards the related companies, subsidiary companies, connected companies and the parent company of the Company, accordingly;
31.2	Is a result of the status of the Employee and considering his position and everything implied by such, his terms of employment under this agreement have been determined, inter alia, in reliance on his undertakings;
31.3	It is fair, in reasonable and good measure, also in light of the special consideration he received within the framework of the contract of employment with the Company and is intended, first and foremost, to protect the confidentiality of the Company and its Confidential Information which is the essence of its business and commercial advantage, that is to say the protection of the Company and that great capital has been invested in this.
31.4	That it is not in conflict with previous undertakings of the Employee and the Employee shall not enter into any conflicting undertakings in the future conflicting with his undertakings under this agreement.

32. The breach of any of the undertakings under this Appendix shall be in conflict with the relations of trust and a special trust between the parties as an Employee and Employer, proper trade practices and the duty of good faith and fairness between the parties, it shall harm the business of the Company and shall constitute a fundamental breach of this contract and of the commercial secrets,

	confidential ties, Confidential Information and Protected Confidential Interests of the Company.
33.	The Employee received special and separate consideration for his undertakings under this Appendix which are in good and reasonable measure and do not prevent the Employee from developing his general knowledge and professional talents in the field of his employment in respect of anyone who is not a customer and employee of the Company and without stealing the Commercial Secrets.
I.	Relief
34.	In any event of the breach of the confidentiality sections and/or the restriction of competition sections and/or the intellectual property right sections as stated above, the Company shall be entitled, further to any other remedy or relief in law, or under this Contract, to the following:

34.1	To receive from the Employee the full Consideration and/or the full benefits he benefited from the breach;
34.2	To receive from the Employee the full special Consideration for his undertakings to refrain from competing, as specified in the Agreement, paid to him during the course of his employment under this contract, plus legal linkage and interest differences;
34.3	To receive compensation from the Employee for any damages and/or expenses incurred by the Company as a result of the breach, including legal expenses and attorneys fees plus Value Added Tax as required by law.
34.4	To setoff these amounts from any amount owing by the Company to the Employee.
34.5	And also to receive any legal measure of a mandatory order, injunction order, provisionary,

temporary or permanent measure to prevent the breach and/or the removal thereof, and the Employee declares and agrees in advance to provide such action against him, as it is fair, just and in reasonable and good measure according to the matter.

J. The Provisions which shall apply upon termination of the employment in the event of a change of control -

Change of Control Termination

Change of Control Definition

35. For purposes of the Agreement and this Appendix Change of Control means the occurrence of any of the following:(I) a sale lease, or other disposition of all or substantially all of the assets of the Company or of Veraz Networks, Inc. (the ''Parent company”); (II) a merger or consolidation in which the Company or of the Parent Company is not the surviving corporation; (iii) a reverse merger Involving the Company or of the parent Company in which the Company or of the Parent Company is the surviving corporation but the shares of common stock of the Company or of the Parent Company (the “common stock”) outstanding immediately preceding the merge are converted by virtue of the merger into other property. whether In the form of securities, cash or otherwise; (iv) an acquisition by any person, entity or group within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act, 1934 of US (the “Exchange Act”) or any comparable successor provisions (excluding any employee benefit plan, or related trust, sponsored or maintained by the Company or an affiliate of the Company) of the beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act, or comparable successor rules) of securities of the Company or of the Parent Company representing at least fifty percent (50%) of the combined voting power entitled to vote in The election of directors; or, (v) in the event that the individuals who, as of the effective date of such transaction. are members of the Board of the Parent Company (the “Incumbent

Board”), cease for any reason to constitute at least fifty percent (SO%) of the Parent Company’s Board of Directors (If the election, or nomination for election by the Parent Company’s shareholders, of any new member of the Company’s Board of Directors is approved by a vote of at least fifty percent (50%) of the Incumbent Board, such new member of the Board of Directors shall be considered as a member of the Incumbent Board.) Notwithstanding the foregoing, for the purposes of the Agreement and this Appendix and with respect to any and all clauses of this Section of this Appendix, an initial public offering of the securities of the Parent Company (an “IPO”) or any transactions or events constituting part or an IPO shall not be deemed to constitute or in any way effect a Change of Control.

36.

In the event employee’s employment with the Company is involuntarily terminated without Cause (“Cause” shall mean the occurrence or any of the events specified In Section 32 of the Agreement) by the Company or its successor, or the employee resigns for Good Reason (as defined below), and such termination or resignation occurs within eighteen (18) months following a Change of Control, the employee shall be entitled to: (a) the Company shall pay to the employee severance in an aggregate amount equal to six (6) months of the employee’s then current base salary, subject to withholdings and deductions, such sum payable in monthly installments In accordance with the Company’s standard payroll practices; (b) health, dental and vision benefits for a period of six (6) months commencing on the date of termination and at the same coverage terms as provided to the employee at the date of termination and (c) the immediate acceleration of vesting on all stock, stock options and other stock awards held by the employee in an amount of shares equal to 100% of the then unvested shares, provided that in no event will such acceleration result in employee having unvested shares in an amount less than the amount that would vest over the 12 month period following such termination. Employee’s receipt of the severance payment and

	vesting acceleration provided in this section shall be conditioned on employee’s full compliance with release requirements as shall be determined by the Company at such time. Notwithstanding anything contained in this Appendix to the contrary, if employee receives the benefits pursuant to this Section, he shall not entitled to any other benefits under the Agreement. “Good Reason” shall mean any one of the following events which occurs on or after the commencement of employee’s employment without employee’s consent: (I) any reduction of employee’s then current annual base salary; (ii) any material diminution of the employee’s duties, responsibilities or authority to a level below that of an officer of the Company. excluding for this purpose (1) an isolated or inadvertent action not taken In bad faith which is remedied by the Company immediately after notice thereof is given by the employee, and (2) any change in employee’s title, duties, responsibilities or authority if employee Is given or retains other officer level duties within the Company; or (iii) any requirement that the employee relocate to a work site more than twenty five (25) miles from the Company’s current location.
K.	General
37.	If, for any reason whatsoever, any of the terms of this Agreement are determined as being invalid or unenforceable, the validity and enforceability of the other provisions of this agreement shall not be harmed.
38.	The Employee shall bear all expenses arising from the rights and benefits he received under this agreement. It is hereby clarified that all the amounts as stipulated in the employment agreement are gross amounts and any legal tax and any other obligatory payment, including health insurance and national insurance payments, shall be deducted from these amounts and from any other rights and benefits the Employee receives in the future under this agreement.

39.	Any change to the provisions of this agreement and the appendices thereto shall only be done in writing and signed by the parties.
40.	Any notice sent by registered mail by one party to the other party shall be considered as if received by the other party three business days after having being sent, and if sent by hand or by electronic mail, upon delivery thereof.
41.	The Employee shall not be entitled to transfer, assign, endorse or deliver to others, directly or indirectly, his rights and obligations under this agreement of employment, without receiving the prior written consent of the Company.
42.	The Company may transfer, assign or may endorse the rights and obligations of the Employee, fully or partially, to another, at its discretion provided that the rights of the Employee are maintained.
43.	The Israeli law alone shall apply to the agreement of employment and the labour (employment) relations, including that as stipulated in Section J and the place of jurisdiction shall be the competent judicial instance in Israel.
44.	The addresses of the parties are as detailed in the preamble to the Personal Agreement of Employment.

Confirmation of the Employee

I hereby confirm that I have been given the opportunity to consult with an attorney on my behalf, I have thoroughly read this agreement and the appendices to this agreement, I have understood the contents, significance and meaning thereof in full, and I agree to everything stated thereof and undertake to fulfil all my obligations thereunder in full.

VERAZ
Networks

Appendix B

General Confirmation Regarding Payments of Employers to a Pension Fund and Insurance Fund
Instead of Severance Pay Compensation

Pursuant to the Severance Pay Compensation Law, 5723 – 1963

Pursuant to the powers under Section 14 of the Severance Pay Compensation Law, 5723 – 1963 (hereinafter: “the Law”), I confirm that payments paid by an employer commencing from the publication date of this confirmation, for that employer’s employees for a comprehensive pension in a provident pension fund which is not an insurance fund as defined in the Income Tax Regulations (Rules for Confirmation and Management of Provident Funds), 5724 – 1964 (hereinafter: “the Pension Fund”) or into an executive insurance fund (Bituach Minhalim) including the possibilities for pensions or an integration of payments into a pension fund and into a program which is not a pension fund in the said insurance fund (hereinafter: “the Insurance Fund”) including payments paid by integrating the payments of the Pension Fund and the Insurance Fund, whether the Insurance Fund has a pension program or not (hereinafter: “the Employer’s Payments”), shall replace severance pay compensation owing to the said employee for the salary from which the said payments were made and for the period that the said payments were made (hereinafter: “the Salary and Dismissal”), provided that each of the following prevails:

1) Payments of the Employer.

(a) The Pension Fund is not less than 14¹/₃% of the Salary and Dismissal or 12% of the Salary and Dismissal if the Employer also pays, in addition to such, for payments for his employee in order to complete the severance pay compensation provident fund or into an Insurance Fund or in the name of the Employee at the rate of 2¹/₃% of the Salary and Dismissal. Where the Employer has not paid the said

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	21/3 % in addition to the 12%, as stated, the payments shall replace 72% of the severance pay compensation of the Employee, only;
(b)	The Insurance Fund is not less than one of the following:

(1)

13 1/3 % of the Salary and Dismissal if the Employer also pays for his Employee payments for the securing of monthly income in the case of loss of work ability into a program which has been approved by the Market Capital, Insurance and Savings Commissioner at the Ministry of Finance at the required rate for the said securing of 75% of the Salary and Dismissal at least, or at a rate of 2 1/2% of the Salary and Dismissal according to the lower of the two. (Hereinafter: “the Payment for Insurance of Loss of Ability to Work”);

(2)

11% of the Salary and Dismissal if the Employer has also paid payments for Insurance for the Loss of Ability to Work and in such a case the insurance payments made by the employer shall replace 72% of the severance pay compensation of the employee only; where the employer has paid in addition to all of this also payments to complete the severance pay compensation into the severance pay compensation provident fund or into the Insurance Fund in the name of the

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	employee at the rate of 2 1/3 % of the Salary and Dismissal, the payments of the employer shall be instead of 100% of the severance pay compensation of the employee.
(2)	No later than three months from the commencement of the execution of the payments by the employer a written contract shall be made up between the employer and the employee containing the following:

(a)	A consent of the employee to the arrangement under this confirmation in the wording specifying the payments of the employer and the pension fund and the insurance fund, respectively. The said contract shall also include the wording of this confirmation;
(b)	The prior waiver of the employer on the rights that it may have for a refund of funds made from its payments, unless the rights of the employee to severance pay compensation has been negated in a

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judgment pursuant to sections 16 or 17 of the Law and provided that such rights has been negated or that the employee has withdrawn the funds from the pension fund or from the insurance fund following an occurrence which does not entitle him to do so; in this matter: “an event which entitles” – death, disability or retirement at the age of 60 or more.

(3) This confirmation shall not derogate from the right of an employee to severance pay compensation under law and under a collective agreement, expansion order or contract of employment, for a salary above and beyond the Salary and Dismissal.

15^th of Sivan, 5758 (9^th of June 1998)

Eliyahu Yishai

Minister of Labour and Welfare

EX-10.24

Exhibit 10.24

SUBLEASE AGREEMENT

     This Sublease Agreement (“this Sublease”) is made as of the 31st day of August 2004 by and between ECI Telecom, Inc., a Delaware corporation (“Sublandlord”), and Veraz Networks, Inc., a Delaware corporation (“Subtenant”).

RECITALS:

     1. Pursuant to that certain Lease Agreement dated March 18, 2002 as subsequently amended on March 30, 2004 by a Second Amendment to Lease as subsequently amended on                      2004 by a Third Amendment to Lease and as subsequently amended on                      2004 by a Fourth Amendment to Lease (collectively the “Prime Lease”), by and between Sublandlord, as Tenant, and fort Lauderdale Crown Center, Inc., a Florida corporation (“Lessor”), as Landlord, Sublandlord is leasing Suite 101, consisting of approximately 18,300 rentable square feet on the first (1st) floor of Building “A” (the “Building A Premises”) and approximately 13,104 rentable square feet in Building “C” (the “Building C Premises”) (collectively, the Building A Premises and the Building C Premises shall be referred to as the “Premises”) of the buildings now known as Building “A,” Building “B,” and Building “C,” all of which have the address of 1201 West Cypress Creek Road, Fort Lauderdale, Florida 33309 (collectively, the “Building”), which are a part of the collections of buildings known as Crown Center (the “Master Premises”). A true and complete copy of the Prime Lease is attached hereto as Exhibit A.

     2. Subtenant desires to sublease from Sublandlord a portion of the Master Premises containing approximately 4279 square feet of rentable area as more particularly described herein.

     Now, Therefore, for and in consideration of the mutual covenants set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Sublandlord and Subtenant, hereby agree as follows:

     1. Subleased Premises. Subject to the terms, covenants and conditions set forth in this Sublease, Sublandlord hereby subleases to Subtenant, and Subtenant hereby takes from Sublandlord, that certain portion of the Master Premises containing approximately 4279 square feet of rentable area being more particularly shown in cross-hatching on the floor plan attached hereto as Exhibit B (hereinafter referred to as the “Subleased Premises”).

     2. Sublease Term.

          (a) Term. The term of this Sublease (the “Term”) shall commence on October 1, 2004 (the “Commencement Date”), and shall terminate concurrently with the expiration of the Prime Lease including any and all option periods exercised by Sublandlord unless otherwise sooner terminated in accordance with the provision of this Sublease (the “Expiration Date”).

          (b) Automatic Termination. Notwithstanding any other provision hereof, the termination or expiration of the Prime Lease for any reason shall automatically result in the termination of this Sublease, and the obligations of the parties hereunder to be performed from

1.

and after such termination or expiration shall cease as of the date of such expiration or termination of the Prime Lease. Sublandlord shall in no event be liable to Subtenant for any loss or damage occasioned by, or resulting from, the expiration or termination of the Prime Lease.

     3. Rent.

          (a) Minimum Rent. During the term of this Sublease, Subtenant shall pay to Sublandlord a monthly full service (“Rent”) for the Subleased Premises, without set-off, deduction or demand, in the amounts as follows: $9,500.00. The rent shall be inclusive of all electric, janitorial, building maintenance all pass-throughs, under the Lease including but not limited to Common Area Maintenance (“CAM”) and Real Estate Taxes. The Rent for shall increase at annual adjustments of three percent (3%) for the year preceding said anniversary, plus applicable sales tax thereon.

     The Subtenant shall pay any and all applicable sales tax remaining from this Sublease along with the payment of the Rent.

     Whenever, under the terms of this Sublease (including, without limitation, the terms incorporated by reference from the Prime Lease), any sum of money is required to be paid by Subtenant in addition to the monthly minimum rent hereunder including sales tax, such sum shall be deemed to be additional rent, whether or not designated as such, and shall be collectible as rent. If the Commencement Date occurs on a day other than the first day of a calendar month, Subtenant shall pay the Rent on a pro-rata basis for the number of days between the Commencement Date and the last day of the calendar month in which the Commencement Date occurs, both dates being inclusive.

          (b) Payment of Rent. Subtenant shall pay all Rent, as well as all additional rent under this Sublease and the Prime Lease, when due and payable, in equal monthly installments in advance on or before the first day of each calendar month during the Term hereof, in lawful money of the United States, without notice or demand and without deduction, abatement, counterclaim, set-off or recoupment of any amount or for any reason whatsoever. All Rent and additional rent payable by Subtenant under this Sublease shall be paid and delivered to Sublandlord at 1201 West Cypress Road, Fort Lauderdale, Florida 33309, Attention: Chief Financial Officer, or such other address or person as Sublandlord may designate in writing.

          (c) Additional Rent. In addition to the payment of the Rent, Subtenant shall pay to Sublandord lord all amounts which Sublandlord may be required to pay to Lessor as a result of Subtenant’s failure to perform or comply with any of the terms and conditions of this Sublease or the Prime Lease, which amounts shall be payable by Subtenant to Sublandlord upon demand.

          (d) Late Charges; Interest. Any installment of Rent, additional rent or any other charges due hereunder and not received by Sublandlord within five (5) days from the due date shall be subject to a late payment charge equal to ten percent (10%) of the amount due, which charge Subtenant shall immediately pay to Sublandlord. In addition, such payment and such late fee shall bear interest at the rate of fifteen percent (15%) per annum from the date such payment was due to the date of payment. If Subtenant shall have been in default hereunder,

2.

Sublandlord may at any time thereafter require that Rent and additional rent due hereunder be paid by certified check.

     4. Acceptance. Subtenant hereby accepts the Subleased Premises in their “AS IS, WHERE IS” condition on the date hereof and acknowledges and agrees that no representations or warranties with respect to the condition or use thereof have been made by Sublandlord or by anyone representing or purporting to represent Sublandlord. Sublandlord and Lessor are under no obligation to make any structural changes or other alterations, decorations, additions, improvements or other changes in or to the Subleased Premises.

     5. Compliance with Prime Lease.

          (a) Incorporation of Prime Lease. Sublandlord and Subtenant hereby acknowledge and agree that this Sublease is subject and subordinate to the terms and conditions of the Prime Lease, a copy of which is attached hereto as Exhibit A. Except as may be inconsistent with the terms hereof, all terms, covenants and conditions of the Prime Lease are herein incorporated by reference and made a part hereof and shall be applicable to this Sublease with the same force and effect as if Sublandlord were the lessor under the Prime Lease and Subtenant were the lessee thereunder. In the event of any inconsistency between the terms of the Prime Lease and this Sublease, the terms of this Sublease shall in all cases govern.

          (b) Exclusions. Notwithstanding the foregoing, the terms of this Sublease shall not include the discretionary elections and consents provided to Sublandlord under the Prime Lease. The right to make all such elections and provide all such consents shall be reserved solely to Sublandlord and Sublandlord shall in no event be liable to Subtenant for any loss or damage occasioned by or resulting from any elections made or consents given by Sublandlord as lessee under the Prime Lease. In no event shall Sublandlord be deemed to have made any of the representations, warranties, covenants, agreements or indemnifications made by Lessor under the Prime Lease.

          (c) Compliance; Indemnification. Subtenant hereby assumes all of Sublandlord’s obligations under the Prime Lease with respect to the Subleased Premises and covenants and agrees that Subtenant shall comply with the terms and provisions of the Prime Lease with respect to the Subleased Premises and shall neither do nor permit anything to be done which would constitute a default or a breach under the Prime Lease or otherwise cause the Prime Lease to be terminated or forfeited by reason of any right reserved to or vested in Lessor under the Prime Lease. Subtenant shall indemnify, defend and hold Sublandlord harmless from and against all costs, claims, damages or expenses of any kind whatsoever (including but not limited to attorneys’ fees and related legal expenses) resulting from any breach or default by Subtenant of Subtenant’s obligations hereunder, including, without limitation, those which may result in the termination or forfeiture of the Prime Lease, or otherwise resulting from Subtenant’s use, occupancy or operation of the Subleased Premises or occasioned wholly or in part by any act or omission of Subtenant, and Subtenant’s agents, contractors or employees.

          (d) Lessor Services. Subtenant acknowledges and agrees that Sublandlord shall not be obligated to perform any of the covenants and obligations of Lessor under the Prime Lease, including but not limited to any covenant or obligation of Lessor with respect to the

3.

furnishing of any services or utilities to the Subleased Premises or the Office Building or the maintenance, repair or restoration of the Subleased Premises or the Office Building, and Subtenant shall rely upon and look solely to Lessor under the Prime Lease for the performance thereof. If Lessor shall default in the performance of any of its covenants or obligations under the Prime Lease, Subtenant shall have no rights or remedies against Sublandlord but instead shall have the right, at Subtenant’s expense and in the name of Sublandlord, to make any demand or institute any action or proceeding at law or in equity or otherwise against Lessor permitted under the Prime Lease for the enforcement of Lessor’s obligations or covenants under the Prime Lease. The foregoing notwithstanding, Subtenant shall furnish Sublandlord with written notice of Lessor’s default and Sublandlord at its option and expense may (i) seek to cure such default itself; (ii) bring its own action against Lessor; (iii) determine that no default was present and/or; (iv) allow Subtenant to make Subtenant’s claim directly against Lessor. Sublandlord agrees that it will execute any reasonable demands, pleadings, documents or other written instruments and will otherwise reasonable cooperate with Subtenant as may be necessary to enable Subtenant to proceed in Sublandlord’s name to enforce such obligations or covenants of Lessor under the Lease. Subtenant shall indemnify, defend and hold harmless Sublandlord against all costs and expenses (including attorneys’ fees and related expenses and court costs) suffered or to be suffered by Sublandlord in connection with any such demand, action or proceeding undertaken by Subtenant.

     6. Alterations; Improvements. Subtenant shall not make any alterations, additions, improvements or renovations to or affecting the Subleased Premises without the prior written consent of Lessor and Sublandlord. Any such alterations, additions, improvements or renovations approved by Lessor and Sublandlord shall be constructed by Subtenant at Subtenant’s sole cost and expense and in accordance with the requirements of the Prime Lease.

     7. Subtenant’s Insurance.

          (a) Insurance Coverages. Subtenant shall obtain, at Subtenant’s sole cost and expense, and maintain during the Term hereof the insurance coverages required to be maintained by Sublandlord as subtenant under the Prime Lease and shall deliver a certificate of such insurance coverages to Sublandlord contemporaneously with Subtenant’s execution of this Sublease, and from time to time thereafter deliver renewal certificates to Sublandlord prior to the expiration of such insurance coverages. The company or companies writing such insurance, as well as the form of such insurance, shall at all times be subject to Sublandlord’s approval and any such company or companies shall be licensed to do business in the State of Florida. All such policies shall contain a provision whereby the same cannot be canceled, terminated, reduced or materially changed unless Sublandlord and Lessor are given at least thirty (30) days prior written notice. In addition to the named insureds, if any, specified in the Prime Lease, Sublandlord shall be named as an additional insured on all insurance policies Subtenant is required to maintain hereunder.

          (b) Waiver of Liability. Subtenant hereby releases Lessor and Sublandlord from all liability or responsibility to Subtenant or any person claiming by, through or under Subtenant by way of subrogation or otherwise, for any injury, loss or damage to any person or property in or around the Subleased Premises or to Subtenant’s business irrespective of the cause of such injury, loss or damage, and Subtenant shall require Subtenant’s insurer(s) to include in

4.

all of Subtenant’s insurance policies which could give rise to the right of subrogation against Lessor or Sublandlord a clause or endorsement whereby the insurer(s) shall waive any and all rights of subrogation against Lessor and Sublandlord.

     8. Assignment and Further Sublease. Subtenant shall not voluntarily or by operation of law assign, transfer, mortgage, sublet, or otherwise transfer or encumber all or any part of Subtenant’s interest in this sublease or in the Premises, without Sublandlord’s and Lessor’s prior written consent, such consent shall not be unreasonably withheld, delayed or conditioned pursuant to the terms and conditions of Section 10 of the Prime Lease.

     9. Personality. The Subtenant shall be permitted to utilize any and all furniture, fixtures and equipment (hereinafter referred to as the “Personality”) currently located within the Demised Premises. Subtenant accepts said Personality in their “As Is, Where Is and How Is” condition with all faults and defects. It is expressly understood and agreed that the condition, fitness, functionality and operability of the Personality shall not be a condition of this Sublease nor the Subtenant’s obligation to pay Rent due hereunder. The Personality shall be returned to the Sublandlord at the end of the Term in the same condition as of the Commencement Date reasonable wear and tear excepted. The Sublessee shall indemnify defend and hold the Sublandlord harmless from any and all claims, demands, suits, judgments emanating from its utilization and/or maintenance of the Personality.

     10. Surrender. Upon the Expiration Date, or at any earlier termination of this Sublease, the Subtenant shall quit and surrender to the Sublandlord the Subleased Premises, broom clean and in as good order and condition as they were on the Commencement Date, ordinary wear and tear excepted.

     11. Default.

          (a) Event of Default. Any one or more of the following shall constitute an “Event of Default” hereunder:

               (i) Any default by Subtenant under (A) this Sublease or (B) the Prime Lease which continues beyond the expiration of any cure period expressly granted to Sublandlord under the Prime Lease.

               (ii) The sale of Subtenant’s interest in the Subleased Premises under attachment, execution or similar legal process.

               (iii) The filing of a petition proposing the adjudication of Subtenant as a bankrupt or insolvent or the reorganization of Subtenant or an arrangement by Subtenant with Subtenant’s creditors, whether pursuant to the Federal Bankruptcy Code or any similar federal or state proceedings.

               (iv) The admission in writing by Subtenant of Subtenant’s inability to pay Subtenant’s debts when due.

5.

               (v) The appointment of a receiver, trustee, guardian, conservator or similar officer to manage or oversee the business or any property of Subtenant or to wind-up Subtenant’s business or affairs

               (vi) The making by Subtenant of an assignment for the benefit of Subtenant’s creditors.

               (vii) Any failure by Subtenant to (a) make when due any payments of the Rent, additional rent or other sum due hereunder, which failure continues for five (5) days after Landlord delivers written notice thereto to Tenant or (b) perform or observe any term, covenant or condition of this Sublease not otherwise specifically described in this Section 11, which failure continues for twenty (20) days after Sublandlord delivers written notice to the Subtenant.

          (b) Remedies. Upon the occurrence of an Event of Default, Sublandlord shall have all of the same rights and remedies against Subtenant that would be available to Lessor under the Prime Lease if the occurrence of such Event of Default were attributable to Sublandlord thereunder. It is understood and agreed that, upon the occurrence of any such Event of Default, Sublandlord may elect to re-Sublet the Subleased Premises in its sole and absolute discretion and without impairing in any manner the liability of Subtenant to Sublandlord under this Sublease.

          (c) Right to Cure. If Subtenant shall default in the observance of any provision or covenant on Subtenant’s part to be performed, Sublandlord, in addition to all other remedies available to it, may elect, but shall not be required, to perform such obligation of Subtenant and Subtenant shall reimburse Sublandlord for any expenditure incurred in connection therewith, together with interest thereon at a rate of eighteen percent (18%) per annum, or at such rate as is provided in the Prime Lease, whichever is greater, upon demand from Sublandlord.

          (d) Attorneys’ Fees. In the event any sums payable to Sublandlord hereunder are collected at law or through any attorney, Subtenant, in addition to such sums, shall reimburse Sublandlord upon demand for its costs and expenses, including reasonable attorneys’ fees, incurred by Sublandlord. Subtenant shall pay all attorneys’ fees and expenses Sublandlord incurs in enforcing any other obligation of Subtenant hereunder, or in connection with any litigation which Sublandlord shall, without its fault, become involved through or on account of this Sublease.

          (e) Waiver of Trial by Jury. Insofar as permitted by law, Sublandlord and Subtenant hereby expressly waive the right to trial by jury in any action or proceeding or counterclaim between the parties hereto, or their successors or permitted assigns, arising out of or in any way connected with this Sublease or any of its provisions, Subtenant’s use or occupancy of the Subleased Premises, and/or claim of injury or damage.

     12. Damage, Destruction or Condemnation. In the event of damage or destruction of the Subleased Premises or the taking of all or any part thereof under the power of eminent domain, this Sublease shall terminate if the Prime Lease is terminated as a result thereof, and the rent payable hereunder shall abate only as long as and to the extent that the rent due from

6.

Sublandlord to Lessor under the Prime Lease with respect to the Subleased Premises abates as a result thereof. Subtenant shall have no claim to Sublandlord’s insurance proceeds or to condemnation proceeds.

     13. Brokers. Subtenant acknowledges and agrees that it has not engaged the services of, and are not liable to any real estate agent, broker, finder or any other person or entity for any brokerage or finder’s fee, commission or other amount with respect to this Sublease. Sublandlord and Subtenant each agree to indemnify, defend and hold the other harmless against all loss, liability and expense, including attorneys’ fees and costs, suffered by either party due to a breach of the foregoing representation, covenant and warranty.

     14. Miscellaneous Provisions.

          (a) Headings. Headings used herein are for convenience only and shall not be construed to limit or extend the meaning of any provision of this Sublease.

          (b) Severability. The provisions of this Sublease are severable and, if any clause or provision shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provisions or part thereof in such jurisdiction and shall not in any manner affect such clause or provision in any other jurisdiction or any other clause or provision of this Sublease in any jurisdiction.

          (c) Governing Law. This Sublease shall be governed by and construed in accordance with the laws of the State of Florida, without regard to conflicts of laws principles.

          (d) Counterparts. This Sublease may be executed in two or more counterparts, each of which shall be deemed an original and which together shall constitute one and the same instrument.

          (e) Entire Agreement Modifications. This Sublease constitutes the entire agreement between the parties hereto with respect to the Subject matter hereof and supersedes all prior discussions, understandings, agreements and negotiations between the parties hereto. This Sublease shall not be modified or amended and no waiver of any provision hereof shall be effective unless set forth in an instrument duly executed by the parties hereto.

          (f) Successors and Assigns. The provisions of this Sublease shall extend to and shall bind and inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and permitted assigns. If Sublandlord transfers its estate in the Subleased Premises, Sublandlord shall thereafter be relieved of all obligations of Sublandlord expressed in this Sublease or implied by law, except those arising out of a breach or default by Sublandlord prior to such transfer.

          (g) Waiver. One or more waivers of any covenant or condition by Sublandlord shall not be construed as a waiver of a further breach of the same or other covenant or condition, and any consent or approval shall not be deemed to waive or render unnecessary Sublandlord’s consent or approval to any subsequent similar action. Sublandlord’s acceptance of Rent or additional rent during the continuance of any breach of this Sublease or Event of Default hereunder shall not constitute a waiver of such breach or Event of Default. Any payment by

7.

Subtenant of a lesser amount of Rent or additional rent than is due shall be applied to such arrearage as Sublandlord may designate irrespective of any contrary designation by Subtenant and Sublandlord’s acceptance of any such payment shall not be deemed an accord and satisfaction, and shall be without prejudice to Sublandlord’s right to pursue other remedies.

          (h) Notices. Any notice required or permitted under this Sublease shall be in writing and shall be deemed to have been received (i) if given by overnight delivery service or by personal delivery, when actually received, or (ii) if given by certified mail, return receipt requested, postage prepared, two (2) business days after posting with the United States Postal Service, to the other party at the following addresses or such other addresses as the parties hereto shall designate in writing:

If to Sublandlord:

ECI Telecom, Inc.
1201 West Cypress Road
Fort Lauderdale, Florida 33309
Attention: Chief Financial Officer
Telefax Number (954) 351-4404

If to Subtenant:

Veraz Networks, Inc.
926 Rock Avenue Suite 20
San Jose, CA 95131
Attn: Chief Financial Officer

     Notwithstanding the foregoing, Subtenant shall be deemed to have received any notices provided to Sublandlord by Lessor under the Prime Lease on the same date that Sublandlord is deemed to have received any such notice under the Prime Lease. Sublandlord agrees that it shall promptly provide Subtenant with a photocopy of any such notice so received. In addition, unless otherwise expressly provided herein, any notices, reports or payments which Sublandlord is required to provide to Lessor under the Prime Lease shall be delivered by Subtenant to Sublandlord ten (10) days prior to the date on which any such notices, reports or payments must be provided by Sublandlord as lessee under the Prime Lease, and any response to notices or reports to Subtenant required to be Made by Sublandlord within a period specified in the Prime Lease shall not be due until ten (10) days following the date on which any such response is due from Lessor under the Prime Lease to Sublandlord as lessee thereunder.

          (i) Survival. Notwithstanding any provision to the contrary contained in this Sublease, Subtenant’s obligations to indemnify Sublandlord hereunder shall survive the expiration of the Term hereof or any earlier termination of this Sublease.

          (j) Time Being of the Essence. TIME SHALL BE OF THE ESSENCE with regard to each date by which performance is required by Subtenant under the Prime Lease or this Sublease.

8.

          (k) Authority. Each party hereto hereby represents and warrants that this Sublease has been duly authorized, executed and delivered by all necessary action on behalf of such party, constitutes the valid and binding agreement of such party and is enforceable in accordance with its terms.

     15. Additional Provisions.

          (a) Permitted Use. Subtenant shall have the right to use the Subleased Premises solely for general office purposes.

          (b) Security Deposit. Concurrently with Subtenant’s execution of this Sublease, Subtenant shall deposit with Sublandlord the sum of $0 and 00/100 Dollars ($0) (the “Security Deposit”), in cash, to secure Subtenant’s full and faithful performance of all the, obligations herein set forth. Sublandlord shall not be required to pay interest on the Security Deposit or to maintain the Security Deposit in a separate account. If any sum payable by Subtenant to Sublandlord shall be due and unpaid, or if Sublandlord makes any payments on behalf of Subtenant, or if Sublandlord suffers any loss, cost or expense as a result of Subtenant’s non-performance of any obligation or covenant herein, then Sublandlord, at its option and without limiting any other remedy, may use and apply any part of the Security Deposit to compensate Sublandlord for the payments not made or the loss, cost or expense suffered by Sublandlord. Within five (5) business days after written notice of Sublandlord’s use of the Security Deposit, Subtenant shall deposit with Sublandlord cash in an amount sufficient to restore the Security Deposit to its prior amount. Within approximately forty-five (45) days after the later of (a) the expiration or earlier termination of the Term, or (b) Subtenant’s vacating the Sublease Premises, Sublandlord shall return the Security Deposit less such portion thereof as Sublandlord may have used to satisfy Subtenant’s obligations and less such other sums as Sublandlord reasonably expects to be due from Subtenant. Subtenant shall not transfer or assign the Security Deposit or any interest therein without Sublandlord’s prior written consent, which consent Sublandlord may withhold in its sole and absolute discretion.

          (c) Condition Precedent. This Sublease and the obligations of the parties hereunder are expressly subject to the receipt by Sublandlord and Subtenant of the consent of Lessor (in the form attached hereto) to the subletting of the Subleased Premises to Subtenant hereunder. Subtenant agrees to cooperate with Sublandlord to obtain such consent of Lessor. In the event Lessor has not consented to this Sublease within forty-five (45) days after the date on which this Subleases is fully executed by Sublandlord and Subtenant. Sublandlord shall have the right to terminate this Sublease by providing written notice thereof to Subtenant, in which event Sublandlord shall return any prepaid rent to Subtenant and neither party shall have any further rights or obligations hereunder.

     16. Sublandlord Services. The Sublandlord shall provide the Subtenant with the following services at no additional cost:

          (a)

9.

     In Witness Whereof, Sublandlord and Subtenant have caused this Sublease to be executed on their behalf by their duly authorized representatives and their seals affixed hereto as of the day and year first above written.

AGREED AND ACCEPTED:

SUBLANDLORD:		SUBTENANT:
ECI TELECOM, INC. a Delaware corporation		VERAZ NETWORKS, INC. a Delaware corporation
By:	/s/Patrick Sparks	By:	/s/ John Thompson
Name:	Patrick Sparks	Name:	John Thompson
Title:	VP-Operations & IT	Title:	CFO
Date:	08/31/04	Date:	8/31/04

CONSENT OF LESSOR

     Fort Lauderdale Crown Center, Inc., a Florida corporation, as Lessor under the Prime Lease, hereby executes this Sublease for the sole purpose of consenting to (i) the sublease effected hereby, and (ii) the use of the Premises for the purpose set forth herein; provided, however, that the foregoing consent to subletting shall not release Sublandlord from its liability under the Prime Lease nor waive the necessity for obtaining the consent of Lessor to any further subletting of the Master Premises.

By:

Fort Lauderdale Crown Center, Inc., a Florida corporation

Name:

Title:

Date:

10.

EX-10.25

Exhibit 10.25

SUBLEASE AGREEMENT AMENDMENT

(FORT LAUDERDALE)

     THIS SUBLEASE AGREEMENT AMENDMENT (“Amendment”) is made effective as of the 31^st day of January 2006 by and between ECI TELECOM INC., a Delaware corporation (“Sublandlord”) and VERAZ NETWORKS, INC. (“Subtenant”) and amends that certain Sublease Agreement by and between Sublandlord and Subtenant entered in as of the 31^st day of August 2004 (“Sublease”).

RECITALS

A. Pursuant to the Sublease, Subtenant leased from Sublandlord certain space located 1201 West Cypress Creek Road, Fort Lauderdale, Florida 33309 (“Building”).

B. Subtenant and Sublandlord now wish to amend the Sublease to allow Subtenant to lease from Sublandlord an additional 652 square feet of space located in the Building as more fully described hereinafter (hereinafter referred to as the “Additional Space”).

C. Nothing herein contained shall be deemed to reduce and/or diminish the Sublessee’s obligations or duties as to the Subleased Premises as originally set forth in the Sublease as this Amendment merely adds space to the Sublease.

SUBLEASE AGREEMENT

     NOW, THEREFORE, for and in consideration of the mutual covenants set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Sublandlord and Subtenant hereby agree as follows:

1. Section 1 of the Sublease shall be amended to read as follows:

Subleased Premises. Subject to the terms and conditions set forth in this Sublease, Sublandlord hereby subleases to Subtenant, and Subtenant hereby takes from Sublandlord, that certain portion of the Master Premises containing approximately 4,931 square feet of rentable area being more particularly shown in cross-hatching on the floor plan attached hereto in Exhibit A (hereinafter referred to as the “Subleased Premises”). For the avoidance of doubt, both parties agree that this will be the only space subject to the Sublease and that all warehouse space which may or may not have been provided under the Sublease from time to time prior to the date of this Amendment to the Sublease shall be deemed fully returned to the Sublandlord with no further obligations from the Subtenant.

2. Section 2(a) of the Sublease shall be amended to read as follows:

Term. The term of the Sublease for the Additional Space only (the “Term”) shall commence on February 1, 2006 (the “Commencement Date”) and shall terminate on January 31, 2007, provided, however, that Subtenant shall have the option to extend the Sublease for the Additional Space for additional one (1) year periods (“Extension Periods”) by providing written notice thereof to Sublandlord; provided, further, that no Extension Periods shall be deemed to extend the sublease beyond the term of the Prime Lease, including any and all option periods exercised by the Sublandlord; and (2) with respect to the space originally leased under the Sublease, with the expiration of the Prime Lease, including, any and all option periods exercised by Sublandlord

1.

unless otherwise sooner terminated in accordance with the provision of this Sublease (each of which shall be referred to as an “Expiration Date”).

3. The first paragraph of Section 3(a) of the Sublease shall be amended to read as follows:

Minimum Rent. During the term of the Sublease, as amended by this Amendment, Subtenant shall pay to Sublandlord a monthly full service rent (“Rent” for the subleased Premises, without set-off, deduction or demand, in the amounts as detailed below. The rent shall be inclusive of all electric, janitorial, building maintenance and all-pass-through obligations under the Lease including but not limited to Common Area Maintenance (“CAM”) and Real Estate Taxes. The Rent shall increase at annual adjustments of three percent (3%) for the year preceding said anniversary, plus applicable sales tax thereon.

Monthly Rent Charges

			With
			additional
Period	Original Space		space		Total
Feb 1, 2006 - Sep 30, 2006	$	9,785.00	$	720.00	$	10,505.00
Oct 1, 2006 - Sep 30, 2007	$	10,078.55	$	741.60	$	10,820.15
Oct 1, 2007 - March 31, 2008*	$	10,380.91	$	763.85	$	11,144.75
April 1, 2008 - Sep 30, 2008	$	10,380.91	$	763.85	$	11,144.75
Oct 1, 2008 - Sep 30, 2009	$	10,692.33	$	786.76	$	11,479.10
Oct 1, 2009 - Sep 30, 2010	$	11,013.10	$	810.37	$	11,823.47
Oct 1, 2010 - Sep 30, 2011**	$	11,343.50	$	834.68	$	12,178.17

*	Sublease will terminate on 3/31/08 if ECI exercises its right to terminate prime lease.
**	This represents end of lease term.

     IN WITNESS WHEREOF, Sublandlord and Subtenant have caused this Amendment to be executed on their behalf by their duly authorized representatives as of the day and year first above written.

SUBLANDLORD:
ECI TELECOM, INC.
a Delaware Corporation
Signature:		/s/ Paul Ellett
Printed Name:	Paul Ellett
Title:	General manager
Date:	02-23-06

2.

SUBTENANT:
VERAZ NETWORKS, INC.
a Delaware Corporation
Signature:		/s/  Al Wood
Printed Name:	Al Wood
Title:	CEO
Date:	2/28/06

3.

Exhibit A
Rentable Area

EX-10.26

Exhibit 10.26

STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE – NET
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION

1. Basic Provision (“Basic Provisions”).

     1.1 Parties: This Lease (“Lease”), dated for reference purposes only December       , 2001, is made by and between Balch LLC, a California Limited Liability Company (“Lessor”) and NexVerse Networks, Inc., a Delaware corporation (“Lessee”), collectively the “Parties”, or individually a “Party”).

     1.2 (a) Premises: That certain portion of the Project (as defined below), including all improvements therein or to be provided by Lessor under the terms of this Lease, commonly known by the street address of a portion of 926 Rock Avenue, Building 2, located in the City of San Jose, County of Santa Clara, State of California, with zip code _________, as outlined on Exhibit A attached hereto (”Premises”) and generally described as (describe briefly the nature of the Premises): approximately 24,747 square foot portion of the 46,430 square foot R&D/Industrial building (as shown on Exhibit A)

In addition to Lessee’s rights to use and occupy the Premises as hereinafter specified. Lessee shall have non-executive rights to the Common Areas (as defined in Paragraph 2.7 below) as hereinafter specified, but shall not have any rights to the roof, exterior walls or utility raceways of the building containing the Premises (“Building”) or to any other buildings in the Project. The premises, the Building, the Common Areas, the land upon which they are located, along with all other buildings and Improvements thereon, are herein collectively referred to as the “Project.” (See also Paragraph 2)

     1.2 (b) Parking: Zero (0) unreserved vehicle parking spaces (“Unreserved Parking Spaces”); and _________ the parking area marked on Exhibit B for reserved vehicle parking spaces (“Reserved Parking Spaces”). (See also Paragraph 2.6)

     1.3 Term: Approx. two (2) years and four (4) months (“Original Term”) commencing retroactively November 19, 2001 (“Commencement Date”) and ending April 30, 2004 (“Expiration Date”). (See also Paragraph 3)

     1.4 Early Possession: N/A (“Early Possession Date”).

(See also Paragraphs 3.2 and 3.3)

     1.5 Basic Rent: $40,090.00 per moth (“Base Rent”), payable on the first day of each month commencing January 2002. (See also Paragraph 4)

þ       If this box is checked, there are porivision in this Lease for the Base Rent to be adjusted.

     1.6 Lessee’s Share of Common Area Operating Expenses: Fifty-three point three percent (53.3%) (“Lessee’s Share”).

     1.7 Base Rent and Other Monies Paid Upon Execution:

(a)	Base Rent: $40,090.00 for the period Dec. 1, 2001 – Dec. 31, 2001
(b)	Common Area Operating Expenses: $                  for the period
(c)	Security Deposit: $See Add. Par. 5 (“Security Deposit”). (See also Paragraph 5)
(d)	Other: $16,036.00 for base rent between Nov. 19-30, 2001
(e)	Total Due Upon Execution of this Lease: $56,126.00 excluding security deposit.

     1.8 Agreed Use: Office rsearch and development of high technology products and services only (but not manufacturing) (See also Paragraph 6)

     1.9 Insuring Party: Lessor is the “Insuring Party”. (See also Paragraph 8)

     1.10 Real Estate Brokers: (See also Paragraph 15)

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          (a) Representation: The following real estate brokers ( the “Brokers”) and brokerage relationships exist in this transaction (check applicable boxes):

þ Grubb & Ellis Company represents Lessor exclusively (“Lessor’s Broker”):

o                                          represents Lessee exclusively (“Lesseer’s Broker”); or

o                                          represents both Lessor and Lessee (“Dual Agency”):

          (b) Payment to Brokers: Upon execution and delivery of the Lease by both Parties. Lessor shall pay to the Brokers the brokerage fee agreed to in a separate written agreement (or if there is no such agreement, the sum of                                          or                     % of the total Base Rent for the brokerage services rendered by the Brokers).

      1.11 Guarantor: The obligations of the Lessee under this Lease are to be guaranteed by                                                                                                             (“Guarantor”). (See also Paragraph 37)

      1.12 Addenda and Exhibits. Attached hereto is an Addendum or Addenda consisting of Paragraphs                       through                        and Exhibits A through C, all of which constitute a part of this Lease.

2. Premises.

     2.1 Letting. Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the Premises, for the term, at the rental, and upon all of the terms, covenants and conditions set forth in this Lease. Unless otherwise provided herein, any statement of size set forth in this Lease, or that may have been used in calculating Rent, is an approximation which the Parties agree is reasonable and any payments based thereon are not subject to revision whether or not the actual size is more or less.

     2.2 Condition. Lessor shall deliver that portion of the Premises contained within the Building (‘Unit’’) to Lessee broom clean and free–of debris on the Commencement Date or the Early Possession Date, whichever first occurs (“Start Date”), and, so long as the required service contracts described in Paragraph 7.1(b) below are obtained by Lessee and in effect within thirty days following the Start Date, warrants that the existing electrical, plumbing, fire sprinkler, lighting, heating, ventilating and air conditioning systems (“HVAC”), loading doors, if any, and all other such elements in the Unit, other than those constructed by Lessee, shall be in good operating condition on said date and that the structural elements of the roof, bearing walls and foundation of the Unit shall be free of material defects. If a non-compliance with such warranty exists as of the Start Date, or if one of such systems or elements should malfunction or fail within the appropriate warranty period, Lessor shall, as Lessor’s sole obligation with respect to such matter, except as otherwise provided in this Lease, promptly after receipt of written notice from Lessee selling forth with specificity the nature and extent of such non-compliance, malfunction or failure, rectify same at Lessor’s expense. The warranty periods shall be as follows: (i) 6 months as to the HVAC systems, and (ii) 30 days as to the remaining systems and other elements of the Unit. If Lessee does not give Lessor the required notice within the appropriate warranty period, correction of any such non-compliance, malfunction or failure shall be the obligation of Lessee at Lessee’s sole cost and expense (except for the repairs to the fire sprinkler systems, roof, foundations, and/or bearing walls — see Paragraph 7).

     2.3 Compliance. Lessor warrants that the Improvements on the Premises and the Common Areas comply with the building codes that were in effect at the time that each such improvement, or portion thereof, was constructed, and also with all applicable laws, covenants or restrictions of record, regulations, and ordinances in effect on the Start Date (“Applicable Requirements”). Said warranty does not apply to the use to which Lessee will put the Premises or to any Alterations or Utility Installations (as defined in Paragraph 7.3(a)) made or to be made by Lessee. NOTE: Lessee is responsible for determining whether or not the Applicable Requirements, and especially the zoning, are appropriate for Lessee’s intended use, and acknowledges that past uses of the Premises may no longer be allowed. If the Premises do not comply with said warranty, Lessor shall, except as otherwise provided, promptly after receipt of written notice from Lessee setting forth with specificity the nature and extent of such non-compliance, rectify the same at Lessor’s expense. If Lessee does not give Lessor written notice of a non-compliance with this warranty within 6 months following the Start Date, correction of that non-compliance shall be the obligation of Lessee at Lessee’s sole cost and expense. If the Applicable Requirements are hereafter changed so as to require during the term of this Lease the construction of an addition to or an alteration of the Unit, Premises and/or Building, the remediation of any Hazardous Substance, or the reinforcement or other physical modification of the Unit, Premises and/or Building (“Capital Expenditure”), Lessor and Lessee shall allocate the cost of such work as follows:

          (a) Subject to Paragraph 2.3(c) below, if such Capital Expenditures are required as a result of the specific and unique use of the Premises by Lessee as compared with uses by tenants in general, Lessee shall be fully responsible for the cost thereof, provided, however that if such Capital Expenditure is required during the last 2 years of this Lease and the cost thereof exceeds 6 months’ Base Rent, Lessee may instead terminate this Lease unless Lessor notifies Lessee, in writing, within 10 days after receipt of Lessee’s termination notice that Lessor has elected to pay the difference between the actual cost thereof and the amount equal to 6 months’ Base Rent. If Lessee elects termination, Lessee shall immediately cease the use of the Premises which requires such Capital Expenditure and deliver to Lessor written notice specifying a termination date at least 90 days thereafter. Such termination date shall, however, in no event be earlier than the last day that Lessee could legally utilize the Premises without commencing such Capital Expenditure.

          (b) If such Capital Expenditure is not the result of the specific and unique use of the Premises by Lessee (such as, governmentally mandated seismic modifications), then Lessor and Lessee shall allocate the obligation to pay for the portion of such costs reasonably attributable to the Premises pursuant to the formula set out in Paragraph 7.1(d); provided, however, that if such Capital Expenditure is required during the last 2 years of this Lease or if Lessor reasonably determines that it is not economically feasible to pay its share thereof, Lessor shall have the option to terminate this Lease upon 90 days prior written notice to Lessee unless Lessee notifies Lessor, in writing, within 10 days after receipt of Lessor’s termination notice that Lessee will

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pay for such Capital Expenditure. If Lessor does not elect to terminate, and fails to tender its share of any such Capital Expenditure, Lessee may advance such funds and deduct same, with Interest, from Rent until Lessor’s share of such costs have been fully paid. If Lessee is unable to finance Lessor’s share, or if the balance of the Rent due and payable for the remainder of this Lease is not sufficient to fully reimburse Lessee on an offset basis, Lessee shall have the right to terminate this Lease upon 30 days written notice to Lessor.

          (c) Notwithstanding the above, the provisions concerning Capital Expenditures are intended to apply only to non-voluntary, unexpected, and new Applicable Requirements. If the Capital Expenditures are instead triggered by Lessee as a result of an actual or proposed change in use, change in intensity of use, or modification to the Premises then, and in that event, Lessee shall be fully responsible for the cost thereof, and Lessee shall not have any right to terminate this Lease.

     2.4 Acknowledgements. Lessee acknowledges that: (a) it has been advised by Lessor and/or Brokers to satisfy itself with respect to the condition of the Premises (including but not limited to the electrical, HVAC and fire sprinkler systems, security, environmental aspects, and compliance with Applicable Requirements and the Americans with Disabilities Act), and their suitability for Lessee’s intended use, (b) Lessee has made such investigation as it deems necessary with reference to such matters and assumes all responsibility therefor as the same relate to its occupancy of the Premises, and (c) neither Lessor, Lessors agents, nor Brokers have made any oral or written representations or warranties with respect to said matters other than as set forth in this Lease. In addition, Lessor acknowledges that: (i) Brokers have made no representations, promises or warranties concerning Lessee’s ability to honor the Lease or suitability to occupy the Premises, and (ii) it is Lessors sole responsibility to investigate the financial capability and/or suitability of all proposed tenants.

     2.5 Lessee as Prior Owner/Occupant. The warranties made by Lessor in Paragraph 2 shall be of no force or effect if immediately prior to the Start Date Lessee was the owner or occupant of the Premises. In such event, Lessee shall be responsible for any necessary corrective work.

     2.6 Vehicle Parking. Lessee shall be entitled to use the number of Unreserved Parking Spaces and Reserved Parking Spaces specified in Paragraph 1.2(b) on those portions of the Common Areas designated from time to time by Lessor for parking. Lessee shall not use mere parking spaces outside the designated parking area then-said-number. Said parking spaces shall be used for parking by vehicles no larger than full-size passenger automobiles or pick-up trucks, herein called “Permitted Size Vehicles.” Lessor may regulate the loading and unloading of vehicles by adopting Rules and Regulations as provided in Paragraph 2.9. No vehicles other than Permitted Size Vehicles may be parked in the Common Area without the prior written permission of Lessor.

          (a) Lessee shall not permit or allow any vehicles that belong to or are controlled by Lessee or Lessee’s employees, suppliers, shippers, customers, contractors or invitees to be loaded, unloaded, or parked in areas other than those designated by Lessor for such activities.

          (b) Lessee shall not service or store any vehicles in the Common Areas.

          (c) If Lessee permits or allows any of the prohibited activities described in this Paragraph 2.6, then Lessor shall have the right, without notice, in addition to such other rights and remedies that it may have, to remove or tow away the vehicle involved and charge the cost to Lessee, which cost shall be immediately payable upon demand by Lessor.

     2.7 Common Areas — Definition. The term “Common Areas” is defined as all areas and facilities outside the Premises and within the exterior boundary line of the Project and interior utility raceways and installations within the Unit that are provided and designated by the Lessor from time to time for the general non-exclusive use of Lessor, Lessee and other tenants of the Project and their respective employees, suppliers, shippers, customers, contractors and invitees, including parking areas, loading and unloading areas, trash areas, roadways, walkways, driveways and landscaped areas.

     2.8 Common Areas — Lessee’s Rights. Lessor grants to Lessee, for the benefit of Lessee and its employees, suppliers, shippers, contractors, customers and invitees, during the term of this Lease, the non-exclusive right to use, in common with others entitled to such use, the Common Areas as they exist from time to lime, subject to any rights, powers, and privileges reserved by Lessor under the terms hereof or under the terms of any rules and regulations or restrictions governing the use of the Project. Under no circumstances shall the right herein granted to use the Common Areas be deemed to include the right to store any property, temporarily or permanently, in the Common Areas. Any such storage shall be permitted only by the prior written consent of Lessor or Lessors designated agent, which consent may be revoked at any time. In the event that any unauthorized storage shall occur then Lessor shall have the right, without notice, in addition to such other rights and remedies that it may have, to remove the property and charge the cost to Lessee, which cost shall be immediately payable upon demand by Lessor.

     2.9 Common Areas — Rules and Regulations. Lessor or such other person(s) as Lessor may appoint shall have the exclusive control and management of the Common Areas and shall have the right, from time to time, to establish, modify, amend and enforce reasonable rules and regulations (“Rules and Regulations”) for the management, safety, care, and cleanliness of the grounds, the parking and unloading of vehicles and the preservation of good order, as well as for the convenience of other occupants or tenants of the Building and the Project and their invitees. Lessee agrees to abide by and conform to all such Rules and Regulations, and to cause its employees, suppliers, shippers, customers, contractors and invitees to so abide and conform. Lessor shall not be responsible to Lessee for the non-compliance with said Rules and Regulations by other tenants of the Project.

     2.10 Common Areas — Changes. Lessor shall have the right, in Lessor’s sole discretion, from time to time:

          (a) To make changes to the Common Areas, including, without limitation, changes in the location, size, shape and number of driveways, entrances, parking spaces, parking areas, loading and unloading areas, ingress, egress, direction of traffic, landscaped areas, walkways and utility raceways;

          (b) To close temporarily any of the Common Areas for maintenance purposes so long as reasonable

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access to the Premises remains available;

          (c) To designate other land outside the boundaries of the Project to be a part of the Common Areas;

          (d) To add additional buildings and improvements to the Common Areas;

          (e) To use the Common Areas while engaged in making additional improvements, repairs or alterations to the Project, or any portion thereof, and

          (f) To do and perform such other acts and make such other changes in, to or with respect to the Common Areas and Project as Lessor may, in the exercise of sound business judgment, deem to be appropriate.

3. Term.

     3.1 Term. The Commencement Date, Expiration Date and Original Term of this Lease are as specified in Paragraph 1.3.

     3.2 Early Possession. If Lessee totally or partially occupies the Premises prior to the Commencement Date, the obligation to pay Base Rent shall be abated for the period of such early possession. All other terms of this Lease (including but not limited to the obligations to pay Lessee’s Share of Common Area Operating Expenses, Real Property Taxes and insurance premiums and to maintain the Premises) shall, however, be in effect during such period. Any such early possession shall not affect the Expiration Date.

     3.3 Delay In Possession. Lessor agrees to use its best commercially reasonable efforts to deliver possession of the Premises to Lessee by the Commencement Date: If, despite said efforts, Lessor is unable to deliver possession as agreed, Lessor shall not be subject to any liability therefor, nor shall such failure affect the validity of this Lease and Lessee shall, none the less, net;-however be obligated to pay Rent from the Commencement Date or perform its other obligations until it receives possession of the Premises. If possession of is not delivered within 60 days after the Commencement Date, Lessee may, at its option, by notice in writing within 10 days after the end of such 60 day period, cancel this Lease, in which event the Parties shall be discharged from all obligations hereunder. If such written notice is not received by Lessor within said 10 day period, Lessee’s right to cancel shall terminate. Except as otherwise provided, if possession is not tendered to Lessee by the Start Date and Lessee does not terminate this Lease, as aforesaid, any period of rent abatement that Lessee would otherwise have enjoyed shall run from the date of delivery of possession and continue for a period equal to what Lessee would otherwise have enjoyed under the terms hereof, but minus any days of delay caused by the acts or omissions of Lessee. If possession of the Premises is not delivered within 4 months after the Commencement Date, this Lease shall terminate unless other agreements are reached between Lessor and Lessee, in writing.

     3.4 Lessee Compliance. Lessor shall not be required to tender possession of the Premises to Lessee until Lessee complies with its obligation to provide evidence of insurance (Paragraph 8.5). Pending delivery of such evidence, Lessee shall be required to perform all of its obligations under this Lease from and after the Start Date, including the payment of Rent, notwithstanding Lessor’s election to withhold possession pending receipt of such evidence of insurance. Further, if Lessee is required to perform any other conditions prior to or concurrent with the Start Date, the Start Date shall occur but Lessor may elect to withhold possession until such conditions are satisfied.

4. Rent

     4.1 Rent Defined. All monetary obligations of Lessee to Lessor under the terms of this Lease (exceptt including monthly installments for the Security Deposit) are deemed to be rent (“Rent”).

     4.2 Common Area Operating Expenses. Lessee shall pay to Lessor during the term hereof, in addition to the Base Rent, Lessee’s Share (as specified in Paragraph 1.6) of all Common Area Operating Expenses, as hereinafter defined, during each calendar year of the term of this Lease, in accordance with the following provisions:

          (a) “Common Area Operating Expenses” are defined, for purposes of this Lease, as all costs incurred by Lessor relating to the ownership and operation of the Project, including, but not limited to, the following:

(i) The operation, repair and maintenance, in neat, clean, good order and condition of the following:

(aa) The Common Areas and Common Area improvements, including parking areas, loading and unloading areas, trash areas, roadways, parkways, walkways, driveways, landscaped areas, bumpers, irrigation systems, Common Area lighting facilities, fences and gates, elevators, roofs, and roof drainage systems.

(bb) Exterior signs and any tenant directories.

(cc) Any fire detection and/or sprinkler systems.

(ii)	The cost of water, gas, electricity and telephone to service the Common Areas and any utilities not separately metered.
(iii)	Trash disposal, pest control services, property management, security services, and the costs of any environmental inspections.
(iv)	Reserves set aside for maintenance and repair of Common Areas.
(v)	Real Property Taxes (as defined in Paragraph 10).

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(vi)	The cost of the premiums for the insurance maintained by Lessor pursuant to Paragraph 8.
(vii)	Any deductible portion of an insured loss concerning the Building or the Common Areas.
(viii)	The cost of any Capital Expenditure to the Building or the Project not covered under the provisions of Paragraph 2.3 provided; however, that Lessor shall allocate the cost of any such Capital Expenditure over a 12 year period and Lessee shall not be required to pay more than Lessee’s Share of 1/144th of the cost of such Capital Expenditure in any given month.
(ix)	Any other services to be provided by Lessor that are stated elsewhere in this Lease to be a Common Area Operating Expense.

          (b) Any Common Area Operating Expenses and Real Property Taxes that are specifically attributable to the Unit, the Building or to any other building in the Project or to the operation, repair and maintenance thereof, shall be allocated entirely to such Unit, Building, or other building. However, any Common Area Operating Expenses and Real Property Taxes that are not specifically attributable to the Building or to any other building or to the operation, repair and maintenance thereof, shall be equitably allocated by Lessor to all buildings in the Project.

          (c) The inclusion of the improvements, facilities and services set forth in Subparagraph 4.2(a) shall not be deemed to impose an obligation upon Lessor to either have said improvements or facilities or to provide those services unless the Project already has the same, Lessor already provides the services, or Lessor has agreed elsewhere in this Lease to provide the same or some of them.

          (d) Lessee’s Share of Common Area Operating Expenses shall be payable by Lessee within 10 days after a reasonably detailed statement of actual expenses is presented to Lessee. At Lessor’s option, however, an amount may be estimated by Lessor from time to time of Lessee’s Share of annual Common Area Operating Expenses and the same shall be payable monthly or quarterly, as Lessor shall designate, during each 12 month period of the Lease term, on the same day as the Base Rent is due hereunder. Lessor shall deliver to Lessee within 60 days after the expiration of each calendar year a reasonably detailed statement showing Lessee’s Share of the actual Common Area Operating Expenses incurred during the preceding year. If Lessee’s payments under this Paragraph 4.2(d) during the preceding year exceed Lessee’s Share as indicated on such statement, Lessor shall credit the amount of such over-payment against Lessee’s Share of Common Area Operating Expenses next becoming due. If Lessee’s payments under this Paragraph 4.2(d) during the preceding year were less than Lessee’s Share as indicated on such statement, Lessee shall pay to Lessor the amount of the deficiency within 10 days after delivery by Lessor to Lessee of the statement.

     4.3 Payment. Lessee shall cause payment of Rent to be received by Lessor in lawful money of the United States, without offset or deduction (except as specifically permitted in this Lease), on or before the day on which it is due. Rent for any period during the term hereof which is for less than one full calendar month shall be prorated based upon the actual number of days of said month. Payment of Rent shall be made to Lessor at its address stated herein or to such other persons or place as Lessor may from time to time designate in writing. Acceptance of a payment which is less than the amount then due shall not be a waiver of Lessor’s rights to the balance of such Rent, regardless of Lessor’s endorsement of any check so stating. In the event that any check, draft, or other instrument of payment given by Lessee to Lessor is dishonored for any reason, Lessee agrees to pay to Lessor the sum of $25 in addition to any late charges which may be due.

5. Security Deposit. Lessee shall deposit with Lessor as provided in Addendum, Paragraph 5 upon execution hereof the Security Deposit as security for Lessee’s faithful performance of its obligations under this Lease. If Lessee fails to pay Rent, or otherwise Defaults under this Lease, Lessor may use, apply or retain all or any portion of said Security Deposit for the payment of any amount due Lessor or to reimburse or compensate Lessor for any liability, expense, loss or damage which Lessor may suffer or incur by reason thereof. If Lessor uses or applies all or any portion of the Security Deposit, Lessee shall within 10 days after written request therefor deposit monies with Lessor sufficient to restore said Security Deposit to the full amount required by this Lease. If the Base Rent increase during the term of this Lease, Lessee shall, upon written request from Lessor, deposit additional monies with Lessor so that the total amount of the Security Deposit shall at all times bear the same proportion to the increased Base Rent as the initial Base Rent. Should the Agreed Use be amended to accommodate a material change in the business of Lessee or to accommodate a sublessee or assignee, Lessor shall have the right to increase the Security Deposit to the extent necessary, in Lessor’s reasonable judgment, to account for any increased wear and tear that the Premises may suffer as a result thereof. If a change in control of Lessee occurs during this Lease and following such change the financial condition of Lessee is, in Lessors reasonable judgment, significantly reduced, Lessee shall deposit such additional monies with Lessor as shall be sufficient to cause the Security Deposit to be at a commercially reasonable level based on such change in financial condition. Lessor shall not be required to keep the Security Deposit separate from its general accounts. Within 14 days after the expiration or termination of this Lease, if Lessor elects to apply the Security Deposit only to unpaid Rent, and otherwise within 30 days after the Premises have been vacated pursuant to Paragraph 7.4(c) below, Lessor shall return that portion of the Security Deposit not used or applied by Lessor. No part of the Security Deposit shall be considered to be held in trust, to bear interest or to be prepayment for any monies to be paid by Lessee under this Lease.

6. Use.

     6.1 Use. Lessee shall use and occupy the Premises only for the Agreed Use, or any other legal use which is reasonably comparable thereto, and for no other purpose. Lessee shall not use or permit the use of the Premises in a manner that is unlawful, creates damage, waste or a nuisance, or that disturbs occupants of or causes damage to neighboring premises or properties. Lessor shall not unreasonably withhold or delay its consent to any written request for a modification of the Agreed Use, so long as the same will not impair the structural integrity of the improvements on the Premises or the mechanical or electrical systems therein, and/or is not significantly more burdensome to the Premises. If Lessor elects to withhold consent, Lessor shall

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within 7 days after such request give written notification of same, which notice shall include an explanation of Lessor’s objections to the change in the Agreed Use.

     6.2 Hazardous Substances.

          (a) Reportable Uses Require Consent. The term “Hazardous Substance” as used in this Lease shall mean any product, substance, or waste whose presence, use, manufacture, disposal, transportation, or release, either by itself or in combination with other materials expected to be on the Premises, is either: (i) potentially injurious to the public health, safety or welfare, the environment or the Premises, (ii) regulated or monitored by any governmental authority, or (iii) a basis for potential liability of Lessor to any governmental agency or third party under any applicable statute or common law theory. Hazardous Substances shall include, but not be limited to, hydrocarbons, petroleum, gasoline, and/or crude oil or any products, by-products or fractions thereof. Lessee shall not engage in any activity in or on the Premises which constitutes a Reportable Use of Hazardous Substances without the express prior written consent of Lessor and timely compliance (at Lessee’s expense) with all Applicable Requirements. “Reportable Use” shall mean (i) the installation or use of any above or below ground storage tank, (ii) the generation, possession, storage, use, transportation, or disposal of a Hazardous Substance that requires a permit from, or with respect to which a report, notice, registration or business plan is required to be filed with, any governmental authority, and/or (iii) the presence at the Premises of a Hazardous Substance with respect to which any Applicable Requirements requires that a notice be given to persons entering or occupying the Premises or neighboring properties. Notwithstanding the foregoing, Lessee may use any ordinary and customary materials reasonably required to be used in the normal course of the Agreed Use, so long as such use is in compliance with all Applicable Requirements, is not a Reportable Use, and does not expose the Premises or neighboring property to any meaningful risk of contamination or damage or expose Lessor to any liability therefor. In addition, Lessor may condition its consent to any Reportable Use upon receiving such additional assurances as Lessor reasonably deems necessary to protect itself, the public, the Premises and/or the environment against damage, contamination, injury and/or liability, including, but not limited to, the installation (and removal on or before Lease expiration or termination) of protective modifications (such as concrete encasements) and/or increasing the Security Deposit.

          (b) Duty to Inform Lessor. If Lessee knows, or has reasonable cause to believe, that a Hazardous Substance has come to be located in, on, under or about the Premises, other than as previously consented to by Lessor, Lessee shall immediately promptly give written notice of such fact to Lessor, and provide Lessor with a copy of any report, notice, claim or other documentation which it has concerning the presence of such Hazardous Substance.

          (c) Lessee Remediation. Lessee shall not cause or permit any Hazardous Substance to be spilled or released in, on, under, or about the Premises (including through the plumbing or sanitary sewer system) and shall promptly, at Lessee’s expense, take all investigatory and/or remedial action reasonably recommended, whether or not formally ordered or required, for the cleanup of any contamination of, and for the maintenance, security and/or monitoring of the Premises or neighboring properties, that was caused or materially contributed to by Lessee, its Sublessee’s employees, contractors, representatives or agents, or pertaining to or involving any Hazardous Substance brought onto the Premises during the term of this Lease, by or for Lessee, or any third party.

          (d) Lessee Indemnification. Lessee shall Indemnify, defend and hold Lessor, its agents, employees, lenders and ground lessor, if any, harmless from and against any and all loss of rents and/or damages, liabilities, judgments, claims, expenses, penalties, and attorneys’ and consultants’ fees arising out of or involving any Hazardous Substance brought onto the Premises by or for Lessee, or any third party (provided, however, that Lessee shall have no liability under this Lease with respect to underground migration of any Hazardous Substance under the Premises from areas outside of the Project). Lessee’s obligations shall Include, but not be limited to, the effects of any contamination or injury to person, property or the environment created or suffered by Lessee, and the cost of investigation, removal, remediation, restoration and/or abatement, and shall survive the expiration or termination of this Lease. No termination, cancellation or release agreement entered into by Lessor and Lessee shall release Lessee from its obligations under this Lease with respect to Hazardous Substances, unless specifically so agreed by Lessor in writing at the time of such agreement.

          (e) Lessor Indemnification. Lessor and its successors and assigns shall indemnify, defend, reimburse and hold Lessee, its employees and lenders, harmless from and against any and all environmental damages, including the cost of remediation, which existed as a result of Hazardous Substances on the Premises prior to the Start Date or which are caused by the gross negligence or willful misconduct of Lessor, its agents or employees. Lessors obligations, as and when required by the Applicable Requirements, shall include, but not be limited to, the cost of investigation, removal, remediation, restoration and/or abatement, and shall survive the expiration or termination of this Lease.

          (f) Investigations and Remediations. Lessor shall retain the responsibility and pay for any investigations or remediation measures required by governmental entities having jurisdiction with respect to the existence of Hazardous Substances on the Premises prior to the Start Date, unless such remediation measure is required as a result of Lessee’s particular use (including “Alterations”, as defined in paragraph 7.3(a) below) of the Premises, in which event Lessee shall be responsible for such payment. Lessee shall cooperate fully in any such activities at the request of Lessor, including allowing Lessor and Lessor’s agents to have reasonable access following reasonable notice (except in an emergency) to the Premises at reasonable times in order to carry out Lessors Investigative and remedial responsibilities.

          (g) Lessor Termination Option. If a Hazardous Substance Condition (see Paragraph 9.1(e)) occurs during the term of this Lease, unless Lessee is legally responsible therefor (in which case Lessee shall make the investigation and remedlation thereof required by the Applicable Requirements and this Lease shall continue in full force and effect, but subject to Lessors rights under Paragraph 6.2(d) and Paragraph 13), Lessor may, at Lessors option, either (i) investigate and remediate such Hazardous Substance Condition, if required, as soon as reasonably possible at Lessors expense, in which event this Lease shall continue in full force and effect, or (ii) if the estimated cost to remediate such condition exceeds 12 times the then monthly Base Rent or $100,000, whichever is greater, give written notice to Lessee, within 30 days after receipt by Lessor of knowledge of the occurrence of such Hazardous Substance Condition, of Lessors desire to terminate this Lease as of the date 60 days following the

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date of such notice. In the event Lessor elects to give a termination notice, Lessee may, within 10 days thereafter, give written notice to Lessor of Lessee’s commitment to pay the amount by which the cost of the remediation of such Hazardous Substance Condition exceeds an amount equal to 12 times the then monthly Base Rent or $100,000, whichever is greater. Lessee shall provide Lessor with said funds or satisfactory assurance thereof within 30 days following such commitment. In such event, this Lease shall continue in full force and effect, and Lessor shall proceed to make such remediation as soon as reasonably possible after the required funds are available. If Lessee does not give such notice and provide the required funds or assurance thereof within the time provided, this Lease shall terminate as of the date specified in Lessors notice of termination.

     6.3 Lessee’s Compliance with Applicable Requirements. Except as otherwise provided in this Lease, Lessee shall, at Lessee’s sole expense, fully, diligently and in a timely manner, materially comply with all Applicable Requirements, the requirements of any applicable fire insurance underwriter or rating bureau, and the recommendations of Lessors engineers and/or consultants which relate in any manner to the Premises, without regard to whether said requirements are now in effect or become effective after the Start Date. Lessee shall, within 10 days after receipt of Lessor’s written request, provide Lessor with copies of all permits and other documents, and other information evidencing Lessee’s compliance with any Applicable Requirements specified by Lessor, and shall immediately upon receipt, notify Lessor in writing (with copies of any documents involved) of any threatened or actual claim, notice, citation, warning, complaint or report pertaining to or involving the failure of Lessee or the Premises to comply with any Applicable Requirements.

     6.4 Inspection; Compliance. Lessor and Lessors “Lender” (as defined in Paragraph 30) and consultants shall have the right to enter Into Premises at any time, in the case of an emergency, and otherwise at reasonable times, upon reasonable notice (except in an emergency) for the purpose of inspecting the condition of the Premises and for verifying compliance by Lessee with this Lease. The cost of any such inspections shall be paid by Lessor, unless a violation of Applicable Requirements, or a contamination is found to exist or be imminent, or the inspection is requested or ordered by a governmental authority; provided that Lessee shall not be responsible for the cost of such inspections, Lessor would be responsible for such costs pursuant to Paragraph 6.2.E above. In such case, Lessee shall upon request reimburse Lessor for the cost of such inspection, so long as such inspection is reasonably related to the violation or contamination for which Lessee is responsible under this Lease.

7. Maintenance; Repairs, Utility Installations; Trade Fixtures and Alterations.

     7.1 Lessee’s Obligations.

          (a) In General. Subject to the provisions of Paragraph 2.2 (Condition), 2.3 (Compliance), 6.3 (Lessee’s Compliance with Applicable Requirements), 7.2 (Lessors Obligations), 9 (Damage or Destruction), and 14 (Condemnation), Lessee shall, at Lessee’s sole expense, keep the Premises, Utility Installations (intended for Lessee’s exclusive use, no matter where located), and Alterations in good order, condition and repair (whether or not the portion of the Premises requiring repairs, or the means of repairing the same, are reasonably or readily accessible to Lessee, and whether or not the need for such repairs occurs as a result of Lessee’s use, any prior use, the elements or the age of such portion of the Premises), including, but not limited to, all equipment or facilities, such as plumbing, HVAC equipment, electrical, lighting facilities, boilers, pressure vessels, fixtures, interior walls, interior surfaces of exterior walls, ceilings, floors, windows, doors, plate glass, and skylights but excluding any items which are the responsibility of Lessor pursuant to Paragraph 7.2. Lessee, in keeping the Premises in good order, condition and repair, shall exercise and perform good maintenance practices, specifically including the procurement and maintenance of the service contracts required by Paragraph 7.1(b) below. Lessee’s obligations shall include restorations, replacements or renewals when necessary to keep the Premises and at improvements thereon or a part thereof in good order, condition and state of repair.

          (b) Service Contracts. Lessee shall, at Lessee’s sole expense, procure end maintain contracts, with copies to Lessor, in customary form and substance for, and with contractors specializing and experienced in the maintenance of the following equipment and improvements, if any, if and when installed on the Premises: (i) HVAC equipment, (ii) boiler and pressure vessels, (iii) clarifiers, and (iv) any other equipment, if reasonably required by Lessor. However, Lessor reserves the right, upon notice to Lessee, to procure and maintain any or all of such service contracts, and if Lessor so elects, Lessee shall reimburse Lessor, upon demand, for the cost thereof.

          (c) Failure to Perform. If Lessee fails to perform Lessee’s obligations under this Paragraph 7.1, Lessor may enter upon the Premises after 10 days’ prior written notice to Lessee (except in the case of an emergency, in which case no notice shall be required), perform such obligations on Lessee’s behalf, and put the Premises in good order, condition and repair, and Lessee shall promptly reimburse Lessor for the cost thereof.

          (d) Replacement. Subject to Lessee’s indemnification of Lessor as set forth in Paragraph 8.7 below, and without relieving Lessee of liability resulting from Lessee’s failure to exercise and perform good maintenance practices, if an item described in Paragraph 7.1(b) cannot be repaired other than at a cost which is in excess of 50% of the cost of replacing such item, then such item shall be replaced by Lessor, and the cost thereof shall be prorated between the Parties and Lessee shall only be obligated to pay, each month during the remainder of the term of this Lease, on the date on which Base Rent is due, an amount equal to the product of multiplying the cost of such replacement by a fraction, the numerator of which is one, and the denominator of which is 144 (ie. 1/144th of the cost per month). Lessee shall pay interest on the unamortized balance at a rate that is commercially reasonable in the reasonable judgment of Lessors accountants. Lessee may, however, prepay its obligation at any time.

     7.2 Lessor’s Obligations. Subject to the provisions of Paragraphs 2.2 (Condition), 2.3 (Compliance), 4.2 (Common Area Operating Expenses), 6 (Use), 7.1 (Lessee’s Obligations), 9 (Damage or Destruction) and 14 (Condemnation), Lessor, subject to reimbursement pursuant to Paragraph 4.2, shall keep in good order, condition and repair the foundations, exterior walls, structural condition of interior bearing walls, exterior roof, fire sprinkler system, Common Area fire alarm and/or smoke detection systems, fire hydrants, parking lots, walkways, parkways, driveways, landscaping, fences, signs and utility systems serving the Common Areas and all parts thereof, as well as providing the services for which there is a Common Area Operating Expense pursuant to Paragraph 4.2. Lessor shall not be obligated to paint the exterior or interior surfaces of exterior walls nor shall Lessor be obligated to maintain,

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repair or replace windows, doors or plate glass of the Premises. Lessee expressly waives the benefit of any statute now or hereafter in effect to the extent it is inconsistent with the terms of this Lease.

     7.3 Utility Installations; Trade Fixtures; Alterations.

          (a) Definitions. The term ‘Utility Installations” refers to all floor and window coverings, air lines, power panels, electrical distribution, security and fire protection systems, communication systems, lighting fixtures, HVAC equipment, plumbing, and fencing in or on the Premises. The term “Trade Fixtures” shall mean Lessee’s machinery and equipment that can be removed without doing material damage to the Premises. The term “Alterations” shall mean any modification of the improvements, other than Utility Installations or Trade Fixtures, whether by addition or deletion. “Lessee Owned Alterations and/or Utility Installations” are defined as Alterations and/or Utility Installations made by Lessee that are not yet owned by Lessor pursuant to Paragraph 7.4(a).

          (b) Consent. Lessee shall not make any Alterations or Utility Installations to the Premises without Lessor’s prior written consent. Lessee may, however, make non-structural Utility Installations to the interior of the Premises (excluding the roof) without such consent but upon notice to Lessor, as long as they are cosmetic in nature, do not require permits, are not visible from the outside, do not involve puncturing, relocating or removing the roof or any existing walls, and the cumulative cost thereof during this Lease as extended does not exceed a sum equal to 3 month’s Base Rent in the aggregate or a sum equal to one month’s Base Rent in any one year. Notwithstanding the foregoing, Lessee shall not make or permit any roof penetrations and/or install anything on the roof without the prior written approval of Lessor. Lessor may, as a precondition to granting such approval, require Lessee to utilize a contractor chosen and/or approved by Lessor. Any Alterations or Utility Installations that Lessee shall desire to make and which require the consent of the Lessor shall be presented to Lessor in written form with detailed plans. Consent shall be deemed conditioned upon Lessee’s: (1) acquiring all applicable governmental permits, (ii) furnishing Lessor with copies of both the permits and the plans and specifications prior to commencement of the work, and (iii) compliance with all conditions of said permits and other Applicable Requirements in a prompt and expeditious manner. Any Alterations or Utility Installations shall be performed in a workmanlike manner with good and sufficient materials. Lessee shall promptly upon completion furnish Lessor with as-built plans and specifications. For work which costs an amount in excess of one month’s Base Rent, Lessor may condition its consent upon Lessee providing a lien and completion bond in an amount equal to 150% of the estimated cost of such Alteration or Utility Installation and/or upon Lessee’s posting an additional Security Deposit with Lessor.

          (c) Indemnification. Lessee shall pay, when due, all claims for labor or materials furnished or alleged to have been furnished to or for Lessee at or for use on the Premises, which claims are or may be secured by any mechanic’s or materlalman’s lien against the Premises or any interest therein. Lessee shall give Lessor not less than 10 days notice prior to the commencement of any work in, on or about the Premises, and Lessor shall have the right to post notices of non-responsibility. If Lessee shall contest the validity of any such lien, claim or demand, then Lessee shall, at its sole expense defend and protect itself, Lessor and the Premises against the same and shall pay and satisfy any such adverse judgment that may be rendered thereon before the enforcement thereof. If Lessor shall require, Lessee shall furnish a surety bond in an amount equal to 150% of the amount of such contested lien, claim or demand, indemnifying Lessor against liability for the same. If Lessor elects to participate in any such action, Lessee shall pay Lessor’s attomeys’ fees and costs.

     7.4 Ownership; Removal; Surrender; and Restoration.

          (a) Ownership. Subject to Lessor’s right to require removal or elect ownership as hereinafter provided, all Alterations and Utility Installations made by Lessee shall be the property of Lessee, but considered a part of the Premises. Lessor may, at any time, elect in writing to be the owner of all or any specified part of the Lessee Owned Alterations and Utility Installations. Unless otherwise instructed per paragraph 7.4(b) hereof, all Lessee Owned Alterations and Utility Installations shall, at the expiration or termination of this Lease, become the property of Lessor and be surrendered by Lessee with the Premises.

          (b) Removal. By delivery to Lessee of written notice from Lessor not earlier than 90 and not later than 30 days prior to the end of the term of this Lease, Lessor may require that any or all Lessee Owned Alterations or Utility Installations be removed by the expiration or termination of this Lease. Lessor may require the removal at any time of all or any part of any Lessee Owned Alterations or Utility Installations made without the required consent.

          (c) Surrender; Restoration. Lessee shall surrender the Premises by the Expiration Date or any earlier termination date, with all of the Improvements, parts and surfaces thereof broom clean and free of debris, and in good operating order, condition and state of repair, ordinary wear and tear excepted. “Ordinary wear and tear” shall not include any damage or deterioration that would have been prevented by good maintenance practice. Notwithstanding the foregoing, if this Lease is for 12 months or less, then Lessee shall surrender the Premises in the same condition as delivered to Lessee on the Start Date with NO allowance for ordinary wear and tear. Lessee shall repair any damage occasioned by the installation, maintenance or removal of Trade Fixtures, Lessee owned Alterations and/or Utility Installations, furnishings, and equipment as well as the removal of any storage tank installed by or for Lessee. Lessee shall also completely remove from the Premises any and all Hazardous Substances brought onto the Premises by or for Lessee, or any third party (except Hazardous Substances which were deposited via underground migration from areas outside of the Project) even if such removal would require Lessee to perform or pay for work that exceeds statutory requirements. Trade Fixtures shall remain the property of Lessee and shall be removed by Lessee. The failure by Lessee to timely vacate the Premises pursuant to this Paragraph 7.4(c) without the express written consent of Lessor shall constitute a holdover under the provisions of Paragraph 26 below.

8. Insurance; Indemnity.

     8.1 Payment of Premiums. The cost of the premiums for the insurance policies required to be carried by Lessor, pursuant to Paragraphs 8.2(b), 8.3(a) and 8.3(b), shall be a Common Area Operating Expense. Premiums for policy periods commencing prior to, or extending beyond, the term of this Lease shall be prorated to coincide with the corresponding Start Date or

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Expiration Date.

     8.2 Liability Insurance.

          (a) Carried by Lessee. Lessee shall obtain and keep in force a Commercial General Liability policy of insurance protecting Lessee and Lessor as an additional insured against claims for bodily injury, personal injury and property damage based upon or arising out of the ownership, use, occupancy or maintenance of the Premises and all areas appurtenant thereto. Such insurance shall be on an occurrence basis providing single limit coverage in an amount not less than $1,000,000 $2,000,000 per occurrence with an annual aggregate of not less than $2,000,000, an “Additional Insured-Managers or Lessors of Premises Endorsement” and contain the “Amendment of the Pollution Exclusion Endorsement” for damage caused by heat, smoke or fumes from a hostile fire. The policy shall not contain any intra-insured exclusions as between insured persons or organizations, but shall include coverage for liability assumed under this Lease as an “Insured contract” for the performance of Lessee’s Indemnity obligations under this Lease. The limits of said Insurance shall not, however, limit the liability of Lessee nor relieve Lessee of any obligation hereunder. All Insurance carried by Lessee shall be primary to and not contributory with any similar insurance carried by Lessor, whose Insurance shall be considered excess insurance only.

          (b) Carried by Lessor. Lessor shall maintain liability insurance as described in Paragraph 8.2(a), in addition to, and not in lieu of, the insurance required to be maintained by Lessee. Lessee shall not be named as an additional insured therein.

     8.3 Property Insurance — Building, Improvements and Rental Value.

          (a) Building and Improvements. Lessor shall obtain and keep in force a policy or policies of insurance in the name of Lessor, with loss payable to Lessor, any ground-lessor, and to any Lender insuring loss or damage to the Premises. The amount of such insurance shall be equal to the full replacement cost of the Premises, as the same shall exist from time to time, or the amount required by any Lender, but in no event more than the commercially reasonable and available insurable value thereof. Lessee Owned Alterations and Utility Installations, Trade Fixtures, and Lessee’s personal property shall be insured by Lessee under Paragraph 8.4. If the coverage is available and commercially appropriate, such policy or policies shall Insure against all risks of direct physical loss or damage (except the perils of flood and/or earthquake unless required by a Lender), Including coverage for debris removal and the enforcement of any Applicable Requirements requiring the upgrading, demolition, reconstruction or replacement of any portion of the Premises as the result of a covered loss. Said policy or policies shall also contain an agreed valuation provision in lieu of any coinsurance clause, waiver of subrogation, and inflation guard protection causing an increase in the annual property insurance coverage amount by a factor of not less than the adjusted U.S. Department of Labor Consumer Price Index for All Urban Consumers for the city nearest to where the Premises are located. If such insurance coverage has a deductible clause, the deductible amount shall not exceed $1,000 $10,000 per occurrence.

          (b) Rental Value. Lessor shall also obtain and keep in force a policy or policies in the name of Lessor with loss payable to Lessor and any Lender, insuring the loss of the full Rent for one year with an extended period of indemnity for an additional 180 days (“Rental Value insurance”). Said insurance shall contain an agreed valuation provision in lieu of any coinsurance clause, and the amount of coverage shall be adjusted annually to reflect the projected Rent otherwise payable by Lessee, for the next 12 month period.

          (c) Adjacent Premises. Lessee shall pay for any increase in the premiums for the property insurance of the Building and for the Common Areas or other buildings in the Project if said increase is caused by Lessee’s acts, omissions, use or occupancy of the Premises.

          (d) Lessee’s Improvements. Since Lessor is the Insuring Party, Lessor shall not be required to insure Lessee Owned Alterations and Utility Installations unless the item in question has become the property of Lessor under the terms of this Lease.

     8.4 ‘Lessee’s Property; BusIness Interruption Insurance.

          (a) Property Damage. Lessee shall obtain and maintain insurance coverage on all of Lessee’s personal property Trade Fixtures, and Lessee Owned Alterations and Utility Installations. Such insurance shall be full replacement cost coverage with a deductible of not to exceed $10,000 $1,000 per occurrence. The proceeds from any such insurance shall be used by Lessee for the replacement of personal property, Trade Fixtures and Lessee Owned Alterations and Utility Installations. Lessee shall provide Lessor with written evidence that such insurance is in force.

          (b) Business Interruption. Lessee shall obtain and maintain loss of income and extra expense insurance in amounts as will reimburse Lessee for direct or indirect loss of earnings attributable to all perils commonly insured against by prudent lessees in the business of Lessee or attributable to prevention of access to the Premises as a result of such perils.

          (c) No Representation of Adequate Coverage. Lessor makes no representation that the limits or forms of coverage of insurance specified herein are adequate to cover Lessee’s property, business operations or obligations under this Lease.

     8.5 Insurance Policies. Insurance required herein shall be by companies duly licensed or admitted to transact business in the state where the Premises are located, and maintaining during the policy term a “General Policyholders Rating” of at least A-, VII B+, V, as set forth in the most current issue of “Best’s Insurance Guide”, or such other rating as may be required by a Lender. Lessee shall not do or permit to be done anything which invalidates the required insurance policies. Lessee shall, prior to the Start Date, deliver to Lessor certified copies of policies of such insurance or certificates evidencing the existence and amounts of the required insurance. No such policy shall be cancelable or subject to modification except after 30 days prior written notice to Lessor. Lessee shall, at least 30 days prior to the expiration of such policies, furnish Lessor with evidence of renewals or “insurance binders” evidencing renewal thereof, or Lessor may order such insurance and charge the cost thereof to Lessee, which amount shall

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be payable by Lessee to Lessor upon within twenty (20) days of demand. Such policies shall be for a term of at least one year, or the length of the remaining term of this Lease, whichever is less. If either Party shall fail to procure and maintain the insurance required to be carried by it, the other Party may, but shall not be required to, procure and maintain the same.

     8.6 Waiver of Subrogation. Without affecting any other rights or remedies, Lessee and Lessor each hereby release and relieve the other, and waive their entire right to recover damages against the other, for loss of or damage to its property arising out of or incident to the perils required to be insured against herein. The effect of such releases and waivers is not limited by the amount of insurance carried or required or by any deductibles applicable hereto. The Parties agree to have their respective property damage insurance carriers waive any right to subrogation that such companies may have against Lessor or Lessee, as the case may be, so long as the insurance is not invalidated thereby.

     8.7 Indemnity. Except for Lessors gross negligence or willful misconduct, Lessee shall indemnify, protect, defend and hold harmless the Premises, Lessor and its agents, Lessor’s master or ground lessor, partners and Lenders, from and against any and all claims, loss of rents and/or damages, liens, judgments, penalties, attorneys’ and consultants’ fees, expenses and/or liabilities arising out of, involving, or in connection with, the use and/or occupancy of the Premises by Lessee. If any action or proceeding is brought against Lessor by reason of any of the foregoing matters, Lessee shall upon notice defend the same at Lessee’s expense by counsel reasonably satisfactory to Lessor and Lessor shall cooperate with Lessee in such defense. Lessor need not have first paid any such claim in order to be defended or indemnified.

     8.8 Exemption of Lessor from Liability. Lessor shall not be liable for injury or damage to the person or goods, wares, merchandise or other property of Lessee, Lessee’s employees, contractors, invitees, customers, or any other person in or about the Premises, whether such damage or injury is caused by or results from fire, steam, electricity, gas, water or rain, or from the breakage, leakage, obstruction or other defects of pipes, fire sprinklers, wires, appliances, plumbing, HVAC or lighting fixtures, disruption of utility or telecommunications service or from any other cause, whether the said injury or damage results from conditions arising upon the Premises or upon other portions of the Building, or from other sources or places. Lessor shall not be liable for any damages arising from any act or neglect of any other tenant of Lessor nor from the failure of Lessor to enforce the provisions of any other lease in the Project. Notwithstanding Lessors negligence or breach of this Lease, Lessor shall under no circumstances be liable for injury to Lessee’s business or property or for any loss of income or profit therefrom.

9. Damage or Destruction.

     9.1 Definitions.

          (a) “Premises Partial Damage” shall mean damage or destruction to the improvements on the Premises, other than Lessee Owned Alterations and Utility Installations, which can reasonably be repaired in 3 months or less from the date of the damage or destruction, and the cost thereof does not exceed a sum equal to 6 month’s Base Rent. Lessor shall notify Lessee in writing within 30 days from the date of the damage or destruction as to whether or not the damage is Partial or Total.

          (b) “Premises Total Destruction” shall mean damage or destruction to the improvements on the Premises, other than Lessee Owned Alterations and Utility Installations and Trade Fixtures, which cannot reasonably be repaired in 3 months or less from the date of the damage or destruction and/or the cost thereof exceeds a sum equal to 6 month’s Base Rent. Lessor shall notify Lessee in writing within 30 days from the date of the damage or destruction as to whether or not the damage is Partial or Total.

          (c) “Insured Loss” shall mean damage or destruction to improvements on the Premises, other than Lessee Owned Alterations and Utility Installations and Trade Fixtures, which was caused by an event required to be covered by the insurance described in Paragraph 8.3(a), irrespective of any deductible amounts or coverage limits involved.

          (d) “Replacement Cost” shall mean the cost to repair or rebuild the improvements owned by Lessor at the time of the occurrence to their condition existing immediately prior thereto, including demolition, debris removal and upgrading required by the operation of Applicable Requirements, and without deduction for depreciation.

          (e) “Hazardous Substance Condition” shall mean the occurrence or discovery of a condition involving the presence of, or a contamination by, a Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the Premises.

     9.2 Partial Damage — Insured Loss. If a Premises Partial Damage that is an Insured Loss occurs, then Lessor shall, at Lessor’s expense, repair such damage (but not Lessee’s Trade Fixtures or Lessee Owned Alterations and Utility Installations) as soon as reasonably possible and this Lease shall continue in full force and effect; provided, however, that Lessee shall, at Lessor’s election, make the repair of any damage or destruction the total cost to repair of which is $5,000 or less, and, in such event, Lessor shall make any applicable insurance proceeds available to Lessee on a reasonable basis for that purpose. Notwithstanding the foregoing, if the required insurance was not in force or the insurance proceeds are not sufficient to effect such repair, the Insuring Party shall promptly contribute the shortage in proceeds as and when required to complete said repairs. In the event, however, such shortage was due to the fact that, by reason of the unique nature of the improvements, full replacement cost insurance coverage was not commercially reasonable and available, Lessor shall have no obligation to pay for the shortage in insurance proceeds or to fully restore the unique aspects of the Premises unless Lessee provides Lessor with the funds to cover same, or adequate assurance thereof, within 10 days following receipt of written notice of such shortage and request therefor. If Lessor receives said funds or adequate assurance thereof within said 10 day period, the party responsible for making the repairs shall complete them as soon as reasonably possible and this Lease shall remain in full force and effect. If such funds or assurance are not received, Lessor may nevertheless elect by written notice to Lessee within 10 days thereafter to: (i) make such restoration and repair as is commercially reasonable with Lessor paying any shortage in proceeds, in which case this Lease shall remain in full force and effect, or (ii) have this Lease terminate 30 days thereafter. Lessee shall not be entitled to reimbursement of any funds contributed by Lessee to repair any such damage or destruction. Premises Partial Damage due to flood or earthquake shall be subject to Paragraph 9.3, notwithstanding that there may be some insurance coverage, but the net proceeds of any such insurance

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shall be made available for the repairs if made by either Party.

     9.3 Partial Damage — Uninsured Lose. If a Premises Partial Damage that is not an Insured Loss occurs, unless caused by a negligent or willful act of Lessee (in which event Lessee shall make the repairs at Lessee’s expense), Lessor may either; (i) repair such damage as soon as reasonably possible at Lessors expense, in which event this Lease shall continue in full force and effect, or (ii) terminate this Lease by giving written notice to Lessee within 30 days after receipt by Lessor of knowledge of the occurrence of such damage. Such termination shall be effective 60 days following the date of such notice. In the event Lessor elects to terminate this Lease, Lessee shall have the right within 10 days after receipt of the termination notice to give written notice to Lessor of Lessee’s commitment to pay for the repair of such damage without reimbursement from Lessor. Lessee shall provide Lessor with said funds or satisfactory assurance thereof within 30 days after making such commitment. In such event this Lease shall continue in full force and effect, and Lessor shall proceed to make such repairs as soon as reasonably possible after the required funds are available. If Lessee does not make the required commitment, this Lease shall terminate as of the date specified in the terminatIon notice.

     9.4 Total Destruction. Notwithstanding any other provision hereof, if a Premises Total Destruction occurs, this Lease shall terminate 60 days following such Destruction. If the damage or destruction was caused by the gross negligence or willful misconduct of Lessee, Lessor shall have the right to recover Lessor’s damages from Lessee, except as provided in Paragraph 8.6.

     9.5 Damage Near End of Term. If at any time during the last 6 months of this Lease there is damage for which the cost to repair exceeds one month’s Base Rent, whether or not an Insured Loss, Lessor (or Lessee, provided Lessee did not cause the damage) may terminate this Lease effective 60 days following the date of occurrence of such damage by giving a written termination notice to Lessee the other party within 30 days after the date of occurrence of such damage. Notwithstanding the foregoing, if Lessee at that time has an exercisable option to extend this Lease or to purchase the Premises, then Lessee may preserve this Lease by, (a) exercising such option and (b) providing Lessor with any shortage in insurance proceeds (or adequate assurance thereof) needed to make the repairs on or before the earlier of (i) the date which is 10 days after Lessee’s receipt of Lessor’s written notice purporting to terminate this Lease, or (ii) the day prior to the date upon which such option expires. If Lessee duly exercises such option during such period and provides Lessor with funds (or adequate assurance thereof) to cover any shortage in insurance proceeds, Lessor shall, at Lessor’s commercially reasonable expense, repair such damage as soon as reasonably possible and this Lease shall continue in full force and effect. If Lessee fails to exercise such option and provide such funds or assurance during such period, then this Lease shall terminate on the date specified in the termination notice and Lessee’s option shall be extinguished.

     9.6 Abatement of Rent; Lessee’s Remedies.

          (a) Abatement. In the event of Premises Partial Damage or Premises Total Destruction or a Hazardous Substance Condition for which Lessee is not responsible under this Lease, the Rent payable by Lessee for the period required for the repair, remediation or restoration of such damage shall be abated in proportion to the degree to which Lessee’s use of the Premises is impaired, but not to exceed the proceeds received from the Rental Value insurance. All other obligations of Lessee hereunder shall be performed by Lessee, and Lessor shall have no liability for any such damage, destruction, remediation, repair or restoration except as provided herein.

          (b) Remedies. If Lessor shall be obligated to repair or restore the Premises and does not commence, in a substantial and meaningful way, such repair or restoration within 90 days after such obligation shall accrue, Lessee may, at any time prior to the commencement of such repair or restoration, give written notice to Lessor and to any Lenders of which Lessee has actual notice, of Lessee’s election to terminate this Lease on a date not less than 60 days following the giving of such notice. If Lessee gives such notice and such repair or restoration is not commenced within 30 days thereafter, this Lease shall terminate as of the date specified in said notice. If the repair or restoration is commenced within such 30 days, this Lease shall continue in full force and effect. “Commence” shall mean either the unconditional authorization of the preparation of the required plans, or the beginning of the actual work on the Premises, whichever first occurs.

     9.7 Termination; Advance Payments. Upon termination of this Lease pursuant to Paragraph 6.2(g) or Paragraph 9, an equitable adjustment shall be made concerning advance Base Rent and any other advance payments made by Lessee to Lessor. Lessor shall, in addition, return to Lessee so much of Lessee’s Security Deposit as has not been, or is not then required to be, used by Lessor.

     9.8 Waive Statutes. Lessor and Lessee agree that the terms of this Lease shall govern the effect of any damage to or destruction of the Premises with respect to the termination of this Lease and hereby waive the provisions of any present or future statute to the extent inconsistent herewith.

10. Real Property Taxes.

     10.1 Definition. As used herein, the term “Real Property Taxes” shall include any form of assessment; real estate, general, special, ordinary or extraordinary, or rental levy or tax (other than inheritance, personal Income, gift, franchise, or estate taxes); improvement bond; and/or license fee imposed upon or levied against any legal or equitable interest of Lessor in the Project, Lessor’s right to other Income therefrom, and/or Lessor’s business of leasing, by any authority having the direct or indirect power to tax and where the funds are generated with reference to the Project address and where the proceeds so generated are to be applied by the city, county or other local taxing authority of a jurisdiction within which the Project is located. The term “Real Property Taxes” shall also include any tax, fee, levy, assessment or charge, or any increase therein, imposed by reason of events occurring during the term of this Lease, including but not limited to, a change in the ownership of the Project or any portion thereof or a change in the improvements thereon. In calculating Real Property Taxes for any calendar year, the Real Property Taxes for any real estate tax year shall be included in the calculation of Real Property Taxes for such calendar year based upon the number of days which such calendar year and tax year have in common.

     10.2 Payment of Taxes. Lessor shall pay the Real Property Taxes applicable to the Project, and except as

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otherwise provided in Paragraph 10.3, any such amounts shall be included in the calculation of Common Area Operating Expenses in accordance with the provisions of Paragraph 4.2.

     10.3 Additional Improvements. Common Area Operating Expenses shall not include Real Property Taxes specified in the tax assessor’s records and work sheets as being caused by additional improvements placed upon the Project by other lessees or by Lessor for the exclusive enjoyment of such other lessees. Notwithstanding Paragraph 10.2 hereof, Lessee shall, however, pay to Lessor at the time Common Area Operating Expenses are payable under Paragraph 4.2, the entirety of any increase in Real Property Taxes if assessed solely by reason of Alterations, Trade Fixtures or Utility Installations placed upon the Premises by Lessee or at Lessee’s request.

     10.4 Joint Assessment. If the Building is not separately assessed, Real Property Taxes allocated to the Building shall be an equitable proportion of the Real Property Taxes for all of the land and improvements included within the tax parcel assessed, such proportion to be determined by Lessor from the respective valuations assigned in the assessor’s work sheets or such other information as may be reasonably available. Lessor’s reasonable determination thereof, in good faith, shall be conclusive.

     10.5 Personal Property Taxes. Lessee shall pay prior to delinquency all taxes assessed against and levied upon Lessee Owned Alterations and Utility Installations, Trade Fixtures, furnishings, equipment and all personal property of Lessee contained in the Premises. When possible, Lessee shall cause its Lessee Owned Alterations and Utility Installations, Trade Fixtures, furnishings, equipment and all other personal property to be assessed and billed separately from the real property of Lessor. If any of Lessee’s said property shall be assessed with Lessor’s real property, Lessee shall pay Lessor the taxes attributable to Lessee’s property within 10 days after receipt of a written statement setting forth the taxes applicable to Lessee’s property.

11. Utilities. Lessee shall pay for all water, gas, heat, light, power, telephone, trash disposal and other utilities and services supplied to the Premises, together with any taxes thereon. Notwithstanding the provisions of Paragraph 4.2, if at any time in Lessor’s sole judgment, Lessor determines that Lessee is using a disproportionate amount of water, electricity or other commonly metered utilities, or that Lessee is generating such a large volume of trash as to require an increase in the size of the dumpster and/or an increase in the number of times per month that the dumpster is emptied, then Lessor may increase Lessee’s Base Rent by an amount equal to such increased costs.

12. Assignment and Subletting.

     12.1 Lessor’s Consent Required.

          (a) Lessee shall not voluntarily or by operation of law assign, transfer, mortgage or encumber (collectively, “assign or assignment”) or sublet all or any part of Lessee’s interest in this Lease or in the Premises without Lessor’s prior written consent

          (b) A change in the control of Lessee shall constitute an assignment requiring consent. The transfer, on a cumulative basis, of 25% or more of the voting control of Lessee shall constitute a change in control for this purpose.

          (c) The involvement of Lessee or its assets in any transaction, or series of transactions (by way of merger, sale, acquisition, financing, transfer, leveraged buy-out or otherwise), whether or not a formal assignment or hypothecation of this Lease or Lessee’s assets occurs, which results or will result in a reduction of the Net Worth of Lessee by an amount greater than 25% of such Net Worth as it was represented at the time of the execution of this Lease or at the time of the most recent assignment to which Lessor has consented, or as it exists immediately prior to said transaction or transactions constituting such reduction, whichever was or is greater, shall be considered an assignment of this Lease to which Lessor may withhold its consent. “Net Worth of Lessee” shall mean the net worth of Lessee (excluding any guarantors) established under generally accepted accounting principles.

          (d) An assignment or subletting without consent shall, at Lessor’s option, be a Default curable after notice per Paragraph 13.1(c), or a noncurable Breach without the necessity of any notice and grace period. If Lessor elects to treat such unapproved assignment or subletting as a noncurable Breach, Lessor may either: (i) terminate this Lease, or (ii) upon 30 days written notice, increase the monthly Base Rent to 110% of the Base Rent then in effect. Further, in the event of such Breach and rental adjustment, (i) the purchase price of any option to purchase the Premises held by Lessee shall be subject to similar adjustment to 110% of the price previously in effect, and (ii) all fixed and non-fixed rental adjustments scheduled during the remainder of the Lease term shall be increased to 110% of the scheduled adjusted rent.

          (e) Lessee’s remedy for any breach of Paragraph 12.1 by Lessor shall be limited to compensatory damages and/or injunctive relief.

     12.2 Terms and Conditions Applicable to Assignment and Subletting.

          (a) Regardless of Lessor’s consent, no assignment or subletting shall: (i) be effective without the express written assumption by such assignee or sublessee of the obligations of Lessee under this Lease, (ii) release Lessee of any obligations hereunder, or (iii) alter the primary liability of Lessee for the payment of Rent or for the performance of any other obligations to be performed by Lessee.

          (b) Lessor may accept Rent or performance of Lessee’s obligations from any person other than Lessee pending approval or disapproval of an assignment. Neither a delay in the approval or disapproval of such assignment nor the acceptance of Rent or performance shall constitute a waiver or estoppel of Lessor’s right to exercise its remedies for Lessee’s Default or Breach.

          (c) Lessor’s consent to any assignment or subletting shall not constitute a consent to any subsequent assignment or subletting.

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          (d) In the event of any Default or Breach by Lessee, Lessor may proceed directly against Lessee, any Guarantors or anyone else responsible for the performance of Lessee’s obligations under this Lease, including any assignee or sublessee, without first exhausting Lessor’s remedies against any other person or entity responsible therefore to Lessor, or any security held by Lessor.

          (e) Each request for consent to an assignment or subletting shall be in writing, accompanied by information relevant to Lessor’s determination as to the financial and operational responsibility and appropriateness of the proposed assignee or sublessee, including but not limited to the intended use and/or required modification of the Premises, if any, together with a fee of $1,000, as consideration for Lessor’s considering and processing said request. Lessee agrees to provide Lessor with such other or additional information and/or documentation as may be reasonably requested.

          (f) Any assignee of, or sublessee under, this Lease shall, by reason of accepting such assignment or entering into such sublease, be deemed to have assumed and agreed to conform and comply with each and every term, covenant, condition and obligation herein to be observed or performed by Lessee during the term of said assignment or sublease, other than such obligations as are contrary to or inconsistent with provisions of an assignment or sublease to which Lessor has specifically consented to in writing.

          (g) Lessor’s consent to any assignment or subletting shall not transfer to the assignee or sublessee any Option granted to the original Lessee by this Lease unless such transfer is specifically consented to by Lessor in writing. (See Paragraph 39.2)

     12.3 Additional Terms and Conditions Applicable to Subletting. The following terms and conditions shall apply to any subletting by Lessee of all or any part of the Premises and shall be deemed included in all subleases under this Lease whether or not expressly incorporated therein:

          (a) Lessee hereby assigns and transfers to Lessor all of Lessee’s interest in all Rent payable on any sublease, and Lessor may collect such Rent and apply same toward Lessee s obligations under this Lease; provided, however, that until a Breach shall occur in the performance of Lessee’s obligations, Lessee may collect said Rent. Lessor shall not, by reason of the foregoing or any assignment of such sublease, nor by reason of the collection of Rent, be deemed fable to the sublessee for any failure of Lessee to perform and comply with any of Lessee’s obligations to such sublessee. Lessee hereby irrevocably authorizes and directs any such sublessee, upon receipt of a written notice from Lessor stating that a Breach exists in the performance of Lessee’s obligations under this Lease, to pay to Lessor all Rent due and to become due under the sublease. Sublessee shall rely upon any such notice from Lessor and shall pay all Rents to Lessor without any obligation or right to inquire as to whether such Breach exists, notwithstanding any claim from Lessee to the contrary.

          (b) In the event of a Breach by Lessee, Lessor may, at its option, require sublessee to attom to Lessor, in which event Lessor shall undertake the obligations of the sublessor under such sublease from the time of the exercise of said option to the expiration of such sublease; provided, however, Lessor shall not be liable for any prepaid rents or security deposit paid by such sublessee to such sublessor or for any prior Defaults or Breaches of such sublessor.

          (c) Any matter requiring the consent of the sublessor under a sublease shall also require the consent of Lessor.

          (d) No sublessee shall further assign or sublet all or any part of the Premises without Lessor’s prior written consent

          (e) Lessor shall deliver a copy of any notice of Default or Breach by Lessee to the sublessee, who shall have the right to cure the Default of Lessee within the grace period, if any, specified in such notice. The sublessee shall have a right of reimbursement and offset from and against Lessee for any such Defaults cured by the sublessee.

13. Default; Breach; Remedies.

     13.1 Default; Breach. A “Default” is defined as a failure by the Lessee to comply with or perform any of the terms, covenants, conditions or Rules and Regulations under this Lease. A "Breach” is defined as the occurrence of one or more of the following Defaults, and the failure of Lessee to cure such Default within any applicable grace period:

          (a) The abandonment of the Premises; or the vacating of the Premises without providing a commercially reasonable level of security, or where the coverage of the property insurance described in Paragraph 8.3 is jeopardized as a result thereof, or without providing reasonable assurances to minimize potential vandalism.

          (b) The failure of Lessee to make any payment of Rent or any Security Deposit required to be made by Lessee hereunder, whether to Lessor or to a third party, when due, to provide reasonable evidence of insurance or surety bond, or to fulfill any obligation under this Lease which endangers or threatens life or property, where such failure continues for a period of 3 business days following written notice to Lessee.

          (c) The failure by Lessee to provide (i) reasonable written evidence of compliance with Applicable Requirements, (ii) the service contracts, (iii) the rescission of an unauthorized assignment or subletting, (iv) an Estoppel Certificate, (v) a requested subordination, (vi) evidence concerning any guaranty and/or Guarantor, (vii) any document requested under Paragraph 41 (easements), or (viii) any other documentation or information which Lessor may reasonably require of Lessee under the terms of this Lease, where any such failure continues for a period of 10 days following written notice to Lessee.

          (d) A Default by Lessee as to the terms, covenants, conditions or provisions of this Lease, or of the rules adopted under Paragraph 2.9 hereof, other than those described in subparagraphs 13.1(a), (b) or (c), above, where such Default continues for a period of 30 days after written notice; provided, however, that if the nature of Lessee’s Default is such that more than

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30 days are reasonably required for its cure, then it shall not be deemed to be a Breach if Lessee commences such cure within said 30 day period and thereafter diligently prosecutes such cure to completion.

          (e) The occurrence of any of the following events: (i) the making of any general arrangement or assignment for the benefit of creditors; (ii) becoming a “debtor” as defined in 11 U.S.C. § 101 or any successor statute thereto (unless, in the case of a petition filed against Lessee, the same is dismissed within 60 days); (iii) the appointment of a trustee or receiver to take possession of substantially all of Lessee’s assets located at the Premises or of Lessee’s interest in this Lease, where possession is not restored to Lessee within 30 days; or (iv) the attachment, execution or other judicial seizure of substantially all of Lessee’s assets located at the Premises or of Lessee’s interest in this Lease, where such seizure is not discharged within 30 days; provided, however, in the event that any provision of this subparagraph (e) is contrary to any applicable law, such provision shall be of no force or effect, and not affect the validity of the remaining provisions.

          (f) The discovery that any financial statement of Lessee or of any Guarantor given to Lessor was materially false.

          (g) If the performance of Lessee’s obligations under this Lease is guaranteed: (i) the death of a Guarantor, (ii) the termination of a Guarantor’s liability with respect to this Lease other than in accordance with the terms of such guaranty, (iii) a Guarantor’s becoming insolvent or the subject of a bankruptcy filing, (iv) a Guarantor’s refusal to honor the guaranty, or (v) a Guarantor’s breach of its guaranty obligation on an anticipatory basis, and Lessee’s failure, within 60 days following written notice of any such event, to provide written alternative assurance or security, which, when coupled with the then existing resources of Lessee, equals or exceeds the combined financial resources of Lessee and the Guarantors that existed at the time of execution of this Lease.

     13.2 Remedies. If Lessee falls to perform any of its affirmative duties or obligations, within 10 days after written notice (or in case of an emergency, without notice), Lessor may, at its option, perform such duty or obligation on Lessee’s behalf, including but not limited to the obtaining of reasonably required bonds, insurance policies, or governmental licenses, permits or approvals. The costs and expenses of any such performance by Lessor shall be due and payable by Lessee upon receipt of invoice therefor. If any check given to Lessor by Lessee shall not be honored by the bank upon which it is drawn, Lessor, at its option, may require all future payments to be made by Lessee to be by cashier’s check. In the event of a Breach, Lessor may, with or without further notice or demand, and without limiting Lessor in the exercise of any right or remedy which Lessor may have by reason of such Breach:

          (a) Terminate Lessee’s right to possession of the Premises by any lawful means, in which case this Lease shall terminate and Lessee shall immediately surrender possession to Lessor. In such event Lessor shall be entitled to recover from Lessee: (i) the unpaid Rent which had been earned at the time of termination; (ii) the worth at the time of award of the amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that the Lessee proves could have been reasonably avoided; (iii) the worth at the time of award of the amount by which the unpaid rent for the balance of the term after the time of award exceeds the amount of such rental loss that the Lessee proves could be reasonably avoided; and (iv) any other amount necessary to compensate Lessor for all the detriment proximately caused by the Lessee’s failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result therefrom, including but not limited to the cost of recovering possession of the Premises, expenses of reletting, including necessary renovation and alteration of the Premises, reasonable attorneys’ fees, and that portion of any leasing commission paid by Lessor in connection with this Lease applicable to the unexpired term of this Lease. The worth at the time of award of the amount referred to in provision (iii) of the immediately preceding sentence shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of the District within which the Premises are located at the time of award plus one percent. Efforts by Lessor to mitigate damages caused by Lessee’s Breach of this Lease shall not waive Lessor’s right to recover damages under Paragraph 12. If termination of this Lease is obtained through the provisional remedy of unlawful detainer, Lessor shall have the right to recover in such proceeding any unpaid Rent and damages as are recoverable therein, or Lessor may reserve the right to recover all or any part thereof in a separate suit. If a notice and grace period required under Paragraph 13.1 was not previously given, a notice to pay rent or quit, or to perform or quit given to Lessee under the unlawful detainer statute shall also constitute the notice required by Paragraph 13.1. In such case, the applicable grace period required by Paragraph 13.1 and the unlawful detainer statute shall run concurrently, and the failure of Lessee to cure the Default within the greater of the two such grace periods shall constitute both an unlawful detainer and a Breach of this Lease entitling Lessor to the remedies provided for in this Lease and/or by said statute.

          (b) Continue the Lease and Lessee’s right to possession and recover the Rent as it becomes due, in which event Lessee may sublet or assign, subject only to reasonable limitations. Acts of maintenance, efforts to relet, and/or the appointment of a receiver to protect the Lessor’s interests, shall not constitute a termination of the Lessee’s right to possession.

          (c) Pursue any other remedy now or hereafter available under the laws or judicial decisions of the state wherein the Premises are located. The expiration or termination of this Lease and/or the termination of Lessee’s right to possession shall not relieve Lessee from liability under any indemnity provisions of this Lease as to matters occurring or accruing during the term hereof or by reason of Lessee’s occupancy of the Premises.

     13.3 Inducement Recapture. Any agreement for free or abated rent or other charges, or for the giving or paying by Lessor to or for Lessee of any cash or other bonus, inducement or consideration for Lessee’s entering into this Lease, all of which concessions are hereinafter referred to as "Inducement Provisions”, shall be deemed conditioned upon Lessee’s full and faithful performance of all of the terms, covenants and conditions of this Lease. Upon Breach of this Lease by Lessee, any such Inducement Provision shall automatically be deemed deleted from this Lease and of no further force or effect, and any rent, other charge, bonus, inducement or consideration theretofore abated, given or paid by Lessor under such an Inducement Provision shall be immediately due and payable by Lessee to Lessor, notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by Lessor of rent or the cure of the Breach which initiated the operation of this paragraph shall not be deemed a waiver by Lessor of the provisions of this paragraph unless specifically so stated in writing by Lessor at the time of such acceptance.

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     13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee of Rent will cause Lessor to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. Such costs include, but are not limited to, processing and accounting charges, and late charges which may be imposed upon Lessor by any Lender. Accordingly, if any Rent shall not be received by Lessor within 5 days after such amount shall be due, then, without any requirement for notice to Lessee, Lessee shall pay to Lessor a one-time late charge equal to 10% of each such overdue amount or $100, whichever is greater. The parties hereby agree that such late charge represents a fair and reasonable estimate of the costs Lessor will incur by reason of such late payment. Acceptance of such late charge by Lessor shall in no event constitute a waiver of Lessee’s Default or Breach with respect to such overdue amount, nor prevent the exercise of any of the other rights and remedies granted hereunder. In the event that a late charge is payable hereunder, whether or not collected, for 3 consecutive installments of Base Rent, then notwithstanding any provision of this Lease to the contrary, Base Rent shall, at Lessor’s option, become due and payable quarterly in advance.

     13.5 Interest, Any monetary payment due Lessor hereunder, other than late charges, not received by Lessor, when due as to scheduled payments (such as Base Rent) or within 30 days following the date on which it was due for non-scheduled payment, shall bear interest from the date when due, as to scheduled payments, or the 31st day after it was due as to non-scheduled payments. The interest (“Interest”) charged shall be equal to the prime rate reported in the Wall Street Journal as published closest prior to the date when due plus 4%, but shall not exceed the maximum rate allowed by law. Interest is payable in addition to the potential late charge provided for in Paragraph 13.4.

     13.6 Breach by Lessor.

          (a) Notice of Breach. Lessor shall not be deemed in breach of this Lease unless Lessor fails within a reasonable time to perform an obligation required to be performed by Lessor. For purposes of this Paragraph, a reasonable time shall in no event be less than 30 days after receipt by Lessor, and any Lender whose name and address shall have been furnished Lessee in writing for such purpose, of written notice specifying wherein such obligation of Lessor has not been performed; provided, however, that if the nature of Lessor’s obligation is such that more than 30 days are reasonably required for its performance, then Lessor shall not be in breach if performance is commenced within such 30 day period and thereafter diligently pursued to completion.

          (b) Performance by Lessee on Behalf of Lessor. In the event that neither Lessor nor Lender cures said breach within 30 days after receipt of said notice, or if having commenced said cure they do not diligently pursue it to completion, then Lessee may elect to cure said breach at Lessee’s expense and offset from Rent an amount equal to the greater of one month’s Base Rent or the Security Deposit, and to pay an excess of such expense under protest, reserving Lessee’s right to reimbursement from Lessor. Lessee shall document the cost of said cure and supply said documentation to Lessor.

14. Condemnation. If the Premises or any portion thereof are taken under the power of eminent domain or sold under the threat of the exercise of said power (collectively “Condemnation”), this Lease shall terminate as to the part taken as of the date the condemning authority takes title or possession, whichever first occurs. If more than 10% of the floor area of the Unit, or more than 25% of Lessee’s Reserved Parking Spaces, is taken by Condemnation, Lessee may, at Lessee’s option, to be exercised in writing within 10 days after Lessor shall have given Lessee written notice of such taking (or in the absence of such notice, within 10 days after the condemning authority shall have taken possession) terminate this Lease as of the date the condemning authority takes such possession. If Lessee does not terminate this Lease in accordance with the foregoing, this Lease shall remain in full force and effect as to the portion of the Premises remaining, except that the Base Rent shall be reduced in proportion to the reduction in utility of the Premises caused by such Condemnation. Condemnation awards and/or payments shall be the property of Lessor, whether such award shall be made as compensation for diminution in value of the leasehold, the value of the part taken, or for severance damages; provided, however, that Lessee shall be entitled to any compensation for Lessee’s relocation expenses, loss of business goodwill and/or Trade Fixtures, without regard to whether or not this Lease is terminated pursuant to the provisions of this Paragraph. All Alterations and Utility Installations made to the Premises by Lessee, for purposes of Condemnation only, shall be considered the property of the Lessee and Lessee shall be entitled to any and all compensation which is payable therefor. In the event that this Lease is not terminated by reason of the Condemnation, Lessor shall repair any damage to the Premises caused by such Condemnation.

15. Brokerage Fees.

     15.1 Additional Commission. In addition to the payments owed pursuant to Paragraph 4.10 above, and unless Lessee and the Brokers otherwise agree in writing, Lessor agrees that: (a) if Lessee exercises any Option, (b) if Lessee acquires from Lessor any rights to the Premises or other premises owned by Lessor and located within the Project, (c) if Lessee remains in possession of the Premises, with theconsent of Lessor, after the expiration of this Lease, or (d) if Base Rent is increased, whether by agreement or operation of an escalation clause herein, then, Lessor shall pay Brokers a fee in accordance with the schedule of the Brokers in effect at the time of the execution of this Lease.

     15.2 Assumption of Obligations. Any buyer or transferee of Lessor’s interest in this Lease shall be deemed to have assumed Lessor’s obligation hereunder. Brokers shall be third party beneficiaries of the provisions of Paragraphs 1, 10, 16, 22 and 31. If Lesser fails to pay to Brokers any amounts due as and for brokerage fees pertaining to this Lease when due, then such amounts shall accrue. In addition, if Lesser fails to pay any amounts to Lessee’s Broker when due, Lessee’s Broker may send written notice to Lessor and Lessee of such failure and if Lessor fails to pay such amounts within 10 days after sold monies to its Broker and offset such amounts against Rent. In addition, Lessee’s Broker shall be deemed to be a third party beneficiary of any commission agreement entered into by and/or between Lessor and Lessee’s Broker for the limited purposes of collecting any brokerage fee owed.

     15.3 Representations and Indemnities of Broker Relationships. Lessee and Lessor each represent and warrant to the other that it has had no dealings with any person, firm, broker or finder (other than the Brokers, if any) in connection with this Lease, and that no one other than said named Brokers is entitled to any commission or finder’s fee in connection herewith. Lessee

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and Lessor do each hereby agree to indemnify, protect, defend and hold the other harmless from and against liability for compensation or charges which may be claimed by any such unnamed broker, finder or other similar party by reason of any dealings or actions of the indemnifying Party, including any costs, expenses, attorneys’ fees reasonably Incurred with respect thereto.

16. Estoppel Certificates.

          (a) Each Party (as “Responding Party”) shall within 10 days after written notice from the other Party (the “Requesting Party”) execute, acknowledge and deliver to the Requesting Party a statement in writing in form similar to the then most current “Estoppel Certificate” form published by the American Industrial Real Estate Association, plus such additional information, confirmation and/or statements as may be reasonably requested by the Requesting Party.

          (b) If the Responding Party shall fail to execute or deliver the Estoppel Certificate within such 10 day period, the Requesting Party may execute an Estoppel Certificate stating that: (i) the Lease is in full force and effect without modification except as may be represented by the Requesting Party, (ii) there are no uncured defaults in the Requesting Party’s performance, and (iii) if Lessor is the Requesting Party, not more than one month’s rent has been paid in advance. Prospective purchasers and encumbrances may rely upon the Requesting Party’s Estoppel Certificate, and the Responding Party shall be estopped from denying the truth of the facts contained in said Certificate.

          (c) If Lessor desires to finance, refinance, or sell the Premises, or any part thereof, Lessee and all Guarantors shall deliver to any potential lender or purchaser designated by Lessor such financial statements as may be reasonably required by such lender or purchaser, including but not limited to Lessee’s financial statements for the past 3 years. All such financial statements shall be received by Lessor and such lender or purchaser in confidence and shall be used only for the purposes herein set forth.

17. Definition of Lessor. The term “Lessor” as used herein shall mean the owner or owners at the time in question of the fee title to the Premises, or, if this is a sublease, of the Lessee’s interest in the prior lease. In the event of a transfer of Lessor’s title or interest in the Premises or this Lease, Lessor shall deliver to the transferee or assignee (in cash or by credit) any unused Security Deposit held by Lessor. Except as provided in Paragraph 15, upon such transfer or assignment and delivery of the Security Deposit, as aforesaid, the prior Lessor shall be relieved of all liability with respect to the obligations and/or covenants under this Lease thereafter to be performed by the Lessor. Subject to the foregoing, the obligations and/or covenants in this Lease to be performed by the Lessor shall be binding only upon the Lessor as hereinabove defined. Notwithstanding the above, and subject to the provisions of Paragraph 20 below, the original Lessor under this Lease, and all subsequent holders of the Lessor’s interest in this Lease shall remain liable and responsible with regard to the potential duties and liabilities of Lessor pertaining to Hazardous Substances as outlined in Paragraph 6.2 above.

18. Severability. The invalidity of any provision of this Lease, as determined by a court of competent jurisdiction, shall in no way affect the validity of any other provision hereof.

19. Days. Unless otherwise specifically indicated to the contrary, the word “days” as used in this Lease shall mean and refer to calendar days.

20. Limitation on Liability. Subject to the provisions of Paragraph 17 above, the obligations of Lessor under this Lease shall not constitute personal obligations of Lessor, the individual partners of Lessor or its or their individual partners, directors, officers or shareholders, and Lessee shall look to the Premises, and to no other assets of Lessor, for the satisfaction of any liability of Lessor with respect to this Lease, and shall not seek recourse against the individual partners of Lessor, or its or their individual partners, directors, officers or shareholders, or any of their personal assets for such satisfaction.

21. Time of Essence. Time is of the essence with respect to the performance of all obligations to be performed or observed by the Parties under this Lease.

22. No Prior or Other Agreements; Broker Disclaimer. This Lease contains all agreements between the Parties with respect to any matter mentioned herein, and no other prior or contemporaneous agreement or understanding shall be effective. Lessor and Lessee each represents and warrants to the Brokers that it has made, and is relying solely upon, its own Investigation as to the nature, quality, character and financial responsibility of the other Party to this Lease and as to the use, nature, quality and character of the Premises. Brokers have no responsibility with respect thereto or with respect to any default or breach hereof by either Party. The liability (including court costs and attorneys’ fees), of any Broker with respect to negotiation, execution, delivery or performance by either Lessor or Lessee under this Lease or any amendment or modification hereto shall be limited to an amount up to the fee received by such Broker pursuant to this Lease; provided, however, that the foregoing limitation on each Broker’s liability shall not be applicable to any gross negligence or willful misconduct of such Broker.

23. Notices.

     23.1 Notice Requirements. All notices required or permitted by this Lease or applicable law shall be in writing and may be delivered in person (by hand or by courier) or may be sent by regular, certified or registered mail or U.S. Postal Service Express Mail, with postage prepaid, or by facsimile transmission, and shall be deemed sufficiently given if served in a manner specified in this Paragraph 23. The addresses noted adjacent to a Party’s signature on this Lease shall be that Party’s address for delivery or mailing of notices. Either Party may by written notice to the other specify a different address for notice, except that upon Lessee’s taking possession of the Premises, the Premises shall constitute Lessee’s address for notice. A copy of all notices to Lessor shall be concurrently transmitted to such party or parties at such addresses as Lessor may from time to time hereafter designate in writing.

     23.2 Date of Notice. Any notice sent by registered or certified mad, return receipt requested, shall be deemed given on the date of delivery shown on the receipt card, or if no delivery date is shown, the postmark thereon. If sent by regular mall the

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notice shall be deemed given 48 hours after the same is addressed as required herein and mailed with postage prepaid. Notices delivered by United States Express Mail or overnight courier that guarantee next day delivery shall be deemed given 24 hours after delivery of the same to the Postal Service or courier. Notices transmitted by facsimile transmission or similar means shall be deemed delivered upon telephone confirmation of receipt (confirmation report from fax machine is sufficient), provided a copy is also delivered via delivery or mail. If notice is received on a Saturday, Sunday or legal holiday, it shall be deemed received on the next business day.

24. Waivers. No waiver by Lessor or Lessee of the Default or Breach of any term, covenant or condition hereof by Lessee, shall be deemed a waiver of any other term, covenant or condition hereof, or of any subsequent Default or Breach by Lessee the other party of the same or of any other term, covenant or condition hereof. Lessor’s consent to, or approval of, any act shall not be deemed to render unnecessary the obtaining of Lessors consent to, or approval of, any subsequent or similar act by Lessee, or be construed as the basis of an estoppel to enforce the provision or provisions of this Lease requiring such consent. The acceptance of Rent by Lessor shall not be a waiver of any Default or Breach by Lessee. Any payment by Lessee may be accepted by Lessor on account of moneys or damages due Lessor, notwithstanding any qualifying statements or conditions made by Lessee in connection therewith, which such statements and/or conditions shall be of no force or effect whatsoever unless specifically agreed to in writing by Lessor at or before the time of deposit of such payment.

25. Disclosures Regarding The Nature of a Real Estate Agency Relationship.

          (a) When entering into a discussion with a real estate agent regarding a real estate transaction, a Lessor or Lessee should from the outset understand what type of agency relationship or representation it has with the agent or agents in the transaction. Lessor and Lessee acknowledge being advised by the Brokers in this transaction, as follows:

               (i) Lessor’s Agent. A Lessor’s agent under a listing agreement with the Lessor acts as the agent for the Lessor only. A Lessor’s agent or subagent has the following affirmative obligations: To the Lessor: A fiduciary duty of utmost care, integrity, honesty, and loyalty in dealings with the Lessor. To the Lessee and the Lessor: (a) Diligent exercise of reasonable skills and care in performance of the agent’s duties. (b) A duty of honest and fair dealing and good faith. (c) A duty to disclose all facts known to the agent materially affecting the value or desirability of the property that are not known to, or within the diligent attention and observation of, the Parties. An agent is not obligated to reveal to either Party any confidential information obtained from the other Party which does not involve the affirmative duties set forth above,

               (ii) Lessee’s Agent. An agent can agree to act as agent for the Lessee only. In these situations, the agent is not the Lessor’s agent, even if by agreement the agent may receive compensation for services rendered, either in full or in part from the Lessor. An agent acting only for a Lessee has the following affirmative obligations. To the Lessee: A fiduciary duty of utmost care, integrity, honesty, and loyalty in dealings with the Lessee. To the Lessee and the Lessor: (a) Diligent exercise of reasonable skills and care in performance of the agent’s duties. (b) A duty of honest and fair dealing and good faith. (c) A duty to disclose all facts known to the agent materially affecting the value or desirability of the property that are not known to, or within the diligent attention and observation of, the Parties. An agent is not obligated to reveal to either Party any confidential information obtained from the other Party which does not involve the affirmative duties set forth above.

               (iii) Agent Representing Both Lessor and Lessee. A real estate agent, either acting directly or through one or more associate licenses, can legally be the agent of both the Lessor and the Lessee in a transaction, but only with the knowledge and consent of both the Lessor and the Lessee. In a dual agency situation, the agent has the following affirmative obligations to both the Lessor and the Lessee: (a) A fiduciary duty of utmost care, integrity, honesty and loyalty in the dealings with either Lessor or the Lessee. (b) Other duties to the Lessor and the Lessee as stated above in subparagraphs (i) or (ii). In representing both Lessor and Lessee, the agent may not without the express permission of the respective Party, disclose to the other Party that the Lessor will accept rent in an amount less than that indicated in the listing or that the Lessee is willing to pay a higher rent than that offered. The above duties of the agent in a real estate transaction do not relieve a Lessor or Lessee from the responsibility to protect their own interests. Lessor and Lessee should carefully read all agreements to assure that they adequately express their understanding of the transaction. A real estate agent is a person qualified to advise about real estate. If legal or tax advice is desired, consult a competent professional.

          (b) Brokers have no responsibility with respect to any default or breach hereof by either Party. The liability (including court costs and attomeys’ fees), of any Broker with respect to any breach of duty, error or omission relating to this Lease shall not exceed the fee received by such Broker pursuant to this Lease; provided, however, that the foregoing limitation on each Broker’s lIability shall not be applicable to any gross negligence or willful misconduct of such Broker.

          (c) Buyer and Seller agree to identify to Brokers as “Confidential” any communication or information given Brokers that is considered by such Party to be confidential.

26. No Right To Holdover. Lessee has no right to retain possession of the Premises or any part thereof beyond the expiration or termination of this Lease. In the event that Lessee holds over, then the Base Rent shall be increased to 150%, 175% of the Base Rent applicable immediately preceding the expiration or termination. Nothing contained herein shall be construed as consent by Lessor to any holding over by Lessee.

27. Cumulative Remedies. No remedy or election hereunder shall be deemed exclusive but shall, wherever possible, be cumulative with all other remedies at law or in equity.

28. Covenants and Conditions; Construction of Agreement. All provisions of this Lease to be observed or performed by Lessee are both covenants and conditions. In construing this Lease, all headings and titles are for the convenience of the Parties only and shall not be considered a part of this Lease. Whenever required by the context, the singular shall include the plural and vice versa. This Lease shall not be construed as if prepared by one of the Parties, but rather according to its fair meaning as a whole, as if both Parties had prepared it.

29. BInding Effect; Choice of Law. This Lease shall be binding upon the parties, their personal representatives, successors

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and assigns and be governed by the laws of the State in which the Premises are located. Any litigation between the Parties hereto concerning this Lease shall be initiated in the county in which the Premises are located.

30. Subordination; Attornment; Non-Disturbance.

     30.1 Subordination. This Lease and any Option granted hereby shall be subject and subordinate to any ground lease, mortgage, deed of trust, or other hypothecation or security device (collectively, “Security Device”), now or hereafter placed upon the Premises, to any and all advances made on the security thereof, and to all renewals, modifications, and extensions thereof. Lessee agrees that the holders of any such Security Devices (in this Lease together referred to as "Lender”) shall have no liability or obligation to perform any of the obligations of Lessor under this Lease. Any Lender may elect to have this Lease and/or any Option granted hereby superior to the lien of its Security Device by giving written notice thereof to Lessee, whereupon this Lease and such Options shall be deemed prior to such Security Device, notwithstanding the relative dates of the documentation or recordation thereof.

     30.2 Attornment. In the event that Lessor transfers title to the Premises, or the Premises are acquired by another upon the foreclosure or termination of a Security Device to which this Lease is subordinated (i) Lessee shall, subject to the non-disturbance provisions of Paragraph 30.3, attorn to such new owner, and upon request, enter into a new lease, containing all of the terms and provisions of this Lease, with such new owner for the remainder of the term hereof, or, at the election of such new owner, this Lease shall automatically become a new Lease between Lessee and such new owner, upon all of the terms and conditions hereof, for the remainder of the term hereof, and (ii) Lessor shall thereafter be relieved of any further obligations hereunder and such new owner shall assume all of Lessor’s obligations hereunder, except that such new owner shall not: (a) be liable for any act or omission of any prior lessor or with respect to events occurring prior to acquisition of ownership; (b) be subject to any offsets or defenses which Lessee might have against any prior lessor, (c) be bound by prepayment of more than one month’s rent, or (d) be liable for the return of any security deposit paid to any prior lessor.

     30.3 Non-Disturbance. With respect to Security Devices entered into by Lessor after the execution of this Lease, Lessee’s subordination of this Lease shall be subject to receiving a commercially reasonable non-disturbance agreement (a “Non-Disturbance Agreement”) from the Lender which Non-Disturbance Agreement provides that Lessee’s possession of the Premises, and this Lease, including any options to extend the term hereof, will not be disturbed so long as Lessee is not in Breach hereof and attorns to the record owner of the Premises. Further, within 60 days after the execution of this Lease, Lessor shall use its commercially reasonable efforts to obtain a Non-Disturbance Agreement from the holder of any pre-existing Security Device which is secured by the Premises, in the event that Lessor is unable to provide the Non-Disturbance Agreement within said 60 days, then Lessee may, at Lessee’s option, directly contact Lender and attempt to negotiate for the execution and delivery of a Non-Disturbance Agreement.

     30.4 Self-Executing. The agreements contained in this Paragraph 30 shall be effective without the execution of any further documents; provided, however, that, upon written request from Lessor or a Lender in connection with a sale, financing or refinancing of the Premises, Lessee and Lessor shall execute such further writings as may be reasonably required to separately document any subordination, attornment and/or Non-Disturbance Agreement provided for herein.

31. Attorneys’ Fees. If any Party or Broker brings an action or proceeding involving the Premises whether founded in tort, contract or equity, or to declare rights hereunder, the Prevailing Party (as hereafter defined) in any such proceeding, action, or appeal thereon, shall be entitled to reasonable attorneys’ fees. Such fees may be awarded in the same suit or recovered in a separate suit, whether or not such action or proceeding is pursued to decision or judgment. The term, "Prevailing Party” shall include, without limitation, a Party or Broker who substantially obtains or defeats the relief sought, as the case may be, whether by compromise, settlement, judgment, or the abandonment by the other Party or Broker of its claim or defense. The attorneys’ fees award shall not be computed in accordance with any court fee schedule, but shall be such as to fully reimburse all attomeys’ fees reasonably incurred. In addition, Lessor shall be entitled to attorneys’ fees, costs and expenses incurred in the preparation and service of notices of Default and consultations in connection therewith, whether or not a legal action is subsequently commenced in connection with such Default or resulting Breach ($200 is a reasonable minimum per occurrence for such services and consultation).

32. Lessors Access; Showing Premises; Repairs. Lessor and Lessor’s agents shall have the right to enter the Premises at any time, in the case of an emergency, and otherwise at reasonable times upon reasonable notice (except in the event of an emergency) for the purpose of showing the same to prospective purchasers, lenders, or tenants, and making such alterations, repairs, improvements or additions to the Premises as Lessor may deem necessary. All such activities shall be without abatement of rent or liability to Lessee. Except in an emergency, Lessee shall have the right to have a representative present with Lessor during any entry by Lessor into the Building pursuant to this Paragraph 32. Lessor may at any time place on the Premises any ordinary “For Sale” signs and Lessor may during the last 6 months of the term hereof place on the Premises any ordinary “For Lease” signs. Lessee may at any time place on the Premises any ordinary “For Sublease” sign.

33. Auctions. Lessee shall not conduct, nor permit to be conducted, any auction upon the Premises without Lessor’s prior written consent. Lessor shall not be obligated to exercise any standard of reasonableness in determining whether to permit an auction.

34. Signs. Except for ordinary “For Sublease” signs which may be placed only on the Premises, Lessee shall not place any sign upon the Project without Lessor’s prior written consent. All signs must comply with all Applicable Requirements.

35. Termination; Merger. Unless specifically stated otherwise in writing by Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual termination or cancellation hereof, or a termination hereof by Lessor for Breach by Lessee, shall automatically terminate any sublease or lesser estate in the Premises; provided, however, that Lessor may elect to continue any one or all existing subtenancies. Lessors failure within 10 days following any such event to elect to the contrary by written notice to the holder of any such lesser interest, shall constitute Lessors election to have such event constitute the termination of such interest

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36. Consents. Except as otherwise provided herein, wherever in this Lease the consent of a Party is required to an act by or for the other Party, such consent shall not be unreasonably withheld or delayed. Lessor’s actual reasonable costs and expenses (including but not limited to architects’, attorneys’, engineers’ and other consultants’ fees) Incurred in the consideration of, or response to, a request by Lessee for any Lessor consent, including but not limited to consents to an assignment, a subletting or the presence or use of a Hazardous Substance, shall be paid by Lessee upon receipt of an invoice and supporting documentation therefor. Lessors consent to any act, assignment or subletting shall not constitute an acknowledgment that no Default or Breach by Lessee of this Lease exists, nor shall such consent be deemed a waiver of any then existing Default or Breach, except as may be otherwise specifically stated in writing by Lessor at the time of such consent. The failure to specify herein any particular condition to Lessors consent shall not preclude the imposition by Lessor at the time of consent of such further or other conditions as are then reasonable with reference to the particular matter for which consent is being given. In the event that either Party disagrees with any determination made by the other hereunder and reasonably requests the reasons for such determination, the determining party shall furnish its reasons in writing and in reasonable detail within 10 business days following such request.

37. Guarantor.

     37.1 Execution. The Guarantors, if any, shall each execute a guaranty in the form most recently published by the American Industrial Real Estate Association, and each such Guarantor shall have the same obligations as Lessee under this Lease.

     37.2 Default. It shall constitute a Default of the Lessee if any Guarantor fails or refuses, upon request to provide: (a) evidence of the execution of the guaranty, including the authority of the party signing on Guarantor’s behalf to obligate Guarantor, and in the case of a corporate Guarantor, a certified copy of a resolution of its board of directors authorizing the making of such guaranty, (b) current financial statements, (c) an Estoppel Certificate, or (d) written confirmation that the guaranty is still in effect.

38. Quiet Possession. Subject to payment by Lessee of the Rent and performance of all of the covenants, conditions and provisions on Lessee’s part to be observed and performed under this Lease, Lessee shall have quiet possession and quiet enjoyment of the Premises during the term hereof.

39. Options. If Lessee is granted an option, as defined below, then the following provisions shall apply.

     39.1 Definition. “Option” shall mean: (a) the right to extend the term of or renew this Lease or to extend or renew any lease that Lessee has on other property of Lessor, (b) the right of first refusal or first offer to lease either the Premises or other property of Lessor; (c) the right to purchase or the right of first refusal to purchase the Premises or other property of Lessor.

     39.2 Options Personal To Original Lessee. Any Option granted to Lessee in this Lease is personal to the original Lessee, and cannot be assigned or exercised by anyone other than said original Lessee and only while the original Lessee is in full possession of the Premises and, if requested by Lessor, with Lessee certifying that Lessee has no intention of thereafter assigning or subletting.

     39.3 Multiple Options. In the event that Lessee has any multiple Options to extend or renew this Lease, a later Option cannot be exercised unless the prior Options have been validly exercised.

     39.4 Effect of Default on Options.

          (a) Lessee shall have no right to exercise an Option: (i) during the period commencing with the giving of any notice of Default and continuing until said Default is cured, (ii) during the period of time any Rent is unpaid (without regard to whether notice thereof is given Lessee), (iii) during the time Lessee is in Breach of this Lease, or (iv) in the event that Lessee has been given 3 or more notices of separate Default, whether or not the Defaults are cured, during the 12 month period immediately preceding the exercise of the Option.

          (b) The period of time within which an Option may be exercised shall not be extended or enlarged by reason of Lessee’s inability to exercise an Option because of the provisions of Paragraph 39.4(a).

          (c) An Option shall terminate and be of no further force or effect, notwithstanding Lessee’s due and timely exercise of the Option, if, after such exercise and prior to the commencement of the extended term, (i) Lessee fails to pay Rent for a period of 30 days after such Rent becomes due (without any necessity of Lessor to give notice thereof), (ii) Lessor gives to Lessee 3 or more notices of separate Default during any 12 month period, whether or not the Defaults are cured, or (iii) if Lessee commits a Breach of this Lease.

40. Security Measures. Lessee hereby acknowledges that the Rent payable to Lessor hereunder does not Include the cost of guard service or other security measures, and that Lessor shall have no obligation whatsoever to provide same. Lessee assumes all responsibility for the protection of the Premises, Lessee, its agents and invitees and their property from the acts of third parties.

41. Reservations. Lessor reserves the right: (i) to grant, without the consent or joinder of Lessee, such easements, rights and dedications that Lessor deems necessary, (ii) to cause the recordation of parcel maps and restrictions, and (iii) to create and/or install new utility raceways, so long as such easements, rights, dedications, maps, restrictions, and utility raceways do not unreasonably interfere with the use of the Premises by Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to effectuate such rights.

42. Performance Under Protest. If at any time a dispute shall arise as to any amount or sum of money to be paid by one Party to the other under the provisions hereof, the Party against whom the obligation to pay the money is asserted shall have the right to make payment “under protest” and such payment shall not be regarded as a voluntary payment and there shall survive the right on the part of said Party to institute suit for recovery of such sum. If it shall be adjudged that there was no legal obligation on the part of said Party to pay such sum or any part thereof, said Party shall be entitled to recover such sum or so much thereof as it was not legally required to pay.

43. Authority. If either Party hereto is a corporation, trust, limited liability company, partnership, or similar entity, each

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individual executing this Lease on behalf of such entity represents and warrants that he or she is duly authorized to execute and deliver this Lease on its behalf. Each party shall, within 30 days after request, deliver to the other party satisfactory evidence of such authority.

44. Conflict. Any conflict between the printed provisions of this Lease and the typewritten or handwritten provisions shall be controlled by the typewritten or handwritten provisions.

45. Offer. Preparation of this Lease by either party or their agent and submission of same to the other Party shall not be deemed an offer to lease to the other Party. This Lease is not intended to be binding until executed and delivered by all Parties hereto.

46. Amendments. This Lease may be modified only in writing, signed by the Parties in interest at the time of the modification. As long as they do not materially change Lessee’s obligations hereunder, Lessee agrees to make such reasonable non-monetary modifications to this Lease as may be reasonably required by a Lender in connection with the obtaining of normal financing or refinancing of the Premises.

47. Multiple Parties. If more than one person or entity is named herein as either Lessor or Lessee, such multiple Parties shall have joint and several responsibility to comply with the terms of this Lease.

48. Waiver of Jury Trial. The Parties hereby waive their respective rights to trial by jury in any action or proceeding involving the Property or arising out of this Agreement.

49. Mediation and Arbitration of Disputes. An Addendum requiring the Mediation and/or the Arbitration of all disputes between the Parties and/or Brokers arising out of this Lease o is þ is not attached to this Lease.

ATTACHMENT: California Sale/Lease Americans with Disabilities Act, Hazardous Materials, and Tax Disclosure

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LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE PREMISES.

ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY ANY BROKER AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT RELATES. THE PARTIES ARE URGED TO:

1. SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.

2. RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF THE PREMISES. SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE POSSIBLE PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PREMISES, THE STRUCTURAL INTEGRITY, THE CONDITION OF THE ROOF AND OPERATING SYSTEMS, COMPLIANCE WITH THE AMERICANS WITH DISABILITIES ACT AND THE SUITABILITY OF THE PREMISES FOR LESSEE’S INTENDED USE.

WARNING: IF THE PREMISES ARE LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN PROVISIONS OF THE LEASE MAY NEED TO BE REVISED TO COMPLY WITH THE LAWS OF THE STATE IN WHICH THE PREMISES ARE LOCATED.

The parties hereto have executed this Lease at the place and on the dates specified above their respective signatures.

Executed at:	Executed at: San Jose, Ca
on:	on:
By LESSOR:	By LESSEE:
See attached signature page.	NexVerse Networks, Inc., a Delaware corporation
By:	By:	/s/ Gursharan S. Sidhu
Name Printed:	Name Printed: Gursharan S. Sidhu
Title:	Title: Chief Technical Officer & V.P.
By:	By:	/s/ Ravinder P. Singh
Name Printed:	Name Printed: Ravinder P. Singh
Title:	Title: VP Business Development
Address:	Address: 926 Rock Avenue
		San Jose, Ca 95131
Telephone: (___)	Telephone: (408) 952-3300
Facsimile: (___)	Facsimile: (408) 546-0089
Federal ID No.	Federal ID No. 94-3409691

These forms are often modified to meet changing requirements of law and needs of the industry. Always write or call to make sure you are utilizing the most current form: American Industrial Real Estate Association, 700 South Flower Street, Suite 600, Los Angeles, CA 90017. (213} 687-8777.

©Copyright 1999 By American Industrial Real Estate Association.
All rights reserved.
No part of these works may be reproduced in any form without permission in writing.

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© 1999 - American Industrial Real Estate Association	REVISED	FORM MTN-2—2/99E

LESSOR:

BALCH LLC, a California limited liability company
By:	/s/ Jack Balch
	Jack Balch, Member
By:	SHERMAN D. BALCH AND CHERYL A. BALCH 1979 LIVING TRUST, Member

By:	/s/ Sherman D. Balch
	Sherman D. Balch, Trustee

By: JKLM, LLC, a California limited
liability company, Member

By:	/s/ Jack Balch
	Jack Balch

By: SDB PROPERTIES, LLC, a California
limited liability company, Member

By:	/s/ Sherman D. Balch
	Sherman D. Balch, Trustee of
	the Sherman D. Balch and
	Cheryl A. Balch 1979 Living
	Trust, manager

ADDENDUM TO STANDARD INDUSTRIAL/COMMERCIAL

SINGLE-TENANT LEASE — NET

LESSOR:	BALCH LLC., a California limited liability company
LESSEE:	NEXVERSE NETWORKS, INC., a Delaware corporation
PREMISES:	A Portion of Building 2, 926 Rock Avenue, San Jose, California
DATE:	December ___, 2001

          This addendum (“Addendum”) is an attachment to and amendment of that Standard Industrial/Commercial Single-Lessee Lease — Net (the “Form Lease”), of even date herewith, naming the above-referenced lessor as “Lessor,” and the above-referenced lessee as “Lessee.” Words and phrases used in this Addendum shall, except as modified herein, have the same meaning as set forth in the Form Lease. In the event of any conflict between the provisions of the Form Lease and this Addendum, the provisions of this Addendum shall prevail. All references in the following paragraphs are to corresponding paragraphs of the Form Lease, except as otherwise expressly provided herein. The Form Lease and this Addendum shall be referred to collectively as the “Lease.”

1.2(b)	: Parking. Lessor will provide parking for the exclusive use of Lessee on the portion of the parking area of the Property shown on Exhibit B. Lessee’s use of such parking shall be at no cost to Lessee during the term of this Lease or any extensions thereof.
1.5	Base Rent: The Base Rent payable by Lessee for the Premises shall be as follows:

MONTHS	BASE RENT SCHEDULE
01- 12:	$40,090.14* ($1.62 per rentable square foot per month)

The initial Base Rent set forth above (which is based on the approximate rentable square footage of 24,747), shall be adjusted to reflect the final Premises rentable square footage (as determined by Lessor’s architect following substantial completion of Lessor’s Work as defined below) multiplied by $1.62 per rentable square foot. The rentable square footage shall be measured from the outside surface of exterior walls for the ground floor and the outside surface of mezzanine/upper floor walls and shall include any stairwells, elevator shafts, or other vertical penetrations.

*On each anniversary date of the Commencement Date, the Base Rent shall be increased by three percent (3%) over the prior year’s Base Rent throughout the Original Term.

2.9:	Common Areas — Rules and Regulations. If any rule or regulation is in conflict with any term, covenant or condition of this Lease, this Lease shall prevail. Following a written request from Lessee, Lessor shall use commercially reasonable efforts to enforce the rules and regulations against other tenants of the Project.
2.10:	Common Areas — Changes. Lessor’s rights pursuant to this Paragraph 2.10 shall be subject to the condition that exercise of any of such rights shall not unreasonably interfere with Lessee’s use of the Premises or decrease the number of parking places allocated to Lessee, except on a temporary basis during the course of work and except as required to comply with applicable legal requirements.
3.3	Delay in Possession: If this Lease is terminated pursuant to Paragraph 3.3 of the Form Lease, Lessor shall promptly return to Lessee any prepaid Rent and any Security Deposit deposited by Lessee.
4.2(a):	Common Area Operating Expenses. Notwithstanding anything to the contrary contained in this Lease, the following shall not be included within Common Area Operating Expenses:
	Leasing commissions, attorneys’ fees, costs, disbursements, and other expenses incurred in connection with negotiations or disputes with tenants, or in connection with leasing, renovating, or improving space for tenants or other occupants or prospective tenants or other occupants of the Building.
	The cost of any service sold to any tenant (including Lessee) or other occupant to the extent to which Lessor is reimbursed as an additional charge or rental over and above the basic rent and escalations payable under the lease with that tenant.

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	Any depreciation on the Building or Property.
	Costs of capital repairs, improvements and equipment, except for those amortized in accordance with Paragraph 4.2(a)(viii) of the Form Lease.
	Expenses in connection with services or other benefits of a type that are not provided to Lessee but which are provided another tenant or occupant of the Building or Property.
	Costs incurred due to Lessor’s violation of any terms or conditions of this Lease or any other lease relating to the Building or Property.
	Overhead profit increments paid to Lessor’s subsidiaries or affiliates for management or other services on or to the building or for supplies or other materials to the extent that the cost of the services, supplies, or materials exceeds the cost that would have been paid had the services, supplies, or materials been provided by unaffiliated parties on a competitive basis.
	All interest, loan fees, and other carrying costs related to any mortgage or deed of trust or related to any capital item, and all rental and other payable due under any ground or underlying lease, or any lease for any equipment ordinarily considered to be of a capital nature (except janitorial equipment which is not affixed to the Building.)
	Advertising and promotional expenditures.
	Costs of repairs and other work occasioned by fire, windstorm, or other casualty of an insurable nature to the extent covered by Lessor’s insurance proceeds.
	Any costs, fines, or penalties incurred due to violations by Lessor of any governmental rule or authority, this Lease or any other lease in the Property, or due to Lessor’s negligence or willful misconduct.
	Management costs to the extent they exceed 3% of the Base Rent for management fees. Earthquake insurance premiums, except to the extent required by any lender of Lessor.
	Costs for sculpture, paintings, or other objects of art (nor insurance thereon or extraordinary security in connection therewith).
	Wages, salaries, or other compensation paid to any executive employees above the grade of building manager.
	The cost of correcting any building code or other violations in work originally performed by Lessor which were violations prior to the Commencement Date.
	The cost of containing, removing, or otherwise remediating any contamination of the Property (including the underlying land and ground water) by any toxic or hazardous materials (including, without limitation, asbestos and “PCB’s”) where such contamination was not caused by Lessee.
4.2(d)	Common Area Operating Expenses: At Lessor’s election from time to time, Common Area Operating Expenses, including insurance premiums and Real Property Taxes, shall be paid in monthly or quarterly estimated installments (with appropriate annual adjustment) or shall be paid by Lessee within twenty (20) days of periodic (but no more frequently than monthly) invoices from Lessor.
4.2(e):	Common Area Operating Expenses. Lessor shall keep complete and accurate records in accordance with good bookkeeping and accounting practices regarding all Common Area Operating Expenses. On Lessee’s request, but no more frequently than once each year, Lessor shall provide Lessee with paid invoices or other reasonable supporting documentation for specified items of Common Area Operating Expenses.
5.	Security Deposit. On the Commencement Date and on the first day of each month thereafter, Lessee shall deposit with Lessor as a security deposit an amount equal to $0.06 per rentable square foot of the Premises. In addition to the security deposit payments described in the preceding sentence, if Lessee fails to pay any Rent when due for two (2) consecutive months or for a total of three (3) months at any time during the Original Term, Lessee shall deposit with Lessor an additional security deposit amount equal to one month’s Base Rent at the rate applicable for the final month of the Original Term. All security deposit amounts paid under this Addendum Paragraph 51 shall be deemed collectively the “Security Deposit” and shall be governed by Paragraph 5 of the Form Lease.
6.2(h)	Existing Hazardous Substances: Lessee acknowledges and agrees that Lessor has made available for inspection by Lessee’s representatives copies of the environmental reports and related documents in Lessor’s possession which are comprised of those listed on Exhibit C (the “Environmental Reports”) and that Lessee is accepting possession of the Premises with knowledge of the items and conditions disclosed in the Environmental Reports. Except as disclosed in the

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	Environmental Reports, to the best of Lessor’s actual knowledge without investigation, the Premises are in compliance with all Applicable Requirements regarding Hazardous Substances. Lessee shall promptly notify Lessor of any inquiry, test, investigation, or enforcement proceeding by, against or affecting Lessee or the Premises concerning a Hazardous Substance that Lessee has actual knowledge of. To the best of Lessor’s knowledge, Lessor has not used, generated, manufactured, produced, stored, released, discharged or disposed of on, under, about the Premises (or off-site of the Premises that might affect the Premises) Hazardous Substances or knowingly allowed any other person or entity to do so. Lessee shall comply with all statutes, laws, ordinances, rules, regulations and precautions mandated or advised by any Federal, State, local or governmental agency with respect to the use, generation, storage or disposal of Hazardous Substances, except for Hazardous Substances at the Premises prior to the Delivery Date, for which Lessor shall hold Lessee harmless pursuant to Paragraph 6.2(e) of the Form Lease. Except to the extent the Hazardous Substance in question was introduced, released, emitted, used, stored, manufactured, transported or discharge by Lessee and/or its sublessees, agents, contractors, representatives or employees, Lessee shall not be responsible for and hereby is released from any claim, obligation, liability, damage or expense with respect to any Hazardous Substance for which Lessor is responsible under Paragraph 6.2(e) of the Form Lease. Lessor may satisfy Lessor’s obligations under Paragraph 6.2(e) using attorneys and other professionals and consultants selected and directed by Lessor; provided, however, Lessee may at Lessee’s own expense use separate counsel and/or consultants selected by Lessee. Lessee’s indemnification of Lessor, pursuant to Paragraph 8.7 of the Form Lease, shall extend to all liabilities, claims, causes of action, and expenses including all foreseeable and unforeseeable consequential damages, directly or indirectly arising out of the presence, use, generation, storage or disposal of Hazardous Substances in, on, under or about the Premises, including, without limitation, the cost of any required or necessary repairs, cleanup, or detoxification and preparation of any closure or other required plans, whether such action is attributable, directly or indirectly, to use, generation, storage or disposal of Hazardous Substances by Lessee or any person claiming under Lessee, except for Hazardous Substances for which Lessor is responsible under this Lease. Without limiting the generality of any other indemnity provision in this Lease, Lessee shall indemnify, protect, defend and hold Lessor harmless from and against all claims, losses, damages or liabilities suffered or incurred by Lessor as a result of the use or storage of any Hazardous Substance by Lessee and/or its sublessees, agents, contractors, representatives or employees, including without limitation, compensating Lessor for any reduction in the fair market value and/or fair rental value of the Premises. Neither the written consent by Lessor to the use, generation, storage or disposal of Hazardous Substances nor the strict compliance by Lessee with all statutes, laws, ordinances, rules, regulations and precautions pertaining to the Hazardous Substances shall excuse Lessee from Lessee’s obligations pursuant to this Paragraph and Paragraph 6.2 of the Form Lease.
7.3(b)	Consent. Lessor may withhold consent in its sole discretion to any proposed structural Utility Installations or Alterations or to any work involving penetration of the Building roof or involving Hazardous Substances.
7.4:	Ownership; Removal; Surrender; and Restoration. Notwithstanding any provision in this Lease to the contrary:
(a)	Lessee shall not be required to remove (i) any improvements and fixtures installed by Lessee in, on or about the Premises pursuant to Lessee’s repair obligation under this Lease, or (ii) any Alterations or Utility Installations for which Tenant has obtained Lessor’s written consent, unless Lessor has indicated, at the time of granting such consent, that such removal will be required. Lessor shall be entitled to require removal of any or all Alterations and Utility Installations that are not generic office improvements; however, in no event shall Lessee be required to remove more than forty percent (40%) of the Alterations and Utility Installations that are generic office improvements, provided the same are surrendered in good condition and repair. Lessee shall in no event remove electrical, HVAC, or telecommunication wiring, conduit, and network or equipment serving the Building.
(b)	Lessee at its cost shall repair and restore the Premises prior to surrender and following any removal of Alterations, Utility Installations, Trade Fixtures or other items Lessee is required or elects to remove in accordance with this Lease. This shall include repairing and replacing the Premises as necessary, including all floor coverings, walls, and ceiling surfaces as necessary to fully match surrounding areas and to leave the Premises in good repair and condition ready to lease to subsequent tenants without need for further repairs. Lessee’s failure to surrender the Premises in the required condition by the Expiration Date or earlier termination of this Lease shall be deemed a holdover by Lessee including payment of holdover Rent under Paragraph 26 of the form Lease.
(c)	Lessee acknowledges and agrees that the Premises contain Alterations, Utility Installations, Trade Fixtures and personal property installed by the previous tenant and that ownership and other rights to certain of these items may be claimed by the previous tenant or its creditors and/or by Lessor.
8.7	Indemnity. Except for Lessee’s negligence or willful misconduct, Lessor shall indemnify, protect, defend and hold harmless Lessee and Lessee’s employees, officers, agents, directors, and shareholders, and the successors and assigns of each of the foregoing, against and from any and all claims, demands, losses, liabilities, damages, costs, and expenses, (including, without limitation, attorneys’ and consultants’ fees and the costs and expenses of defense) arising out of, involving, or in connection with, Lessor’s use and/or occupancy of the Building.
	8.8: Exemption of Lessor from Liability. The provisions of Paragraph 8.8 shall in no circumstances be interpreted to absolve Lessor from any liability incurred due to Lessor’s gross negligence or willful misconduct.
9.6(c):	Abatement of Rent; Lessee’s Remedies. Notwithstanding anything to the contrary in Paragraph 9, if Lessee’s use of the Premises is substantially impaired due to casualty damage and resulting repair work for a period in excess of twelve (12)

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	months, Lessee shall have the right to terminate this Lease by at lease thirty (30) days’ written notice to Lessor at any time thereafter until Lessee’s use of the Premises is substantially restored; provided, however, (i) Lessor may render Lessee’s termination ineffective by giving Lessee written notice, within twenty (20) days following receipt of Lessee’s termination, of Lessor’s election to continue Lessee’s right to abate Rent regardless of Rental Value insurance proceeds, and (ii) Lessee’s termination right shall not apply if the damage was caused by the use, occupancy, act or omission of Lessee or its subtenants or their respective representatives, agents, contractors, licensees or employees.
10.	Real Property Taxes: Notwithstanding anything to the contrary contained in this Lease, Lessee shall not be required to pay any portion of any tax or assessment expense (i) in excess of the amount which would be payable if such tax or assessment expense were paid in installments over the longest possible term; or (ii) imposed on land and improvements other than the Project.
	Lessee at its cost shall have the right, subject to Lessor’s prior written approval (which shall not be unreasonably withheld or delayed), to seek a reduction in the assessed valuation of the Premises or to contest any tax increase that is to be paid by Lessee. If Lessee seeks a reduction or contests such tax increase, Lessee shall still be obligated to pay its share of any such tax increase being so contested. Lessor shall not be required to join in any proceeding or contest brought by Lessee unless the provisions of any Applicable Requirement require that the proceeding or contest be brought by or in the name of Lessor. In that case, Lessor shall join in the proceedings or contest or permit it to be brought in Lessor’s name as long as Lessor is not required to bear any cost and provided Lessee keeps current on all tax obligations pursuant to this Lease, including any tax being contested hereunder. Lessee, on final determination of the proceedings or contest, shall pay promptly or discharge its share of any tax increase based on the decision or judgment rendered, together with all costs, charges, interest and penalties incidental to the decision or judgment.
12.1	Lessor’s Consent Required: Notwithstanding anything contained in Paragraph 12 of the Form Lease to the contrary, Lessee shall not assign or transfer the Lease nor sublet all or any portion of the Premises without the prior written consent of Lessor, which consent shall not be unreasonably withheld or delayed. As a reasonable condition to Lessor’s consent to any assignment or sublease pursuant to Paragraph 12 of this Lease, Lessee shall pay to Lessor seventy-five percent (75%) of all base rent, additional rent and other consideration payable by such assignee or sublessee in excess of the rent amounts payable under this Lease (prorated in the case of a sublease of a portion of the Premises), except that Lessee may recover commercially reasonable third-party brokerage commissions incurred by Lessee (consistent with industry standard rates) and reasonable legal fees incurred by Lessee for such assignment or sublease (not to exceed Five Thousand Dollars [$5,000]). If part of the consideration for such assignment or sublease is payable other than in cash, Lessor’s share of that noncash consideration shall be in a form reasonably satisfactory to Lessor.
	Notwithstanding Paragraph 12 of the Form Lease, Lessee may, without Lessor’s prior written consent, but subject to the conditions below, sublet all or any portions of the Premises or assign this Lease to (i) a subsidiary, affiliate or corporation controlling, controlled by or under common control with Lessee; (ii) a successor corporation related to Lessee by merger, acquisition, consolidation, non-bankruptcy reorganization or government action; or (iii) a purchaser of substantially all of Lessee’s stock, or its assets located at the Premises along with Lessee’s business in California (individually, a “Permitted Transferee”, and collectively, “Permitted Transferees”), provided that the following conditions are met: (a) as of the date of such transfer, the sublessee or assignee (pursuant to subsection (ii) or (iii) above) shall have a tangible net worth and working capital at least equal to Twenty-five Million Dollars ($25,000,000); (b) the sublessee or assignee (or any affiliate thereof) is not in default, and has not been in repeated default, under any lease for a property in which Lessor or any affiliate of Lessor has an ownership or management interest; and (c) the sublessee or assignee is not a party to any substantial litigation or bankruptcy proceedings. For purposes of this Lease, a sale of Lessee’s capital stock through any public exchange shall not be deemed an assignment, subletting or other transfer of this Lease or the Premises requiring Lessor’s consent.
12.2(a)(i)	References to subletting or sublessee contained in or relating to Paragraph 12.2(a)(i) are hereby deleted. Any sublease shall reference and incorporate Lessor’s rights under Paragraph 12.3 of the Form Lease.
13.2	Remedies. Notwithstanding the provisions of Paragraph 13.2, Lessor’s determination of an emergency shall require the good faith determination thereof by Lessor, and, in such case, Lessor shall be required to use commercially reasonable efforts to provide Lessee with notice reasonable in such situation prior to performing any affirmative duty or obligation of Lessee pursuant to Paragraph 13.2.

2. Base Rent for the First Offer Space shall initially be equal to $1.87 per rentable square foot (with annual adjustments as provided in Addendum Paragraph 1.5) for a First-Offer Notices given before June 1, 2002, and shall be equal to the amount (including periodic increases) specified in Lessor’s First-Offer Notice for a First-Offer Notice given on or after June 1, 2002.

3. Lessee’s Share of Operating Expenses, Real Property Taxes, Insurance Costs and other applicable charges payable by Lessee under this Lease shall be adjusted to reflect the increased rentable square footage of the Premises.

4. From and after the Delivery Date, Lessee shall pay monthly Security Deposits amounts with respect to the First-Offer Space in accordance with Addendum Paragraph 5.

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     Lessee’s lease of the First-Offer Space shall be on the same terms and conditions as affect the original Premises from time to time except as otherwise provided in this Addendum Paragraph 53. Lessee’s obligation to pay Rent with respect to the First-Offer Space shall begin on the Delivery Date subject to Addendum Paragraph 53.D above. Lessee shall be responsible for performing any required Lessee Improvements with respect to the First-Offer Space in accordance with Addendum Paragraph 52.

F. Confirmation of Terms. If Lessee timely and validly exercises the First-Offer Right, Lessor and Lessee shall, within ten (10) days after Lessor’s delivery of the First-Offer Space to Lessee, confirm in writing the addition of the First-Offer Space to the Premises on the terms and conditions set forth in this Addendum Paragraph 53. The written confirmation shall confirm:

1. The actual Delivery Date;

2. The rentable square footage of the Premises with the addition of the First-Offer Space;

3. The percentage that constitutes Lessee’s Share as adjusted in accordance with this Addendum Paragraph 53 to reflect the increased rentable square footage of the Premises;

4. Any other terms that either party reasonably requests be confirmed with respect to the First-Offer Space.

G.

Condition of the Premises and Brokerage Commissions for the First-Offer Space. If Lessee timely and properly exercises its First-Offer Right, Lessee shall accept the First-Offer Space in its then “As-Is” condition and, accordingly, Lessor shall not be required to perform any additional improvements or pay any additional construction allowances, brokerage commissions or other fees relating to the First-Offer Space.

H.

Restrictions on First-Offer Right. The First-Offer Right described in this Addendum is personal to Lessee and any Permitted Transferee and may not be assigned, voluntarily or involuntarily, separate from or as part of the Lease other than to a Permitted Assignee. At Lessor’s option, all rights of Lessee under the First-Offer Right described in this Addendum shall terminate and be of no force or effect if any of the following individual events occur or any combination thereof occur; (1) Lessee is in default beyond any applicable cure period at the time Lessee exercises its First-Offer Right; (2) Lessee fails to pay Rent when due for two (2) consecutive months or for a total of three (3) months at any time during the Original Term; (3) Lessee assigns its rights and obligations under all or part of the Lease, or Lessee subleases all or part of the Premises (except to a Permitted Transferee); (4) Lessee’s then tangible net worth and working capital are not at least equal to Lessee’s tangible net worth and working capital as of the date of this Lease; (5) Lessee has failed to properly exercise its First-Offer Right of Lessee’s plans and specifications as required herein. Lessee shall construct the Lessee Improvements in accordance with the plans approved by Lessor, all Applicable Requirements, Paragraph 7.3 and the other applicable provisions of this Lease and using only contractors approved by Lessor.

53. Right of First Offer to Expand the Premises:

A.	Right of First Offer. Lessor grants to Lessee a right of first offer (“First-Offer Right”) with respect to all (but not a portion) the space of the Building not already included in the Premises (First Offer Space). Lessee’s First Offer Right shall be on the terms and conditions set forth in this Addendum Paragraph 53.
B.	Procedure for Lessor’s Offer. Lessor shall provide Lessee with written notice (“First-Offer Notice”) when Lessor commences written correspondence with a prospective Lessee for any First-Offer Space. The First-Offer Notice shall:

1. Notify Lessee that Lessor has commenced written correspondence with a prospective tenant; and

2. If given on or after June 1, 2002, state Base Rent (including periodic increases) and Lease Term for which Lessor intends to offer such space to other prospective lessees.

C. Procedure for Lessee’s Acceptance. If Lessee wishes to exercise Lessee’s First-Offer Right, Lessee shall, within ten (10) days (for a First-Offer Notice given before June 1, 2002) and with five (5) days (for a First-Offer Notice given on or after June 1, 2002) after delivery of the First-Offer Notice to Lessee, deliver notice to Lessor of Lessee’s intention to exercise its First-Offer Right with respect to all of the First-Offer Space. Regardless of whether the prospective tenant in question desires to lease all or a portion of the First-Offer Space, Lessee must elect to exercise its First-Offer Right, if at all, only with respect to all the First-Offer Space, and Lessee may not elect to lease only a portion of that space. If Lessee does not exercise its First-Offer Right within the response period specified above the First-Offer Right shall terminate and Lessor shall be free to lease the First-Offer Space to anyone on any terms at any time during the Lease Term, without any obligation to provide Lessee with a further right to lease that space; provided, however, that after June 1, 2002, Lessor shall not enter into a lease for the use of the First-Offer Space with any other person or entity on basic terms materially

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less favorable to Lessor than those set forth in the First-Offer Notice without giving Lessee at least five (5) days prior written notice of such proposed lease and the opportunity (during such five (5) day period by delivery of written notice to Lessor) to agree to lease the First-Offer Space on the same terms and conditions as those of such proposed lease.

D.

Delivery of First-Offer Space. If Lessee timely and validly exercises the First-Offer Right, Lessor shall deliver the First-Offer Space to Lessee on a date selected by Lessor (“Delivery Date”). Lessor shall not be liable to Lessee or otherwise be in default under this Lease if Lessor is unable for any reason to deliver the First-Offer Space to Lessee on the projected Delivery Date, provided that Lessee’s obligations respecting the First-Offer Space shall abate until such delivery of possession. If Lessor has not delivered the First-Offer Space to Lessee within 60 days following the delivery date indicated in the First Offer Notice, then Lessee shall have the right thereafter to withdraw its acceptance of the First-Offer Space.

E.

Terms and Conditions Applicable to First-Offer Space. If Lessee timely and validly exercises the First-Offer Right, then, beginning on the Delivery Date and continuing for the balance of the Original Term (including any extensions):

1. The First-Offer Space shall be part of the Premises under this Lease (so that the term “Premises” in this Lease shall refer to the space in the Premises immediately before the Delivery Date plus the First-Offer Space); and,

13.5	Interest. The interest set forth in paragraph 13.5 of the Form Lease shall not apply for the first time in any twenty-four (24) month period unless Lessee’s failure to make payment continues for five (5) days after notice of nonpayment from Lessor, but the interest shall accrue as of the due date. After the first such notice in any twenty-four (24)-month period, the interest shall be payable on any subsequent late payment during the twenty-four (24)-month period without necessity of notice.
16(c)	Financial Statements. Lessor shall not request financial statements of Lessee more frequently than once every six (6) months during the term, unless Lessee is in default or unless requested in connection with any request from a lender, prospective buyer, or prospective lender of Lessor.
30.	Subordination, Non-Disturbance and Attainment Agreement: Following receipt of Lessee’s written request, Lessor shall use reasonable efforts to obtain a written agreement from the holder of any mortgage, deed of trust or similar security interest in the Premises, providing for the recognition of Lessee’s rights, interests and options under the Lease in the event of a foreclosure, deed given in lieu of foreclosure or sale under the mortgage, deed of trust or other similar security instrument (“Non-Disturbance Agreement”). Lessee shall pay all of Lessor’s reasonable costs incurred in efforts to obtain the Non-Disturbance Agreement and any fees payable to the lender in connection therewith
50.	Signs: Any signs Lessee installs on or about the Premises shall comply with all applicable governmental rules and regulations and Lessor’s sign criteria, and shall be subject to Lessor’s prior approval, which shall not be unreasonably withheld or delayed. Subject to the preceding sentence, Lessee shall be entitled to the maximum signage permitted by the City of San Jose.
51.	Lessee’s Work; Condition of Premises: If, and only if, Lessor elects to have the unit physically demised and partitioned from the rest of the Building, Lessor shall perform the following work to the extent not already completed (collectively, Lessor’s Work): construction of finished, painted interior demising walls for the Unit; installation, as necessary, of standard 110 volt electrical service within the Unit; and installation, as necessary, of equipment and duct work for provision of standard office HVAC service to the Unit. Lessor’s Work may be performed after the Commencement Date and delivery of possession to Lessee without any delay in the Commencement Date or the commencement of Lessee’s obligation to pay Rent. Lessor’s Work shall be constructed in accordance with all Applicable Requirements. Notwithstanding anything to the contrary contained in the Form Lease, Lessee acknowledges that except as expressly set forth in this Addendum, neither Lessor nor any representative of Lessor has made any representation or warranty (express or implied) with respect to the Premises and that Lessee is relying solely on its own inspections and investigations with respect to the Applicable Requirements, Hazardous Substances, physical condition and all other matters concerning or affecting the Premises. To the extent permitted by law and necessary for the enforcement during the Original Term. Without limiting the preceding sentence, the warranties in Paragraphs 2.2 and 2.3 of the Form Lease shall not apply and Lessee shall be treated as a prior owner/occupant under Paragraph 2.5 of any warranties from third-party contractors or suppliers (but not Lessor) with respect to the Premises, Lessor shall assign to Lessee its rights with respect to any such third-party warranties.
52.	Lessee Improvements: Other than the Lessor’s Work, Lessee shall be responsible for all improvements and other work (collectively, the “Lessee Improvements”) necessary to prepare the Premises for the operation of Lessee’s business. Lessee Improvements shall include all work necessary to reroute and install as necessary lines and equipment for separate telephone, alarm, plumbing and all other services to the Premises, which shall be done so as to minimize any temporary disruption and to provide permanent full services to the remainder of the Building. Before commencement of the Lessee Improvements in the Premises, Lessee shall submit plans and specifications for Lessee’s Work and the name of the contractors Lessee desires to perform such work, to Lessor for review and approval, which approval shall not be unreasonably withheld or conditioned. Lessor shall respond, in approval or disapproval, of such submittals within ten (10) days of receipt. Lessee shall not commence work until Lessor has approved Lessee’s plans and specifications and

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Lessee’s contractors. Lessee shall pay Lessor’s actual plan review costs and fees in an amount not to exceed One Thousand Dollars ($1,000) for the review in strict accordance with the provisions of this Addendum; or (6) Lessee no longer occupies all or any part of the Premises under the Lease.

Notwithstanding anything to the contrary contained in this Lease, the foregoing prohibition (and the corresponding prohibition under Paragraph 39.2 of the Form Lease) against exercising the First-Offer Right when Lessee is not in full possession of the Premises shall not apply if Lessee has subleased twenty-five percent (25%) or less of the Premises, so long as Lessee is otherwise occupying the Premises in accordance with this Lease.

I. Time is of the Essence. Time is of the essence with respect to each and every time period set forth in this Addendum.

54. Contingencies. Lessor’s obligations under this Lease are contingent upon: (i) Lessor’s obtaining legal possession of the Premises from the previous tenant, to Lessor’s satisfaction and (ii) written approval of this Lease by Lessor’s lender. Lessor agrees to use reasonable and good faith efforts to obtain the foregoing. In the event the foregoing are not obtained within thirty (30) days following mutual execution of this Lease, either party may terminate this Lease on ten (10) days’ written notice to the other party; provided, however, if within ten (10) days following receipt of such a notice of termination from Lessee, Lessor notifies Lessee in writing that the contingencies have been satisfied, Lessee’s notice of termination shall be rendered ineffective and this Lease shall continue in full force and effect.

[SIGNATURES ON NEXT PAGE]

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LESSOR:		LESSEE:
BALCH LLC, a California limited liability company		NEXVERSE NETWORKS, INC., a Delaware corporation
By:	/s/ Jack Balch
	Jack Balch, Member	By:	/s/ Gursharan S. Sidhu
		Name:	Gursharan S. Sidhu
By:	SHERMAN D. BALCH AND
	CHERYL A. BALCH 1979 LIVING	Title:	Chief Technical Officer &. V.P
	TRUST, Member

By:	/s/ Sherman D. Balch	By:	/s/ Ravinder P. Singh
	Sherman D. Balch, Trustee	Name:	Ravinder P. Singh
		Title:	VP, Business Development

By:	JKM, LLC, a California limited
	liability company, Member

By:	/s/ Jack Balch
	Jack Balch, Manager

By:	SDB PROPERTIES, LLC, , a California
	limited liability company, Member

By:	/s/ Sherman D. Balch
	Sherman D. Balch, Trustee of
	the Sherman D. Balch and
	Cheryl A. Balch 1979 Living
	Trust, Manager

8

EX-10.27

Exhibit 10.27

30960 Huntwood Avenue

Hayward, CA 94544

510/429-9400

FAX 510/429-9966

April 15, 2002

Mr. Gursharan S Sidhu
Mr. Ravinder P. Singh
Nexverse Networks, Inc.
926 Rock Avenue
San Jose, CA

RE: Lease dated December 2001 by and between Balch LLC (“Lessor”) and Nexverse Networks, Inc. (“Lessee”) for a 24,747 square foot portion of 926 Rock Avenue, San Jose, CA (“Premises”)

Gentlemen:

As discussed, this letter shall serve to confirm our agreement to void Paragraph 53 “Right of First Offer to Expand the Premises” of the above referenced Lease and Lessee agrees to waive its rights contained in Paragraph 53 of the Lease. Except as stated in this letter, the Lease will remain in full force and effect.

Please confirm your agreement by signing where indicated and return a signed original to us. This letter may be signed in counterparts.

Should you have any questions, please do not hesitate to call. Thank you for your cooperation.

Sincerely,

BALCH LLC	AGREED & ACCEPTED:
	/s/ Gursharan S. Sidhu
	Gursharan S. Sidhu
	CFO & Vice President
	Date: 5/2/2002
Jack W. Balch	/s/ Ravinder P. Singh
Member	Ravinder P. Singh
	Vice President Business Development
MS/jal	Date: 5/2/2002

1.

EX-10.28

Exhibit 10.28

FIRST AMENDMENT TO INDUSTRIAL LEASE AGREEMENT

This First Amendment dated January 18, 2004, to that certain Lease dated December 2001 by and between Balch LLC, a California Limited Liability Company (“Lessor”) and Veraz Networks, Inc., a Delaware Corporation (“Lessee”), formerly known as NexVerse Networks, Inc., a Delaware Corporation.

RECITALS

WHEREAS, Lessee leases a 24,747 ± square foot portion of a 46,430 ± square foot building known as 926 Rock Avenue, San Jose, CA, as shown on Exhibit A, attached hereto and made a part hereof.

WHEREAS, the original term of this Lease commenced on November 19, 2001, and ends on April 30, 2004. Tenant now wishes to extend the Lease term through October 31, 2005.

WHEREAS, Tenant wishes and Landlord agrees to modify the Base Rent commencing March 1, 2004

NOW THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS

1.	The term of this Lease for 926 Rock Avenue shall be extended and expire on October 31, 2005.
2.	Effective March 1, 2004, the monthly rent shall be as follows:
	March 1, 2004 — October 31, 2005           $17,075.43 per month ($0.69q. ft.) NNN.
	Any late fees shall be reduced from ten percent (10%) to five percent (5%).
3.	The current Security Deposit held by Balch LLC is $28,756.01. The Security Deposit shall be reduced to $17,075.00. The difference will be refunded to the Lessee on or before April 1, 2004.
4.	Lessor will allow Lessee to store a 20-foot container in it’s adjacent building, known as 900 Rock Avenue, San Jose, CA, free of rent during tenant’s lease term until such time as Lessor executes leases at 900 Rock Avenue. The storage of this container will not be allowed in the parking lot.
5.	Subject to Paragraph 7 of the Lease, during Lessees’ term, Lessee has the right to install Non-Structural Alterations or Non-Structural Utility Installations in the total amount of $10,000.00, without Lessor’s consent. Lessor agrees that prior to the approval of any subsequent tenant improvements to be constructed by Lessee, that Lessee will be notified in writing before construction begins, if there is any portion of the tenant improvements that Lessor will require Lessee to remove at the end of the term. At no time shall Lessee remove any improvements without Lessor’s written consent.

6. Tenant shall have two (2) option(s) to renew for one (1) year each at 95% of the then Fair Market Rent. Tenant shall exercise its option with written notice to Landlord not more than 270 days or less than 120 days prior to the expiration of the then current lease term.

7. Tenant shall have a first right to negotiate on any contiguous space that becomes available in the building. Tenant shall have seven (7) business days to respond to Landlord’s written notice of such space becoming available.

8.	Assignment and Subleasing: Tenant shall have the right to sublease or assign the Premises. Landlord shall give its consent within fifteen (15) days of Tenant’s documentation of a proposed sublease and or assignment.
	Landlord shall not have the right to recapture the Premises unless tenant subleases the entire Premises for the full remaining term of the Lease. Any profits from an assignment or subleasing of the Premises shall be split fifty-fifty (50%-50%), after deducting brokerage fees, legal costs, and any tenant improvements.

The $1,000.00 processing fee for any sublease and or assignment shall be changed to $500.00, excluding legal fees.

Except as stated above, all other terms and conditions of the Lease shall remain in full force and effect.

Mutually Accepted:

LESSOR:		LESSEE:
BALCH LLC		VERAZ NETWORKS, INC.
By:	/s/ Illegible	By:	/s/ John M. Thompson
Its:		Its:	CFO
Date:	3/3/2004	Date:	February 27, 2004

30960 Huntwood Avenue
Hayward, CA 94544
(510) 429-9400

Exhibit A

(graphics)

EX-10.29

Exhibit 10.29

SECOND AMENDMENT TO INDUSTRIAL LEASE AGREEMENT

This Second Amendment dated April 7, 2005, to that certain Lease dated December 2001 by and between Balch LLC, a California Limited Liability Company (“Lessor”) and Veraz Networks, Inc., a Delaware Corporation (“Lessee”), formerly known as NexVerse Networks, Inc., a Delaware Corporation.

RECITALS

WHEREAS, Lessee leases a 24,747 ± square foot portion of a 46,430 ± square foot building known as 926 Rock Avenue, San Jose, CA, as shown on Exhibit A, attached hereto and made a part hereof.

WHEREAS, the original term of this Lease commenced on November 19, 2001, and ended on April 30, 2004. The Lease was extended by the First Amendment dated January 18, 2004 for eight months beginning on March 1, 2004 and ending on October 31, 2005. Tenant now wishes to extend the Lease term for three (3) years beginning on November 1, 2005 and ending on October 31, 2008.

NOW THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS

1.	The term of this Lease for 926 Rock Avenue shall be extended commencing November 1, 2005 and expiring on October 31, 2008.
2.	Effective November 1, 2005, the monthly rent shall be as follows:
	November 1, 2005 – October 31, 2006 $17,075.43 per month ($0.69 sq. ft.) NNN. November 1, 2006 – October 31, 2007 $17,817.84 per month ($0.72 sq. ft.) NNN. November 1, 2007 – October 31, 2008 $18,560.25 per month ($0.75 sq. ft.) NNN.
3.	The current Security Deposit held by Balch LLC is $17,075.43. The Security Deposit shall be increased to $18,560.25; the difference of $1,484.82 shall be paid to the Lessor on or before November 1, 2005.
4.	Lessor has assigned ninety-eight (98)-parking stalls to the Lessee as shown on Exhibit B, attached hereto and made a part hereof.
5.	This Agreement is contingent upon the property Lender’s approval of the terms and conditions herein.

Except as stated above, all other terms and conditions of the Lease shall remain in full force and effect.

Mutually Accepted:

LESSOR:		LESSEE:
BALCH LLC		VERAZ NETWORKS, INC.
BY:	/s/ Jack W. Balch	By:	/s/ Allen Morton
	Jack W. Balch		Allen Morton
Title: Managing Member		Title: CFO
Date: 4/18/05		By:	/s/ Doug Sabella
			Doug Sabella
30960 Huntwood Avenue		Title: CEO, President
(510) 429-9400
		Date: 4/14/05

Exhibit A

(graphics)

Exhibit B

(graphics)

EX-10.30

Exhibit 10.30

Unprotected Tenancy Contract

Made and Executed in Tel Aviv, this 31st day of December, 2003

BETWEEN:	Amcol Engineering and Industrial Company Ltd., Private corporate no. 51-000669-5 of 92 Yigal Alon Street, Entrance 5, Tel Aviv (hereinafter: “the Landlord”)
	of the one part
AND:	Veraz Networks Ltd., Private corporate no. 51-3044537 Of 43 Hasivim Street, Ramat Siv Industrial Zone, Petach Tikvah (hereinafter: “the Tenant”)
	of the other part
WHEREAS	The Landlord is the proprietor of the rights and is entitled to be registered with title as owner of the land known as Parcel 28 in Block 6393 situated at Hasivim Street, Ramat Siv, Kiryat Matalon, Petach Tikvah (hereinafter: “the Land”); and
WHEREAS	Certain buildings exist on the Land which are designed for high-tech and clean industry, including the Building (as hereinafter defined) (hereinafter: “the Project”); and
WHEREAS	The Landlord declares that there is nothing by law or agreement to prevent it from granting a tenancy of the Premises (as hereinafter defined) to the Tenant as set out in this Agreement; and
WHEREAS	The Tenant wishes lease the Premises (as hereinafter defined) from the Landlord on an unprotected tenancy, subject to the provisions hereinafter contained; and
WHEREAS	The Landlord is desirous of granting a lease of the Premises (as hereinafter defined) on an unprotected tenancy, subject as hereinafter provided;

It is therefore agreed and stipulated between the parties as follows:

Preamble, Appendices and Definitions

1.	a.	The preamble and the Appendices hereto constitute an integral part thereof.
	b.	The headings to the clauses are for ease of reference only and do not constitute a part of the Agreement nor are they to be taken into account for interpretation purposes.
	c.	Appendices of the Contract

Appendix “A” —	plan of the Project;
Appendix “B1” —	plan of the Premises area on the fourth floor of the Building;
Appendix “B2” —	plan of the Premises area on the third floor of the Building;

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Appendix “B3” —	the Premises area on the second floor of the Building;
Appendix “B4” —	plan of the parking areas and storage area on the basement level, minus 1
Appendix “B5” —	plan of the parking areas and storage area on the basement level, minus 2
Appendix “B6” —	plan of the parking areas and storage area on the basement level, minus 3
Appendix “C” —	Management Agreement
Appendix “D” —	Insurance
Appendix “D1” —	Insurance certificate of the Tenant during the Tenancy Term
Appendix “D2” —	Insurance certificate of the Tenant’s Works
Appendix “E” —	Bank guarantee

d. The following terms in this Contract will bear the meanings set out opposite them:

1.	“the Building” —	means the building known as Stage 2 of the “Amcol” Project in the Ramat Siv Industrial Zone in Petach Tikvah, marked in red on the plan attached hereto as Appendix “A”;
2.	“the Premises” —	the whole of the fourth floor of the Building having an area of some 1,272 sq.m., (gross) marked in red on the plan attached hereto as Appendix “B1” (hereinafter: “Area A”);
		and also:
		the whole of the third floor of the Building having an area of some 1,272 sq.m., (gross) marked in red on the plan attached hereto as Appendix “B2” (hereinafter: “Area B”);
		and also:
		Some 971 sq.m., (gross) situated on the second floor of the Building marked in red on the plan attached hereto as Appendix “B3” (hereinafter: “Area C”);
		and also:
		74 covered parking places marked in the parking lot of the Building, as marked in red in Appendices “B4”, “B5”, and “B6” (hereinafter: “the Covered Parking Spaces”) and 4 parking places that are not covered situated adjacent to the Building and marked in red in Appendix “A” hereto, (hereinafter: “the Open Parking Spaces”) (the Covered Parking Spaces and the Open Parking Spaces being hereinafter collectively called: “the Parking Spaces”);
		and also:

3

Storage areas having an average area of some 214sq.m., (gross) situated in the basements of the Building and marked in red on the plans as Appendices “B4”, “B5”, and “B6” hereto (hereinafter: “the Storage Areas”)

(Area A, Area B, Area C, the Parking Spaces and the Storage Areas being hereinafter collectively called: “the Premises”).

The Transaction

2. The Landlord hereby grants to the Tenant and the Tenant hereby takes from the Landlord a tenancy of the Premises in its condition “as is” on the date of the redelivery of possession of the Premises by the Present Tenant of the Premises (as hereinafter defined) to the Landlord and the Tenant hereby waives any claim and/or demand and/or complaint against the Landlord and/or against any person on its behalf in connection therewith (subject as hereinafter mentioned with respect to the making of acoustic renovations to the Premises in a manner whereby persons when speaking will not be heard to an unreasonable degree, between the separate floors and the separate rooms. It is agreed that before possession of the Premises is conveyed to the Tenant, the parties will receive an opinion from an acoustic expert of the Building, Joseph Perla (Eng.) of the “M.G. Acoustics Consultants” office (hereinafter: “the Expert”) concerning the required specification for improving the acoustics and that the Landlord will carry out implementation of his directions contained in the related opinion.

The Landlord will use its best endeavours to improve the acoustics as mentioned to the extent required, within 60 days from the date of receiving the Expert’s opinion, including his directives regarding the manner of implementing the improvement.

Non-applicability of the Tenants Protection Laws

3. It is expressly agreed and declared that construction of the Premises was completed after 20.8.1968 and that the Tenant has not paid nor has been demanded to pay, directly or indirectly, key money and/or any other premium in respect of the Premises or any part thereof, and that the Tenant will not be deemed to be a protected tenant of the Premises according to this Contract and the provisions of the Tenants Protection (Consolidated Version) Law, 5732-1972 (as amended), and any other statute dealing with tenancy protection, including the Regulations and Orders by virtue thereof, do not and will not apply to the tenancy of the Premises.

Tenant’s Declarations

4. The Tenant hereby declares that as of the date of the execution of this Agreement, it is subleasing from the Present Tenant (as hereinafter defined) office areas, laboratories, the storage areas and parking places situated in the Building and that it is well familiar with the Building and the Premises and has examined the Premises, the possibilities of using the same according to law generally and for the purpose of its business and activity generally, and found the same to be suitable for its purposes and hereby waives any claim concerning unsuitability or in relation to the method of use of the Premises, subject as provided in clause 2 above.

5. Cancelled.

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Term of the Tenancy

6.	a.	It is agreed that the Tenancy Term of the Premises under this Contract is for 24 months commencing from 1.1.2004 and expiring on 31.12.2005 (hereinafter: “the Tenancy Term”). It is agreed that the date of commencement of the Tenancy Term will be deemed to be the date of delivery of possession of the Premises to the Tenant for all intents and purposes, the Premises being vacant of all and any persons or things (except for persons or objects representing or belonging to the Tenant (hereinafter: “the Possession Date”).
	b.	Subject to the full and punctual performance of all the Tenant’s undertakings during the Tenancy Term, the Tenant is granted an option to extend the tenancy Term by a further Tenancy Term of 24 months, commencing from the expiration of the Tenancy Term (hereinafter: “the Option” and “the Further Tenancy Term” respectively) provided the Tenant notifies the Landlord of its wish to exercise the Option in advance and in writing, and such notice will have been received at the Landlord’s offices at least 90 days before the expiration of the Tenancy Term.
		In the absence of a notice by the Tenant as mentioned above resulting in the non-exercise of the Option, the Tenancy Term will expire in accordance with that stated in sub-clause (a) above.
	c.	The terms of this Contract will, mutatis mutandis, apply during the Further Tenancy Term with the exception of the grant of the Option to extend the Tenancy Term during the Further Tenancy Term.

Rent and Maintenance Fees

7.	a.	1.	The Tenant undertakes to pay the Landlord in consideration of the tenancy of the Premises during the Tenancy Term, the Rent set out below (hereinafter: “the Rent during the Tenancy Term”):
			1.1	The sum of US$6.50 in respect of each sq.m., (gross) of Areas A, B and C, namely an aggregate area of some 3,515sq.m., (gross) and aggregating some US$22,847.50 for each tenancy month namely, US$68,542.50 for each quarter.
			1.2	The sum of US$3.50 in respect of each sq.m., (gross) of the area of the Storage Areas of some 214sq.m., (gross) and aggregating some US$749.00 for each tenancy month namely, US$2,247.00 for each quarter.
			1.3	The sum of US$50.00 in respect of the 74 Covered Parking Spaces aggregating US$3,700.00 for each tenancy month, namely, US$11,000.00 for each quarter.
			1.4	The sum of US$25.00 in respect of each of the 4 Open Parking Spaces aggregating some US$100.00 for each tenancy month namely, US$300.00 for each quarter.

5

1.5	It is agreed that the Rent enumerated in clauses 1.1 – 1.4 above and which equals US$82,189.50 for each quarter, will be translated into new shekels according to the representative rate of exchange known of US$1 on 1.1.2004, and thereafter will be linked to the Consumer Price Index in accordance with the provisions contained in sub-clause 7.d., and 7.e., hereof.
1.6	If any changes occur in the area of the Premises and/or in the number of Parking Places after the execution of this Agreement, the Rent will be adjusted according to the prices specified above.

	2.	The Tenant undertakes to pay the Landlord during the Further Tenancy Term monthly Rent in a sum equal to the shekel rent paid by the Tenant in the last tenancy month of the Tenancy Term (including linkage differentials), with an increment in real terms of 5% (hereinafter: “the Rent during the Further Tenancy Term”). The Rent during the Tenancy Term and the Rent during the Further Tenancy Term will hereinafter be collectively called: “the Rent”.
	3.	The Rent, the Maintenance Fees and the Electricity User Fees (as defined in the Management Agreement attached as Appendix “C” hereto) (hereinafter: “the Management Agreement”), will be paid to the Landlord by the Tenant together with Value Added Tax as required by law on the dates set out in sub-clause (b) hereof with the addition of the linkage differentials mentioned in sub-clause (e) hereof. The Landlord will furnish a lawful VAT invoice to the Tenant after the payment has actually been made, and not later than 30 days after the payment.
b.	The Rent, Maintenance Fees and the Electricity User Fees will be paid monthly and on the 1st of each month, before the commencement of the calendar quarter of the tenancy to which the payment relates, by means of a bank transfer to the Landlord’s account maintained with the Principal Branch of the Union Bank (no. 063) – account no. 491900/89 (hereinafter: “the Landlord’s Account”), with the exception of the method of payment of the first installment in respect of the Rent and advance payments of the Maintenance and Electricity fees as hereinafter set forth.
	It is agreed that the Tenant will pay the Landlord on the date of the execution of this Agreement in respect of the first tenancy quarter for the Tenancy Term (namely, the Tenancy quarter falling between 1.1.2004 and 31.3.2004) for payment of the Rent, advance payments of the Maintenance and Electricity User Fees which sum amounts in the aggregate to the equivalent of US$119,097 plus VAT as required by law (US$82,189.50 for the Rent and US$36,907.50 in respect of advances of the Maintenance and Electricity User Fees) which will be translated into new shekels as hereinafter set forth by means of a bank transfer to the Landlord’s Account.
	It is agreed that payment for the first quarter mentioned above will be linked to the rate known on 1.1.2004 of US$1; meaning that to the extent the known rate of the U.S. dollar on 1.1.2004 will be higher than that known dollar rate for which payment of the first quarter will have been made by the Tenant, the Tenant will

6

	remit to the Landlord, by 15.1.2004 payment equal to such linkage differentials (plus VAT as required by law) and to the extent the known rate of the US$ on 1.1.2004 will be less than that known and at which the payment for the first quarter will have been made by the Tenant, the Landlord will remit to the Tenant, by 15.1.2004 payment equal to those linkage differentials (plus VAT as required by law).
	The Tenant undertakes to pay all the payments that are payable by it pursuant to the provisions of this Agreement and the Management Agreement, including payment of the Rent, Maintenance and Electricity User Fees, even if it quits the Premises and/or fails to make any or even partial use of the Premises.
c.	The Tenant may not make any pre-payments without the prior consent of the Landlord.
d.	The Rent will be linked to the Consumer Price Index (CPI) as stated below:
	If it transpires from the CPI last published before the actual payment of any installment of the Rent (hereinafter: “the New CPI”) that the New CPI has risen compared with the known CPI of November 2003 that will be published on 15 December, 2003 (hereinafter: “the Base CPI”), then the Rent will correspondingly increase at the rate at which the New CPI will have risen against the Base CPI (hereinbefore and hereinafter called: “the linkage differentials”). If any CPI will be lower for any reason whatsoever than the Base CPI, such installment will not reduce.
e.	In this Agreement “the Consumer Price Index” or “the CPI” means the Consumer Price Index, including fruit and vegetables fixed by the Central Bureau of Statistics and Economic Research, including such index even if published by any other official institution or body, including any other official index in substitution therefor, whether based on the same data on which the existing index is based or not. If there is another index, and the Central Bureau of Statistics and Economic Research fails to determine the relationship between the current and the replaced index, the Landlord’s and the Tenant’s accountants will determine the ratio between the two.
f.	Delay exceeding 14 days in payment of the Rent constitutes a fundamental breach of the Contract.

Interest on Arrears

8.	a.	Any sum becoming due from the Tenant to the Landlord that is not paid on due date, will, in addition to linkage to the CPI, bear arrears interest on the amount in arrears at the maximum rate customary in Bank Hapoalim B.M., on unauthorized overdrawings in overdraft accounts, the interest accruing monthly, as from the payment date prescribed in this Agreement, with respect to the amount in arrears until the date of actual payment of that sum, plus VAT as required by law. Any payment of arrears as mentioned above exceeding 14 (fourteen) days will be deemed to be a fundamental breach of the Contract.
		The arrears interest will be charged in a manner whereby the interest will be compounded with the installment payable by the Tenant to the Landlord after the

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	date of the payment that is in arrears and will, together with such installment and the linkage differentials in respect thereof, be deemed to be principal for purposes of calculating future arrears interest.
b.	Nothing contained in sub-clause (a) above will be construed as conferring upon the Tenant any right to fall into arrears in payment of the Rent under this Contract.

Purpose of the Tenancy

9.	a.	The Tenant undertakes to use the Premises solely for the purpose of marketing, developing, manufacturing and storing communication systems, electronics and high-tech systems, including providing the services and processes required to accomplish such purpose, and for such purpose only.
		The Tenant hereby undertakes not to use nor allow the Premises or any part thereof to be used for any other purpose whatsoever except for that stated above, and the Tenant shall be prohibited from engaging at the Premises in any other business or manufacturing or selling or marketing at the Premises any products, merchandise, commodities or other services of any kind whatsoever that are not included amongst those falling in the ambit of the purpose of the lease, as set out below.
	b.	The Landlord undertakes to grant leases of the other areas (that have not been taken on a tenancy by the Tenant) for uses that do not prejudice those contained in sub-clause (a).
	c.	Without derogating from the foregoing it is hereby agreed that the responsibility for obtaining a business licence and any other permit, including a permit from the Police and/or the Ministry of Health and/or municipal authority and/or the fire fighting authorities (if required by law) and all the taxes and payments that will become due to the authority and/or the government and/or any other body in respect of obtaining the licence, including business tax, signage tax, fees and licences for the business and the management thereof required to operate the Tenant’s business at the Premises, will be the sole responsibility and be at the expense of the Tenant only. It is agreed that the Landlord will forward to the Tenant, within a reasonable time of receiving an application to that effect from the Tenant, copies of any approval, permit or licence that is in the Landlord’s possession and is required by the Tenant to be presented to the authorities, provided that no liability or responsibility whatsoever in connection therewith will attach to the Landlord.
		It is further agreed that the Tenant will bear payment of the costs that will be required in respect of furnishing copies of the foregoing documents, in accordance with the Landlord’s demand.
	d.	The Tenant may not vary the purpose of the tenancy without receiving the Landlord’s prior written consent. If the Tenant wishes to vary the purpose of the tenancy, it will apply in writing to the Landlord specifying the new purpose and the reasons for the variation. A refusal by the Landlord to agree to the variation of the purpose of the tenancy will not constitute a breach of this Contract on the part of the Landlord.

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Use and Repair of the Premises

10.	a.	The exclusive possession of the Premises will be conveyed to the Tenant upon the commencement of the Tenancy Term on condition that this Contract has been executed and the Rent and the advance payment of the Maintenance Fees and Electricity User Fees will have been paid in respect of the first tenancy quarter of the Tenancy Term as provided in clause 7 above and in the Management Agreement, and on condition that all the collateral hereinafter enumerated and certificates of the existence of the insurance contained in the Appendices hereto, will have been furnished by the Tenant to the Landlord.
		With respect to those areas on the second floor of the Building only, and which the Tenant is not currently using as of the execution date of this Agreement, and to the extent it makes no use thereof up till the Possession Date, a memorandum of delivery will be drawn up on the Possession Date on which will be noted the defects in those areas not being the result of fair wear and tear, to the extent any such exist. The Landlord or any person on its behalf will make the repairs pursuant to the memorandum of delivery (to the extent they will be required) within a reasonable time.
	b.	As from the date of commencement of the Tenancy Term, all the obligations and duties resulting from this Contract, including responsibility for any damage that will be caused by any act of the Tenant or by persons on its behalf, will be borne by the Tenant, whether the Tenant has appeared on that day to take possession or not, and whether a memorandum of delivery has been prepared or not.
	c.	Cancelled.
	d.	The Tenant undertakes to carry on its business at the Premises, in the common areas of and adjacent to the Building, in a manner whereby no risk and/or safety or health or other disturbance will occur.
	e.	The Tenant undertakes to operate its business reasonably and cautiously and in co-ordination with the Landlord’s activity or that of the Management Company or persons on their behalf.
	f.	The Tenant will not be entitled to make any use of the pavements, roads and any other public area falling within the boundaries of the Land, except for the purpose for which those public areas are designed.
	g.	The Tenant undertakes to use the Premises in a proper and reasonable manner and properly keep and maintain the Premises, and repair personally and at its own expense, any defect, malfunction or damage that will be caused at the Premises by or on behalf of the Tenant, including by its employees, visitors and invitees and redeliver possession of the Premises to the Landlord at the expiration of the Tenancy Term or the Further Tenancy Term or at the end of this Agreement (howsoever determined), the Premises being free and clear of any person and thing belonging to the Tenant and in good, proper and clean condition as they were delivered to the Tenant, with the exception of fair wear and tear, and available for immediate use and may, at its own expense, effect any repair that will be required in order to fulfil its undertaking mentioned, by not later than the

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	date on which the Landlord is entitled to take possession of the Premises as mentioned.
h.	If the Tenant fails to carry out the repairs mentioned above in this clause as notified by the Landlord and/or fails to properly carry them out in the Landlord’s reasonable opinion, the Landlord will be entitled, but be under no duty, to enter upon the Premises and carry out such repair and maintenance works, either personally or by others, in lieu of, but at the expense of, the Tenant, without derogating from any other rights and relief that are conferred upon the Landlord under this Agreement, and all if the Tenant has failed to carry out such repairs within 7 days of the Landlord notifying it in writing of its intention to enter upon the Premises for the purpose of carrying out such repairs.
i.	The Landlord will repair as soon as possible malfunctions and damages that will be caused to the external shell of the Premises and in the Building and which do not result from reasonable wear, and to a standard being no less than that which existed on the date of the execution of this Contract fair wear and tear excepted.
j.	The Tenant undertakes not to effect any alterations or additions whatsoever in the Premises, without receiving the consent of the Landlord, its consultants, including the fire safety consultant and building architect, in advance and in writing, subject to obtaining a lawful licence and permit if such licence/permit is required, and subject to the performance of the Landlord’s or its representatives directives, to the extent such exist.
	As a fundamental condition precedent for the carrying out of such alterations or additions, to the extent the consents for such purpose have been granted, the Tenant further undertakes to furnish, prior to making the alterations and/or additions, the insurance certificates in the form attached hereto as Appendix “D2”. The Landlord undertakes not to oppose the making of such alterations except on reasonable grounds, and to provide its response to the Tenant’s application within a reasonable time.
	Without derogating from the Landlord’s rights under this clause, the Tenant will be liable immediately upon receiving the Landlord’s demand to do so, to remove, at its own expense, all additions and/or alterations that will have been made contrary to the provisions of this sub-clause and the Landlord will have the right to do this at the Tenant’s expense.
	Alterations which cannot be easily removed or the removal of which will cause damage to the Premises from the aesthetic or structural standpoint, will be left in place with the Landlord’s consent and pass into the Landlord’s ownership free of any consideration upon the conclusion of the Contract or the Tenancy Term, as appropriate.
k.	In the event of the Tenant ceasing to use the Premises for any period during the Tenancy Term and the Further Tenancy Term (to the extent it is realized), the Tenant will be liable for all its undertakings under this Agreement during such period.
l.	The Tenant may not install any signage on the external frontages of the Building and/or the internal common areas of the Building (with the exception of internal signage within the Premises), save as subject to the prior written and express approval of the Landlord and/or the Management Company pertaining to the

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	form, content and location of the signage and pursuant to the provisions of any law, including a permit from the local authority.
	The Landlord will be entitled to remove at the Tenant’s expense any sign that will be installed by the Tenant in breach of the provisions of this clause, provided that 7 days’ advance notice of its intention to do so is given to the Tenant. Any cost and tax or liability applying to or imposed in respect of such signage will be borne solely by the Tenant.
	It is clarified that subject to the foregoing, the Landlord will not oppose in principle signage in which the names of the companies whose products are being sold at the Premises will appear, except on special grounds and the Landlord undertakes to grant its response to the Tenant’s request within a reasonable time. The Landlord is also aware of, and agrees to, the signs currently existing in the Building.
m.	The Landlord’s employees and agents will be entitled to enter upon the Premises at any time during usual business hours provided that this is done by prior arrangement with the Tenant and the visit will be accompanied by a representative of the Tenant – all for purposes of examining the Premises, making repairs and fulfilling the terms of this Contract.
n.	A breach of this clause will be deemed to be a fundamental breach of this Contract.

Levies and payments

11.	a.	The Tenant undertakes to pay, as from the date of the commencement of the Tenancy, all taxes of their various kinds, fees, municipal rates, levies and other payments, imposed now or hereafter during the Tenancy Term (and the Further Tenancy Term to the extent it is exercised), according to the provisions of any law, on the tenant of a property, as distinct from the owner thereof, and relating to the Premises and/or to the business there carried on, directly, and on the legal date on which they are payable to the various authorities.
		The Tenant will further bear all costs of any kind whatsoever that are involved in maintaining the Premises, including its share of the common property, and, without derogating from the generality of the foregoing, expenses in respect of insurances, maintenance, electricity, communications and telephone.
		It is hereby clarified that the Tenant will make the payment for the costs of using the electricity and water directly to the Management Company (as that term is defined in the Management Agreement), or any person on its behalf, pursuant to the terms of the Management Agreement.
		It is hereby clarified that the Tenant will, at its own expense or in conjunction with the Tenant’s of the Building, to the extent it desires, either personally or by means of a third party, arrange for access control services in the lobby of the Building or to the Premises, to the generator services in times of emergency, UPS backup, communications, computer and telephony systems.
	b.	The Landlord undertakes to ensure that the Tenant will be allowed free access to the areas of the Premises on the second, third and fourth floors and also to the

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	Storage Areas by means of the approaches and corridors on each floor between Stage A of the Building and Stage B thereof, in which the Premises are situated.
c.	The Tenant undertakes to reimburse the Landlord within 14 days of receiving a demand to do so in writing, or within 14 days of the actual payment date of the insurance, whichever is the later, its proportional share of the insurance costs paid by the Landlord in respect thereof pursuant to the proportional share of the Premises as against the overall areas of the Project for purposes of insuring the Building and the areas leased in the Project with respect to insurance of loss of profits, as more particularly set out in Appendix “D” hereto.
d.	The Tenant undertakes to produce to the Landlord from time to time, at the Landlord’s request, copies of all the receipts and certifications testifying to the fact that it has indeed paid the payments applicable to it under this Contract and on the termination of the Tenancy Term and/or of the Further Tenancy Term and/or the end of this Agreement (howsoever determined), to remit to it the original receipts and/or bills and/or clear photocopies of those documents. The Tenant undertakes to produce to the Landlord receipts and/or certifications testifying to the payments that have been made after the completion of the Tenancy Term and/or of the Further Tenancy Term (if exercised) and/or the end of this Agreement, (howsoever determined), and which relate to the Tenancy Term and/or the Further Tenancy Term (if exercised) respectively.
e.	To the extent the Landlord and/or the Management Company, makes, for any reason any payment which, by this Contract, is payable by the Tenant, the Tenant will reimburse the Landlord and/or the Management Company for any sum so paid immediately upon their first demand together with the management fees, linkage differentials to the CPI as well as arrears interest at the rate fixed above from the date of the payment thereof by the Landlord and/or the Management Company until the date of actual payment thereof to the Landlord and/or the Management Company.
f.	A breach of this clause will be deemed to be a fundamental breach of this Contract.

Management and maintenance

12.	a.	The Tenant undertakes to sign on the execution of this Agreement with the Landlord (hereinafter also: “the Management Company”), the Management Agreement in the form attached as Appendix “C” hereto (hereinafter: “the Management Agreement”). The Landlord may provide management services pursuant to the Management Agreement directly or by means of a third party to be appointed by it.
		The Tenant further undertakes to comply with all its commitments under the Management Agreement including payment of the advances on a quarterly basis in advance in respect of the Management Fees and Electricity User Fees, without derogating from payment of the Rent. The Tenant undertakes to co-operate with any doorman and/or guard that will be placed in the Building, (if at all) on the Landlord’s behalf or on behalf of the Management Company (as hereinbefore defined) and obey all their instructions.

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	Without derogating from the generality of the foregoing, the Tenant undertakes to co-operate with any such body, in every way and form.
	For the avoidance of any doubt it is hereby clarified that the conditions of the Management and Maintenance Agreement will be no less favourable than those of the management and maintenance that have or will be agreed with other tenants in the Building.
b.	A breach of any of the conditions or undertakings contained in the Management Agreement by any of the parties will constitute a fundamental breach of this Tenancy Agreement and confer upon the aggrieved party the right to exercise against the counterparty all the relief and remedies conferred upon it under this Agreement and/or under the Management Agreement and/or at law.

Assignment of rights

13.	a.	The Tenant hereby undertakes not to transfer or assign its rights under this Contract to any other body or person nor grant any lease or convey to any other person or persons nor allow or grant any right whatsoever to any person or persons to use the Premises or any part thereof, nor share with any person possession of the Premises or the use thereof or any part thereof in any manner and way whatsoever, for consideration or otherwise, without receiving the Landlord’s prior written consent. Notwithstanding the foregoing, this clause will not apply to a sub-lease to the parent company, sister-company and subsidiary, as defined in the Securities Law, 5728-1968 and/or the assignment of the Agreement to any third party that will acquire all (or a substantial part of) the Tenant’s assets, provided that the Landlord’s rights will not be diminished and the Tenant (or any third party, as appropriate) will assume performance of all its undertakings under this Agreement.
		Where the consent of the Landlord is required, the Landlord will not unreasonably withhold its consent but may stipulate reasonable conditions that will be intended to ensure the continued performance of the Tenant’s undertakings under this Agreement.
	b.	The Landlord on its part may transfer its rights and obligations under this Contract to any other person or body without requiring the Tenant’s consent, on condition that the Tenant’s rights under this Contract will not be diminished.

Liability and Insurance

14. a. Without derogating from any provision of law concerning liability, the Tenant will be solely responsible for any loss or damage to person or property that will be caused to the Landlord and/or the Management Company and/or their employees and workers and/or to the Tenant or its employees or workers and/or to any third party whatsoever following the use of the Premises or the Tenant’s activity at the Premises or following any act or omission of the Tenant or its employees or workers and/or those who are employed by it or by persons on its behalf.

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b.

The Tenant undertakes to indemnify the Landlord and/or the Management Company immediately upon receipt of first demand in respect of any reasonable liability or expense (including expenses of defence and/or legal fees) that will be imposed on any of them following any demand or claim resulting from any damage, act or omission for which the Tenant is responsible as aforesaid, on condition that the Landlord will give prompt notice to the Tenant of the existence of such demand or claim and allow it to bring defence against the same.

c.

The undertakings of the parties regarding insurance are set out in Appendix “D” hereby and in the insurance certificates attached as Appendices “D1 –D2” hereto and the provisions of those Appendices will be binding upon the parties and take precedence over any other provision to the contrary.

Vacation of the Property

15.	a.	The Tenant undertakes to quit the Premises immediately upon the expiration of the Tenancy Term or the Further Tenancy Term or the end of this Agreement (howsoever determined), all according to the circumstances, and redeliver exclusive possession of the Premises to the Landlord, the Premises being free and clear of all persons and things, and in good and proper condition as received by it, with the exception of fair wear and tear pursuant to that stated in clause 10(g) above.
	b.	In addition to the remedies and relief enumerated in this Agreement and/or at law, if the Tenant fails to quit the Premises on the date of the vacation thereof as stated above, the Tenant will be liable to pay the Landlord a pre-agreed and estimated sum of new shekels equal to the Rent multiplied by 3 (three hundred per centum) of the last monthly Rent which it ought to have paid according to this Agreement before the delay in vacating began, plus linkage differentials and VAT in respect of each month of delay from the beginning thereof until the actual redelivery of the Premises to the Landlord in accordance with the terms hereof. For the avoidance of any doubt, a period of delay that is shorter than one month will be computed as a proportional part of a full month for purposes of this calculation.
	c.	Without derogating from the Tenant’s obligation to quit the Premises, and without derogating from any other relief conferred upon the Landlord pursuant to this Agreement and/or at law, the Landlord and/or the Management Company will be entitled, in the event of the Tenant failing to quit the Premises on the date prescribed in sub-clause (a) above, to bring suit against the Tenant for payment of all the sums, taxes, installments, undertakings, repair expenses, damages, losses and all other payments without exception as set out in this Agreement and/or in the Management Agreement on account of the period commencing from the date on which the Tenant ought to have vacated the Premises until the date on which it will actually do so and redeliver the same to the Premises in accordance with the terms of this Agreement as if the Tenancy Term and the Further Tenancy Term (if it is exercised) will have continued.
	d.	For the avoidance of any doubt it is clarified that receipt of the payments mentioned in sub-clause (c) above will not create any tenancy relationship between the Tenant and the Landlord with respect to the period following the date of vacation of the Premises.

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e. Nothing contained in this Contract shall derogate from any remedy conferred upon the Landlord by law, including the right to specific performance of the Contract.

Breaches and Remedies

16.	a.	The Contracts (Remedies by reason of Breach of Contract) Law, 5731-1970, will apply to a breach of this Contract by either of the parties.
	b.	In addition to the foregoing and without derogating from any other relief or remedy conferred upon the Landlord by this Contract or at law, the Tenant hereby agrees that if it has committed a fundamental breach of this Contract and/or any of the terms thereof, the Landlord will be entitled to rescind this Contract and demand the surrender and exclusive possession of the Premises from the Tenant and the Tenant undertakes to respond to this demand within 14 days, remove the equipment, employees and representatives from the Premises and to the extent it fails to do so, the Landlord will be entitled to remove the same from the Premises in such manner as it will deem fit, including by way of discontinuing the provision of any service and/or supply of energy and/or water and/or air-conditioning to the Premises and similarly by replacing the locks at the Premises.
		Without derogating from the foregoing, each of the following events will be deemed to confer upon the Landlord the right to terminate the tenancy hereunder, demand the immediate vacation of the Premises by the Tenant and recoup payment from the Tenant by such legal method as is conferred upon it, including by way of realizing the collateral mentioned below to cover all the Landlord’s damages, including eviction of the Tenant, removal of its equipment, employees and representatives from the Premises:

(1)	The Tenant commits a breach of one or more of its undertakings under this Agreement which breach is described as or is deemed to be a fundamental breach of this Agreement and such breach is not cured within 14 days of written notice to the Tenant to do so, or, in the case of a breach other than a fundamental breach, the same has not been cured within 30 days of written notice having been given to the Tenant;
(2)	A judicial closure order has been issued for the Tenant’s business at the Premises and such order has not been vacated within 30 days of issue.
(3)	Bankruptcy or winding-up proceedings have been taken against the Tenant by either the Tenant or a third party, and are not vacated within 90 days of issue.
(4)	Any execution proceedings have been taken against the Tenant at the Premises that prevent the Tenant from performing its undertakings hereunder, including payment of Rent and Maintenance Fees, and such proceedings are not vacated within 60 days.
(5)	A receiver is appointed over all or a material part of the Tenant’s property which prevents the Tenant from performing its undertakings hereunder, including payment of Rent and Maintenance Fees, and such proceedings are not vacated within 60 days.

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(6)	The Tenant has abandoned the Premises or terminated the use thereof for a period exceeding 30 consecutive days for any reason related to the Tenant and has failed to perform its undertakings hereunder, including payment of Rent and Maintenance Fees.
(7)	Cancelled.
(8)	A petition for stay of proceedings is filed against the Tenant and such petition has not been vacated within 90 days.
(9)	A trustee is appointed for the Tenant and such appointment is not vacated within 90 days;
c.	Without derogating from any other right of the Landlord by law or under this Agreement, in the event of a rescission of the Agreement by reason of a breach thereof and the tenancy being terminated, the Tenant undertakes to pay the Landlord pre-determined and agreed damages in the sum equal to the Rent, as existing on the date of the breach, for three (3) months of the tenancy, with the addition of linkage and VAT as required by law.
d.	Without derogating from the generality of the foregoing, the right of lien, and the right to exercise the lien over any property of the Tenant at the Premises, is hereby granted by the Tenant to the Landlord. Should the Landlord elect to exercise the lien no obligation will apply to the Tenant to remove from the Premises such property in respect of which the Landlord will have exercised the right of lien.
e.	Nothing contained in this clause shall derogate from the parties’ rights under this Contract or at law.

Bank Guarantee

17. To secure the performance of all the Tenant undertakings hereunder, the Tenant will furnish the Landlord upon the execution of this Contract with an unconditional autonomous guarantee of a recognized and reputable bank for the entire period of the Tenancy Term and the Further Tenancy Term (if it is exercised) in an amount equal to US$140,000.00 which will be translated into new shekels in accordance with the U.S. dollar rate known on the date of the issue of the guarantee by the bank, plus VAT, such guarantee to be in the form attached hereto as Appendix “E”. The above guarantee will be issued for a period of one year and extended from time to time by the Tenant in a manner whereby it shall remain in force until three months following the expiration of the Tenancy Term and the Further Tenancy Term (if it is exercised). The extended guarantee will be presented to the Landlord by the Tenant 60 (sixty) days before the expiration date of the existing guarantee (with the exception of the expiration of the guarantee after the three months following the Tenancy Term and the Further Tenancy Term (if it is exercised), and as appropriate), failing which the existing guarantee will be called. The guarantee will be held by the Landlord to secure performance of the Tenant’s undertakings hereunder and be returned to the Tenant 3 months following the date of an accounting being made between the parties upon the Premises being vacated pursuant to the terms hereof.

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Setoff

18. It is hereby agreed that the Tenant will not be entitled to set off the Landlord’s and/or the Management Company’s debts against it under this Agreement and/or under the Management Agreement against the Rent and Management Fees and Electricity User Fees payable by the Tenant to the Landlord and/or to the Management Company under this Agreement and the Management Agreement.

Stamp Duty

19. The stamp duty costs of this Agreement and the copies thereof (to the extent it applies) will be borne by the parties in equal shares.

General

20.	a.	This Contract supersedes any memorandum of agreement and/or agreement or proposal and/or representation signed or made between the parties (if so made or signed) and/or any paper and other representation on which negotiations were conducted, and will replace the same in all respects and all matters relating to this Agreement.
	b.	The parties confer exclusive jurisdiction on the competent court in the city of Tel Aviv — Jaffa.

Notices

21.	a.	The addresses of the parties for purposes of this Contract are set out in the preamble thereof.
		Following the commencement of the Tenancy Term, the Tenant’s address for the purposes of this Contract will be at the Premises.

b. Any notice sent by either party to the other to the addresses appearing above will be sent by registered mail and/or be delivered personally and be deemed to have reached its destination within 72 hours of being posted or being served – and if served by hand at the official offices of the parties, the date it reaches its destination will constitute the delivery date.

In witness whereof the parties have set their hands:

/s/ Illegible	/s/ Israel Zohar
The Landlord Amcol Engineering and Industrial Company Ltd.	The Tenant

EX-10.31

Exhibit 10.31

Addendum to the Unprotected Tenancy Contract of 31/12/2003

Made and Executed in Tel Aviv, this 3rd day of November, 2005

BETWEEN:	Amcol Engineering and Industrial Company Ltd., Private corporate no. 51-000669-5 of 92 Yigal Alon Street, Entrance 5, Tel Aviv (hereinafter: “the Landlord”)
	of the one part
AND:	Veraz Networks Ltd., Private corporate no. 51-3044537 Of 43 Hasivim Street, Ramat Siv Industrial Zone, Petach Tikvah (hereinafter: “the Tenant”)
	of the other part
WHEREAS	By an unprotected tenancy contract made and executed between the parties on 31/12/2003 the Tenant took a tenancy from the Landlord of the premises in the Building known as Building B, situated on land known as Parcel 28 in Block 6393 situated at Hasivim Street, Ramat Siv, Kiryat Matalon, Petach Tikvah (hereinafter respectively called: “the Contract” or “the Agreement”, “the Premises”, “Building B” and “the Project”); and
WHEREAS	Prior to signing this Addendum, the Tenant reached agreements with the ECI Telecom Company, private corporate no. 52-0032905, (hereinafter: “ECI”), which is the tenant also of areas in Buildings A and B in the Project, with respect to the exchange of parts of premises between the Tenant and ECI, including determining time schedules and the carrying out of adaptation works in the Premises and/or in the Surrendered Area and/or Alternative Area (as defined in clause 5 hereof); and
WHEREAS	The Tenant has requested the Landlord to approve the exchange of part of the areas of the Premises by other areas that are leased to ECI and also for the addition of areas and 18 covered parking places (hereinafter: “the Additional Parking Spaces”) so that the Alternative Area, including the Additional Area (as defined in clause 5 hereof), as well as the Additional Parking Spaces will constitute an integral part of the Premises in a manner whereby the terms of the Agreement will apply thereto, subject always to the provisions contained in this Addendum; and
WHEREAS	The Landlord has decided to grant to the Tenant’s request all subject to the provisions of this Addendum and the Appendices set out below;

It is therefore agreed and stipulated between the parties as follows:

1. Preamble

a. The preamble to this Addendum and the Appendix thereto constitutes an integral part thereof.

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b. Unless otherwise expressly stated, all the terms and expressions contained in this Addendum will bear the meanings assigned thereto in the Contract.

2.	Headings of the clauses
	The headings to the clauses are for ease of reference only and are not to be applied in the interpretation of this Addendum.
3.	Appendices

Appendix “A” —	sketch plan of the alternative area;
Appendix “B1” —	sketch plan of the surrendered area on the third floor in Building B;
Appendix “B2” —	sketch plan of the surrendered area on the second floor in Building B;
Appendix “C” —	Letter leasing 18 parking places.
Appendix “D” —	sketch plan of the parking spaces in Parking Area –1 in Building A;
Appendix “E1”+ “E2” — Form of “the insurance certificate”

4.	Application of the Contract
	The Landlord hereby grants to the Tenant a tenancy of the Alternative Area and the Additional Parking Places (as hereinafter defined and described) in a manner whereby all the terms of the Contract, as appropriate, will fully apply also to the tenancy of the Alternative Area and the Additional Parking Places, save for those provisions in the Agreement which, by this Addendum, are expressly amended or adapted or replaced.
5.	The Alternative Area and the Surrendered Area

5.1	The Alternative Area includes an additional area which the Tenant wishes to lease from the Landlord namely: all the area of the fourth floor in Building A of the Project, as marked in red on the Plan in Appendix A to this Addendum, having an area of approximately 2,243 sq.m., (gross) (in this Addendum referred to as “the Alternative Area”).
5.2	The Surrendered Area is an aggregate area of approximately 2,182 sq.m., as hereinafter set forth:

5.2.1	The third floor in Building B of the Project, in its entirety, having an area of approximately 1,272sq.m., (gross) delineated in blue on the plan constituting Appendix “B-1” hereto.
5.2.2	Part of the areas of the Premises on the second floor of Building B in the Project, (excluding the Landlord’s [sic] computer room having an area of approximately 61 sq.m., (gross) which will remain in the Tenant’s possession and continue to form part of the Premises) in an area of approximately 910 sq.m., (gross) delineated in blue on the plan constituting Appendix “B-2” hereto.

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6. The Transaction

6.1	It is agreed that subject to the Tenant’s performance of the provisions contained in the Contract and this Addendum, the Landlord will grant the Tenant and the Tenant will take from the Landlord an unprotected right of tenancy in the Alternative Area and in the Additional Parking Places, in lieu of the Tenant’s right of tenancy in the Surrendered Area.
6.2	The difference in areas between the Alternative Area and the Surrendered Area is approximately 61 sq.m., (gross) and will be hereinafter called: “the Additional Area”. For the avoidance of any doubt the Additional Area constitutes an integral part of the Alternative Area and wherever this Agreement relates to the Alternative Area, the intention is also to the Additional Area.
6.3	The Tenant acknowledges and declares that it has found the Alternative Area, the Additional Area and the Additional Parking Places suitable for its purposes and hereby waives any claim regarding inconsistency concerning the construction of the Alternative Area and in relation to the location of the Alternative Area and/or the rights of use in the Alternative Area and/or for any other reason.
6.4	It is hereby agreed that possession of the Alternative Area will be conveyed to the Tenant in the condition in which it is on the date of the execution of this Addendum, without derogating from any other arrangement that has been reached between the Tenant and ECI, to the extent it has been reached. For the avoidance of any doubt, the Tenant hereby waives any right and/or claim and/or demand against the Landlord in connection with the adaptation works that will be made at the Premises, to the extent they will be made.
6.5	Without derogating from that stated below in this Addendum, it is hereby clarified and agreed between the parties that the Tenant will continue to pay full Rent, including all the additional payments to which it is subject under the Agreement, in respect of all the areas of the Premises.
6.6	It is hereby clarified and agreed that the Tenant will bear the costs of the Rent and the remaining costs according to the Agreement in respect of the Additional Area commencing from the date on which it takes actual possession of the Additional Area.
6.7	It is hereby clarified and agreed that the Tenant will not pay on any date whatsoever, Rent and any additional payments in respect of the area that exceeds that of the Premises, except in respect of the Additional Area, which will attract payment of Rent and the additional payments in respect thereof according to this Addendum commencing from delivery of the actual possession thereof, as stated in clause 6.6 above.
6.8	It is hereby agreed by the parties that conveyance of the possession to ECI of each of the parts of the Surrendered Area of the Premises, to the extent this will be done by means of a Delivery Memorandum that will be drawn up in the presence of the respective representatives of the Landlord and ECI, will be deemed for all purposes to be delivery of possession to the Landlord, pursuant to the terms of the Contract and full performance of the Tenant’s undertakings in this regard.

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6.9

It is hereby agreed that possession of the Surrendered Area will be conveyed to the Tenant in the condition in which it is on the date of the execution of this Addendum. For the avoidance of any doubt, to the extent any reservations with respect to the condition of the Surrendered Area or any parts thereof and/or the condition of the Alternative Area or parts thereof arise, it is hereby agreed that the repair of the defects to which those reservations relate will be the exclusive responsibility of the Tenant, including ECI on its behalf, and the Landlord will bear no responsibility whatsoever in respect thereof.

In order to remove any doubt, to the extent the Landlord will be compelled to carry out repairs and/or adjustments at the above areas in order to resolve any disputes that may have arisen between the Tenant and ECI, it will do this at the Tenant’s expense, and the Tenant hereby undertakes to pay the Landlord reimbursement of the costs of those repairs, within 14 days of the date of receiving the repair bill from the Landlord.

7. Term of the Tenancy and Term of the Option

7.1	It is agreed that subject to the Tenant’s performance of the provisions of the Agreement, including this Addendum, the Tenancy Term of the Alternative Area and the Additional Parking Places by the Tenant will commence on the date of the signature of the Delivery Memorandum and/or the Acceptance Memorandum of the Surrendered Area (or part thereof) and of the Alternative Area (or part thereof) and of the Parking Places also (separately) and the expiration thereof will fall on 31.12.2007 (hereinafter: “the Tenancy Term”).
7.2	Subject to the full performance by the Tenant of its undertakings under the Contract, including this Addendum throughout the entire Tenancy Term, the Tenant is hereby granted four option terms to extend the Tenancy Term by four 24-month terms each, the first option term commencing on 01/01/2008 and expiring on 31/12/2009, the second option term commencing on 01/01/2010 and expiring on 31/12/2011, the third option term commencing on 01/01/2012 and expiring on 31/12/2013, and the fourth option term commencing on 01/01/2014 and expiring on 31/12/2015.
	For the avoidance of any doubt, and without derogating from that stated below, the exercise of each of the above options is conditional upon the prior, full performance by the Tenant of its undertakings under the Agreement and this Addendum, including in the option terms that will have been actually taken up.
7.3	It is hereby agreed that the Tenant’s right to exercise each of the option terms is expressly conditional upon the Tenant notifying the Landlord in writing of its wish to exercise each of the option terms hereby conferred upon it, at least 150 days before the expiration of the Tenancy Term (in accordance with the definition thereof) i.e. up till not later than 01/08/2007 in order to exercise the first option, and not later than 01/08/2009 in order to exercise the second option, and not later than 01/08/2011 in order to exercise the third option, and not later than 01/08/2013 in order to exercise the fourth option.

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8. Rent and Additional Payments

8.1	The Tenant undertakes to pay the Landlord, in addition to the Rent under the Agreement, rent in respect of the Additional Area in an amount in shekels equal to 61 sq.m. (gross) multiplied by the basic price of US$6.83 (six U.S. dollars and 83 cents) for each sq.m., (gross) of the area of the Alternative Area, namely the monthly sum of US$417.00 (four hundred and seventeen U.S. dollars) in respect of each tenancy month of the Tenancy Term constituting, US$1250 (one thousand, two hundred and fifty U.S. dollars) in respect of each quarter of the Tenancy Term. For the avoidance of any doubt the Tenant undertakes to pay Rent during the Tenancy Term in respect of the total area of the Premises under the provisions of the Agreement, this being in addition to the Rent which it is liable to pay in respect of the Additional Area, as set out above.
8.2	In addition to that stated in sub-clause 8.1 above, and in addition to the user fees that the Tenant is liable to pay in respect of the Parking Places as stated in the Contract, the Tenant undertakes to pay the Landlord in respect of each of the 18 Additional Parking Places, that it is leasing pursuant to the terms of this Addendum, and which are delineated by a hatched line in Appendix “D” to this Addendum, (hereinafter: “the Parking Places”), the sum of US$50.00 (fifty U.S. dollars) aggregating US$900 (nine hundred U.S. dollars) for each month of the Tenancy Term, which sum constitutes US$2,700 (two thousand, seven hundred U.S. dollars) for each quarter of the Tenancy Term.
8.3	Insofar as the Tenant exercises the option terms as set out in clause 7.2 and 7.3 above, in order to extent the Tenancy Term, an increment in real terms of 10% of the Rent and the User Fees of the Parking Places will apply in each of the option terms that will be paid by the Tenant to the Landlord as compared with the Rent which the Tenant will be required to pay in respect of the last tenancy month of the Tenancy Term and of the first option term, respectively.
8.4	Save for the foregoing, the remaining terms of the Contract, including in connection with the Rent and the Additional Payments such as Management Fees, municipal taxes and insurance will apply to the Tenancy of the Alternative Area and the Additional Parking Places, mutatis mutandis, the representative rate of exchange of the dollar and the Base CPI being those known on the date of the execution of this Addendum.

9. Insurance

9.1

The Tenant undertakes to furnish the Landlord, prior to taking possession of the Alternative Area, the Additional Area and the Additional Parking Places and as a condition therefor, a certificate from the insurance company regarding the existence of the insurances in respect of the tenancy of the Alternative Area, including the Additional Area and the Additional Parking Places, for the entire Tenancy Term, which certificate will be in the form attached hereto as Appendix “E” in this Addendum called: “the Insurers’ Certificate”.

9.2

The Tenant further undertakes to insure all the adaptation works that it intends to execute in the Alternative Area and furnish the Landlord, prior to taking possession of the Alternative Area and as a condition therefor, a certificate from

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the insurance company regarding the existence of the insurances in respect of the Tenant’s Adaptation Works in the Alternative Area.

10.	Securities
	It is agreed that the securities that were furnished by the Tenant to the Landlord pursuant to the terms of the Contract will similarly serve to secure the Tenant’s undertakings under this Addendum.
11.	General
	For the avoidance of any doubt, in the event of any divergence between the terms of the Contract and the terms contained in this Addendum, the terms of this Addendum will prevail.
	It is further agreed that except for the modifications set out in this Addendum above, the parties will be subject to and bound by all the provisions of the Contract, subject to the modifications hereinbefore set forth, as if they had been signed by the Tenant from the very outset and the Tenant undertakes to act in accordance with such terms.

In witness whereof the parties have set their hands:

/s/ Illegible	/s/ Lior Shemesh
Amcol Engineering and Industrial	Veraz Networks Ltd.
Company Ltd.	The Tenant
The Landlord	Lior Shemesh
	VP Finance
	Veraz Networks Ltd.

EX-10.32

Exhibit 10.32

ECI Telecom Ltd.
Housekeeping Department
30 Hasivim St., P.O.B. 500, Petach Tikvah 49517
Tel: 03-9268800; Fax: 03-9268777
e-mail: Avri.Navon@ecitele.com

26 October, 2003
6431 – VERAZ

To:	Israel Zohar
	Mony Nachum
For information:	Hezi Ben Artzi
	Zohar Tzelalichin
From:	Avri Navon

RE: Computer Room – Veraz

1. According to the arrangement between Veraz and ECI, Veraz will receive on the second floor of Stage B of the Ashtrom Building, three rooms (numbered 242, 243 and 244) for a computer room.

2. Further to the examination made by the EDS people and in which the Veraz and ECI representatives participated, all the communication cables from the present computer room can be transferred to the new area that has been allocated for the Veraz company.

3. This arrangement expresses the solution and agreements reached between Veraz and ECI with respect to the allocation of the area for the Veraz company’s computer room.

Yours sincerely,

/s/ Avri Navon
Avri Navon

Encl: Plan

EX-10.33

Exhibit 10.33

Appendix
“C”

Amcol

Engineering and Industrial Company Ltd

23 February, 2005
EM: VE 230205

Mr. Nadav Hacker,
Veraz Networks Ltd.
30 Hasivim St.,
Petach Tikvah 49517	By fax: 9287474

RE: Additional Parking Places for your Company

Further to your request of 22.2.2005, we would be prepared to lease to your company 18 additional parking places according to the price of covered parking in the Tenancy Agreement that was executed between our companies on 31.12.2003.

In the first stage you may use, Parking –1 on the northern side (Stage C) (hereinafter: “the temporary parking places”) until the date on which ECI quits the Building. On the date on which ECI quits you may take 18 parking places from those which they will vacate in the parking area in Stage A on Level –2.

If this arrangement is acceptable to you please confirm our offer by means of your company’s authorized signatories.

Yours faithfully,
/s/ Eran Klinghoffer
Eran Klinghoffer
Amcol Engineering and Industrial Company Ltd

/s/ Lior Shemesh
Lior Shemesh
VP Finance

We confirm the offer of the additional parking places according to this letter and wish to begin using the temporary parking places from                                          onwards.

Veraz Networks Ltd.

/s/ Illegible                                               (signed)
Amcol Engineering and Industrial Company Ltd

Ashdar Center, 92 Yigal Alon St., Tel Aviv 67891, Tel:03-5618444; Fax: 03-5620666

EX-10.34

Exhibit 10.34

Unprotected Tenancy Contract

Made and Executed in Tel Aviv, this 3rd day of November, 2005

BETWEEN:	Amcol Engineering and Industrial Company Ltd., Private corporate no. 51-000669-5 of 92 Yigal Alon Street, Entrance 5, Tel Aviv (hereinafter: “the Landlord”)
	of the one part
AND:	Veraz Networks Ltd., Private corporate no. 51-3044537 Of 30 Hasivim Street, Ramat Siv Industrial Zone, Petach Tikvah (hereinafter: “the Tenant”)
	of the other part
WHEREAS	The Landlord is entitled to be registered with title as owner of the land known as Parcel 28 in Block 6393 situated at Hasivim Street, Ramat Siv, Kiryat Matalon, Petach Tikvah (hereinafter:
	“the Land”) and is entitled to grant a tenancy of the Premises to the Tenant as hereinafter mentioned; and
WHEREAS	Certain buildings exist on the Land which are designed for high-tech and clean industry, including the Building as defined in clause 1 hereof and
WHEREAS	The Landlord wishes to grant a lease of the Premises (as hereinafter defined in clause 1 hereof); and
WHEREAS	The Landlord and the Tenant are desirous of granting and receiving a lease of the Premises on an unprotected tenancy, subject as hereinafter provided;

It is therefore agreed and stipulated between the parties as follows:

Preamble, Appendices and Definitions

1.	a.	The preamble and the Appendices hereto constitute an integral part thereof.
	b.	The headings to the clauses are for ease of reference only and do not constitute a part of the Agreement nor are they to be taken into account for interpretation purposes.
	c.	Appendices of the Contract

Appendix “A” —	plan of the Building;
Appendix “A1” —	plan of the Premises;
Appendix “B” —	specification of the shell of the Building;
Appendix “B1” —	plan and directives for the Tenant’s Adaptation Works (“the Program”);
Appendix “B1.A” —	The Landlord’s remarks on the Program;
Appendix “B1.B” —	General directions for managing the Adaptation Works;
Appendix “C” —	Time schedule for implementing the Adaptation Works;

/s/ L.S.

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Appendix “D” —	Management and Maintenance Agreement
Appendix “E1” + “E2” —	the Tenant’s insurance certificate;
Appendix “F” —	Form of bank guarantee

d. The following terms in this Contract will bear the meanings set out opposite them:

(1)	“the Building” —	means the building or buildings constructed and/or which will be constructed on the Land, including the common areas thereof, including the wing of the Building known as “Stage C” as described in Appendix “A” hereto, and which constitutes an integral part hereof;
(2)	“the Premises” —	a specified part of having “Stage C” of the Building, situated on the fourth floor an area of some 522 sq.m., (gross) marked in red on the plan attached hereto as Appendix “A1” hereto, and which constitutes an integral part hereof;
(3)	“the Shell of the Premises” —	is as described in the specification attached hereto as Appendix “B”, (hereinafter: “the Specification of the Shell”), constituting an integral part hereof;
(4)	“Possession Date” —	means the date of delivery of possession of the Premises, as defined in clause 6.(a) hereof;
(5)	“the Program” —	is as defined in clause 5(b) hereof;
(6)	“the Inspector” —	means Mr. Zohar Zalalichin;
(7)	“the PSU” —	means the protected shelter unit on the relevant floor, that is situated within the area of the Premises and marked as hatched in blue on Appendix “A1” consisting also of the access thereto from the lobby on the relevant floor;

2.	The Transaction
	The Landlord hereby grants to the Tenant and the Tenant hereby takes from the Landlord a tenancy of the Premises at the level of the Shell, as described in Appendix “B” hereto, and after the Landlord will have carried out therein the adaptation works for the Tenant, at the Tenant’s expense, in accordance with the directions and plans attached hereto as Appendices “B1”, “B1A” and “B1B” and which constitute an integral part hereof.
3.	Non-applicability of the Tenants Protection Laws
	It is expressly agreed and declared that construction of the Premises was completed after 20.8.1968 and that the Tenant has not paid nor has been demanded to pay, directly or indirectly, key money and/or any other premium in respect of the Premises or any part thereof, and that the Tenant will not be deemed to be a protected tenant of the

/s/ L.S.

3

	Premises according to this Contract and the provisions of the Tenants Protection (Consolidated Version) Law, 5732-1972 (as amended), and any other statute dealing with tenancy protection, including the Regulations and Orders by virtue thereof, do not and will not apply to the tenancy of the Premises.
4.	Declarations of the parties
	The Tenant declares and warrants that:

(a)	It has examined the Premises, the possibilities of using the same according to statute generally and for the purpose of its businesses and activities in particular, and, predicated on the Landlord’s declarations below, has found the same to be suitable for its purposes, and hereby waives any claim concerning unsuitability and/or in relation to the use of the Premises.
(b)	Without derogating from the foregoing, it is aware that as of the date of the execution of this Agreement, Form 4 and the habitation certificate have yet to be granted in respect of the Building and the Premises.
(c)	That it is not its intention to use and/or store at the Premises hazardous materials of any kind whatsoever, including those which could influence the ability to obtain the permits and approvals that are required from the authorities and that its firefighting requirements meet the definition of “ordinary hazard”, as defined in the “NFPA” American Standard.
(d)	That subject to the Landlord’s declarations below, it is its sole responsibility to obtain all the permits and approvals for carrying on its business at the Premises and will not be able to make any claims or demands whatsoever with respect to the compliance of the Premises with the requirements of the authorities as a condition for granting a permit for carrying on the Tenant’s business at the Premises unless such demand has been incorporated in advance in the Tenant’s Program, as part of this Agreement and has been approved by the Landlord prior to the execution of this Agreement.
(e)	It is aware that the PSU that is situated within the area of the Premises is designed to serve all the occupiers of the particular floor in the event of a state of emergency being declared, and according to the directives of the Civil Defence Forces, it must remove therefrom any furniture or object and allow the use thereof for all the occupiers of the floor, and this it undertakes to do.

The Landlord declares and warrants that:

(f)	It is entitled to be registered as the proprietor of the Land and is entitled to grant a tenancy of the Premises to the Tenant in accordance with the terms of this Agreement.
(g)	There is nothing by law, contract or otherwise to prevent the granting of a lease of the Premises to the Tenant in accordance with the terms of this Agreement.
(h)	The zoning of the Building, including the Premises, according to the building permit is light industry, laboratories and offices relating to the industry on the premises.

/s/ L.S.

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(i) It will convey possession of the Premises to the Tenant in a condition in which the Building, including the central systems thereof and the Premises have been constructed, in order to comply with the purpose of the tenancy at the Premises by the Tenant.

5. Adaptation of the Premises

a.	Subject to the performance by the Tenant of its undertakings under this Agreement, the Landlord will convey the Premises to the Tenant on the date of the commencement of the Tenancy Term (as hereinafter defined) after the required adaptations have been made and the Premises are suitable for occupation in accordance with the terms of this Agreement, including as stated in clause 2 above.
b.	In order to adapt the Premises to the needs of the Tenant, the Tenant prepared, before executing this Agreement, by means of its consultants and the Landlord’s architect, a detailed architectural plan in computerized format, and to such plan the Tenant will thereafter attach notes and various instructions, the purpose of which is to clarify the Tenant’s demands with respect to the adaptation works, including finishing materials, the location of the points of the electromechanical systems, location of the placing of the furniture at the Premises (which furniture will be supplied by the Tenant itself) and the like. This plan and these notes will collectively be attached to this Agreement as Appendix “B1” and in addition to the Landlord’s remarks to the extent they will given in Appendix “B1A”, the foregoing being referred to in this Agreement as the “Plan” and/or “the Program”.
c.	The Tenant declares that the Program contains all the information required by the Landlord in order to plan and execute all the adaptation works on behalf of the Tenant and also includes every special requirement that the Tenant wishes to receive from the Landlord within the scope of the adaptation works in the Building and/or in the systems thereof.
d.	Insofar as the Tenant will have submitted the Program in its entirety to the Landlord for approval at least 7 days prior to the execution of this Agreement, and the Landlord will have approved the Program and/or appended thereto its remarks and/or reservations to and on the Program as Appendix “B1A”, which Appendix will constitute an integral part of the Program, up until the date of the execution of this Agreement, the signature by the parties to this Agreement will constitute an acknowledgement to the effect that the Program is final and agreed by both parties and constitutes an integral part of this Agreement.
e.	The adaptation works of the Premises, as set out in the Program, will be executed by and/or on behalf of the Landlord, at the Tenant’s expense, according to the working plans that will be prepared by and/or on behalf of the Landlord, on the payment terms set out in sub-clause (h) hereto (hereinafter: “the Adaptation Works in the Premises”).
f.	It is hereby clarified that the signature by the Tenant to this Agreement including, to the extent this will not have been done by the date of the execution of this Agreement, the final agreement of the Program contained in Appendices “B1” and “B1A” by means of the signature of both parties to this Agreement on such

/s/ L.S.

5

	Appendices and the attachment thereof on the date of the execution by them as an integral part thereof, and the execution of all the Tenant’s obligations, including the payments set out in clause 7 hereof and the deposit of all the collateral detailed in clause 20 hereof, constitute a condition for the commencement of the execution of the Adaptation Works as appearing as milestone no. 1 in the time schedule contained in Appendix “C” to this Agreement, by the Landlord.
g.	It is hereby agreed that to the extent the Tenant will delay granting its final approval to the Program in its entirety and/or will delay completing its commitments as stated above, until a date which is later than the date of the execution of this Agreement, the date of the commencement of the execution of the Adaptation Works in the Premises will then be correspondingly deferred until the date which falls 7 days after the performance of the last of such conditions, and the date of the conclusion thereof will be correspondingly deferred, this being without deferring the commencement of the Tenancy Term and execution of all the Tenant’s payments in respect of its obligations under this Agreement, including payment of Rent and Management Fees, commencing 90 days after the date of the execution of this Agreement.
h.	It is hereby agreed that the Tenant will be involved in selecting the performing contractors and determining their prices by means of the Inspector, in accordance with the provisions contained in the Appendix of the Principles of Management of the Adaptation Works contained in Appendix “B1B” hereto. Notwithstanding the foregoing, the Tenant is aware of and agrees in advance to, the contractors and their prices being the same as those by means of which the adaptation works will be carried out on Floors 2 and 3 of the Building, for other tenants under the supervision of the Inspector.
i.	It is hereby clarified that to the extent the Tenant will defer the grant of its approvals to the persons of the contractors and/or their prices as stated above beyond the dates allocated for that purpose in the time schedule contained in Appendix “C” hereto, the date of the commencement of the execution of the Adaptation Works in the Premises will be correspondingly deferred until the date which will fall 7 days after the date of receiving the last of such approvals from the Tenant, and the date of the conclusion thereof will be correspondingly deferred, this being without the commencement of the Tenancy Term being deferred and the execution of all the Tenant’s payments in respect of this obligation under this Contract, including payment of the Rent and Management Fees commencing 90 days after the date of the execution of this Agreement.
j.	Reimbursement of the Adaptation Costs

(1) The Tenant undertakes to pay the Landlord reimbursement of the costs of the adaptations on the basis of the total of all the actual costs (hereinafter: “Costs”), with the addition of an agreed overhead amounting to 15%, this being in accordance with that detailed below. It is hereby clarified that the Cost includes all the payments that will be paid by the Landlord in respect of the execution, examination and approval of the Adaptation Works to each third party, as follows: to the planners, consultants, managers, sub-contractors, suppliers, authorities, inspectors, co-ordinators, examination institutions, those making the various copies of the documents and to any other person, all of which will be hereinafter collectively called in this

/s/ L.S.

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	document: “the Contractors”). The total amount of the sum of the Cost plus 15% overhead plus the addition of VAT as required by law will be referred to in this document as “the Adaptations Cost”).
(2)	The payments in respect of the Adaptation Works will be made by the Tenant, back-to-back with the payments made by the Landlord to each of the Contractors, less 30% in respect of its proportionate share of the advance detailed in clause 7(g)(1) hereof, but with an additional 15% overhead, in addition to the VAT amount according to the rate that will be in force on the date of the making of each of the payments, this being within 14 days of the date of receiving the copy of the sub-contractor’s bill, when certified for payment by or on behalf of the Landlord.
(3)	The Landlord will, after conclusion of the execution of the Works, submit to the Tenant a final aggregated and cumulative account of all the Adaptation Costs and the Tenant will pay the Landlord the shortfall in the amount of the Adaptation Works plus 15% overhead and VAT, after the Landlord will have reduced the amount of the advance detailed in clause 7(g)(1) hereof, and all the interim payments that will have been made by the Tenant to the Landlord in respect of the Adaptation Works according to sub-clause 2 above.
(4)	The final account will be made in dollar values according to the representative rate of exchange of the dollar in force on the date of the making of each and every payment. The final payment will be made by the Tenant within 14 days of the date of receiving such final account.
(5)	A delay by the Tenant in paying the bill or part thereof will subject the debt to the provisions regarding the payment of arrears interest set out in clause 8 hereof.

6. Delivery of Possession and the Tenancy Term

a.	It is agreed that subject to the performance by the Tenant of everything stated in this Agreement and the Appendices thereto, the Landlord will, within 90 days of the date of the execution of this Agreement or the date of the performance of the last of the conditions precedent for commencement of the execution of the Adaptation Works mentioned in clauses 4 and 5 above, and subject to the provisions contained in clause 10(b) hereof, convey to the Tenant the possession of the Premises (in this document referred to as “the Possession Date”).
	The Tenancy Term of the Premises will commence on the Possession Date for all purposes regardless of whether the Tenant will have appeared on such day in order to take possession, or not.
b.	The Tenancy Term according to this Agreement will commence on the Possession Date, (as defined in sub-clause 6(a) above), and expire on 31.12.2007 (hereinafter: “the Tenancy Term”).
c.	Subject to the performance by the Tenant of all of its undertakings hereunder, the Tenant is hereby granted four option terms to extend the Tenancy Term by four

/s/ L.S.

7

	additional terms of 24 months each, the commencement of the first option term to fall on 1.1.2008 and expire on 31.12.2009, and the commencement of the second option term to fall on 1.1.2010 and expire on 31.12.2011, and the commencement of the third option term to fall on 1.1.2012 and expire on 31.12.2013, and the commencement of the fourth option term to fall on 1.1.2014 and expire on 31.12.2015.
d.	For the avoidance of any doubt the exercise of each of the above options is conditional upon the prior performance by the Tenant of its undertakings hereunder, including during the option terms that will have actually been exercised, and without derogating from anything stated below.
e.	It is hereby agreed that the Tenant’s right to exercise each of the option terms is expressly conditional on the Tenant giving notice in writing to the Landlord of its wish to exercise each of the option terms hereby conferred upon it, at least 150 days before the expiration of the Tenancy Term (as hereinbefore defined) i.e. by not later than 01.08.2007 in order to exercise the first option, and by not later than 01.08.2009 in order to exercise the second option, and by not later than 01.08.2011 in order to exercise the third option, and until not later than 01.08.2013 in order to exercise the fourth option.
f.	During the additional tenancy terms, the terms of this Agreement will, mutatis mutandis, apply, with the exception of the grant of the option to extend the Tenancy Term during the additional tenancy terms beyond that stated in clause 6.(c) hereof, and except for payment of the Rent by the Tenant during the additional tenancy terms, which will be as stated in clause 7 hereof.

7. The Rent

a.	(1)	In consideration of the tenancy of the Premises, the Tenant will pay the Landlord during the Tenancy Term, rent in respect of the Premises, as hereinafter set forth (hereinafter: “the Rent”) all with the addition of VAT as required by law:
		The amount in new shekels equal to the gross area of the Premises multiplied by the base price of US$6.50 (six dollars and fifty US cents) for each sq.m., (gross) for each tenancy month aggregating the monthly sum of US$3,393 (three thousand, three hundred and ninety-three U.S. dollars) namely an amount that constitutes US$10,179 (ten thousand, one hundred and seventy-nine U.S. dollars) for the entire quarter.
		It is hereby agreed that the amounts enumerated above will be translated into new shekels according to the representative rate of exchange of the U.S. dollar that will be known on the date of the execution of this Agreement, (standing at NIS.4.651 (for completion at the time of the execution of the Contract) to one US$) and henceforth from such date will be linked to the CPI ((as hereinafter described).
	(2)	Insofar as the Tenant will exercise the option terms mentioned in clause 6(c) above, or any of them, to extend the Tenancy Term, an increment in real terms of 10% will apply in each of the option terms in the Rent that the Tenant will pay to the Landlord during the option term compared with the

/s/ L.S.

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		Rent that the Tenant will be required to pay in respect of the last month of the tenancy of the Tenancy Term or of the preceding option term, in accordance with the circumstances.
	(3)	The Rent in each of the Tenancy Term and the additional tenancy terms will be fully linked to the Consumer Price Index (CPI) described in clause (i) hereof.
b.	The Tenant will pay the Landlord the payments in respect of the Rent, Management and Maintenance Fees, payment in respect of the use of electricity and water, reimbursement of the Landlord’s insurance costs as well as the Value Added Tax in respect thereof at the rate that will be in force from time to time, and which will be paid on the date of the making of each and every payment described in this Contract, (hereinafter: “the Tenant’s Payments”), a VAT invoice/receipt in respect of each of the Payments being furnished by the Landlord to the Tenant concurrently with the actual making of each payment.
	The Tenant’s payments will be made to the Landlord by the Tenant quarterly in advance. The payment date of the Rent will fall on the first date of each calendar quarter in advance for such calendar quarter and made by means of a bank transfer to the Landlord’s account in the Principal Branch of the Union Bank (no. 063) – account no. 491900/89 or to such other account as the Landlord will direct in writing to the Tenant. For the avoidance of any doubt it is hereby clarified that nothing contained above amounts to the payment of the Rent and only the actual discharge of each bank transfer and actual payment of the linkage differentials, including the VAT in respect thereof, by the Tenant to the Landlord will constitute payment of the Rent by the Tenant.
c.	A delay exceeding 14 (fourteen) working days in the making of the Tenant’s Payments constitutes a fundamental breach of this Agreement. The Tenant undertakes to pay the Tenant’s Payments for the entire duration of the Tenancy Term and the additional tenancy terms (to the extent they will be exercised by it) in a case also of its quitting the Premises and/or not using or only partially using the same.
d.	The Tenant may not make any pre-payments without the prior consent of the Landlord.
e.	The Rent and the Management Fees in respect of the first three months of the Tenancy Term that are jointly estimated to aggregate the sum of US$19,521 (nineteen thousand, five hundred and twenty-one U.S. dollars according to the representative rate of exchange on the date of the execution of this Agreement) (including VAT) will be paid on the date of and together with the execution of this Contract.
f.	An amount in new shekels equal to 30% of the estimated cost of the Adaptation Works, on the basis of $350 (gross) (three hundred and fifty U.S. dollars for each sq.m., gross leased) multiplied by the area of the Premises as described in clause 1(d)(2) above, and aggregating (including the VAT) approximately US$63,854 (sixty-three thousand, eight hundred and fifty-four U.S. dollars) will be paid by the Tenant to the Landlord as an advance on account of the Adaptation Works, on the execution of this Agreement. For the avoidance of any doubt the estimated

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	cost mentioned above does not constitute any undertaking on the part of the Landlord with respect to the cost of the adaptations and the true cost will be fixed in accordance with that stated herein, on the basis of cost + 15%.
g.	The Rent will be linked to the Consumer Price Index (CPI) as stated below:
	If it transpires from the CPI last published before the actual payment date of any payment of the Rent and the Management Fees (hereinafter: “the New CPI”) that the New CPI has increased in comparison with the CPI known on the date of the execution of this Agreement i.e. the CPI for August 2005, which stands at 102.4 points according to the 2002 average (hereinafter: “the Base CPI”), then the Rent and the Management Fees will correspondingly increase by the rate at which the New CPI will have risen against the Base CPI (hereinafter called: “the linkage differentials”).
	If any CPI will be lower for any reason whatsoever than the Base CPI, such installment will not reduce.
	In this Agreement “the Consumer Price Index” or “the CPI” means the Consumer Price Index, including fruit and vegetables fixed by the Central Bureau of Statistics and Economic Research, including such index even if published by any other official institution or body, including any other official index in substitution therefor, whether based on the same data on which the existing index is based or not. If there is another index, and the Central Bureau of Statistics and Economic Research fails to determine the relationship between the current and the replaced index, the Landlord’s and the Tenant’s accountants will determine the ratio between the two.
h.	The Management Fees and Maintenance Fees will be linked to the representative rate of exchange of the U.S. dollar, as described in the Management Agreement constituting Appendix “D” hereto.
i.	A breach of this clause will constitute a fundamental breach of the Contract.

8. Interest on Arrears

a.	Any sum due and payable by the Tenant under this Agreement that is not paid within 7 days of due date, will, in addition to linkage to the CPI, bear arrears interest on the amount in arrears at the Bank of Israel prime rate plus 6% (six per centum) as from the payment date prescribed in this Agreement, with respect to the amount in arrears until the date of actual payment of that sum, plus VAT as required by law.
b.	It is hereby agreed that any arrears and/or delay in such payment that does not exceed 14 (fourteen) days will not be regarded as a fundamental breach of this Contract but interest on arrears as detailed above will be computed as from the first date of the delay.
	The arrears interest will be charged in a manner whereby the interest will be compounded with the installment payable by the Tenant to the Landlord after the date of the payment that is in arrears and will, together with such installment and

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	the linkage differentials in respect thereof, be deemed to be principal for purposes of calculating future arrears interest.
c.	Nothing stated above will be construed as conferring upon the Tenant any right to fall into arrears in payment of the Rent under this Contract.

9. Purpose of the Tenancy

a.	The Tenant undertakes to use the Premises solely for the purpose of marketing, developing, manufacturing and storing communication systems, electronics and high-tech systems, including providing the services and processes required to accomplish such purpose, and for such purpose only.
	The Tenant hereby undertakes not to use nor allow the Premises or any part thereof to be used for any other purpose whatsoever except for that stated above, and the Tenant shall be prohibited from engaging at the Premises in any other business or manufacturing or selling or marketing at the Premises any products, merchandise, commodities or other services of any kind whatsoever that are not included amongst those falling in the ambit of the purpose of the lease, as set out below.
b.	Without derogating from the foregoing and subject to the Landlord’s declarations, it is hereby agreed that the responsibility for obtaining a business licence and any other permit by law and that will be required in respect of the tenancy of the Premises by the Tenant, including a permit from the Police and/or the Ministry of Health and/or municipal authority and/or the fire fighting authorities and all the taxes and payments that will become due to the authority and/or the government and/or any other body in respect of obtaining the licence, or the permit, including business tax, signage tax, fees and licences for the business and the management thereof required to operate the Tenant’s business at the Premises, will be the sole responsibility of and at the expense of the Tenant only, except for those that relate to the Land and the Building (except for the Premises) and without derogating from the Landlord’s undertakings according to the provisions of this Agreement.

10. Use and Maintenance of the Premises and the Adaptation Works

a.

The exclusive possession of the Premises will be conveyed to the Tenant on the Possession Date on condition that this Contract has been executed and all the payments thereunder will have been paid and the Management Agreement in the Form of Appendix “D”, signed, and on condition that all the collateral executed, certificates of the Tenant of the insurance in the form contained in the Appendices hereto, will have been furnished by the Tenant to the Landlord.

b.

On the Possession Date, a memorandum will be drawn up and signed by a representative of the Landlord, in the presence of the Tenant and/or the Inspector. To the extent the Tenant has any reservations and/or comments regarding repairs or supplemental finishing that, in its opinion, necessitate the Landlord’s action in the Adaptation Works, its reservations will be recorded in such memorandum. The Landlord undertakes to complete and/or repair any defect in the Premises and/or in the Adaptation Works as recorded in that memorandum, within a reasonable time commensurate with the substance of the defect, and in any event not later than 2 months following the Possession Date.

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c.	If any fundamental inconsistencies are discovered in the Inspector’s opinion compared with the specification and/or material defects in the Adaptation Works which, in the Inspector’s opinion, prevent the Tenant from reasonably using the Premises (hereinafter: “Material Defects”), such Material Defects will be specified by the Inspector in the memorandum. The Landlord will repair the Material Defects recorded as mentioned, as early as possible, in the circumstances. Following repair of the Defects, the Tenant will be invited to re-examine the Premises (by 24 hours prior notice) and to the extent the Defects will have been repaired to the Inspector’s satisfaction, the date of the conveyance of the possession will be fixed and the commencement of the Tenancy Term (hereinafter: “the Repeat Possession Date”) fixed as of the date which will fall up to 7 days after such examination. In such a case, the date of the commencement of the Tenancy Term will be deferred and the Tenant will not be bound to pay Rent and/or Management Fees until the Repeat Possession Date (as hereinbefore defined).
d.	The Tenant undertakes to carry on its business at the Premises, in a manner whereby no risk and/or safety or health or other disturbance will occur.
e.	The Tenant undertakes to operate its business reasonably and cautiously and in co-ordination with the Landlord’s activity or that of the Management Company, (as defined in clause 12 hereof). The Tenant further undertakes independently or by others to dismantle and/or load merchandise and/or equipment of any kind whatsoever only in the area designated for such purpose.
f.	The Tenant will be entitled to make use of the pavements, roads and any other public area falling within the boundaries of the Building, solely for the purpose for which those public areas are designed, and subject to the provisions of any law and/or agreement.
g.	The Tenant undertakes to use the Premises in a proper and reasonable manner and properly keep and maintain the Premises, and repair personally and at its own expense, any defect, malfunction or damage that will be caused at the Premises by or on behalf of the Tenant, including by its employees, visitors and invitees and redeliver possession of the Premises to the Landlord at the expiration of the Tenancy Term or the Further Tenancy Terms (to the extent exercised) or after the lawful termination of this Agreement, the Premises being free and clear of any person and thing belonging to the Tenant and in good, proper and clean condition as they were delivered to the Tenant, with the exception of fair wear and tear arising from reasonable use, and, at its own expense, effect any repair that will be required in order to fulfil its undertaking mentioned, by not later than the date on which the Landlord is entitled to take possession of the Premises as mentioned.
	For the removal of doubt it is hereby clarified that all the Adaptation Works which will be carried out the Premises irrespective of whether these are carried out the Landlord and/or persons on its behalf, or directly by the or on behalf of the Landlord, will pass to the ownership of the Landlord without any consideration on the date of the vacation of the Premises by the Tenant, whatever the reason for vacating might be.
h.	If the Tenant fails to carry out the repairs mentioned above in this clause as notified by the Landlord and/or fails to properly carry them out in the Landlord’s reasonable opinion, the Landlord will be entitled, but be under no duty, to enter

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	upon the Premises and carry out such repair and maintenance works, either personally or by others, in lieu of, but at the expense of, the Tenant, without derogating from any other rights and relief that are conferred upon the Landlord under this Agreement, and all if the Tenant has failed to carry out such repairs within 14 days of the Landlord notifying it in writing of its intention to enter upon the Premises for the purpose of carrying out such repairs.
i.	The Landlord will repair independently or through the Management Company, as soon as possible, malfunctions and damages that will be caused to the external shell of the Premises and in the central systems thereof.
j.	The Tenant undertakes not to effect any alterations or additions whatsoever in the Premises, without receiving the consent of the Landlord, its consultants and the Building architect, in advance and in writing, subject to obtaining a lawful licence and permit if such licence/permit is required. The Landlord undertakes not to oppose the making of such alterations except on reasonable grounds, and to provide its response the Tenant’s application within a reasonable time.
	Without derogating from the Landlord’s rights under this clause, the Tenant will be liable immediately upon receiving the Landlord’s demand to do so, to remove, at its own expense, all additions and/or alterations that will have been made contrary to the provisions of this sub-clause and the Landlord will have the right to do this at the Tenant’s expense. In any event, alterations that will be carried out with the Landlord’s consent will remain at the Premises and be conveyed to the Landlord upon the expiration of the Tenancy Term, without the Tenant being required to restore the Premises to its former condition.
	Alterations which cannot be easily removed or the removal of which will cause damage to the Premises from the aesthetic or structural standpoint, will be left in place with the Landlord’s consent and pass into the Landlord’s ownership free of any consideration upon the conclusion of the Contract or the Tenancy Term, whichever is the earlier.
k.	The Tenant may install signage on the Premises subject to the prior written and express consent of the Landlord in relation to the form, content and location of the signage and according to the provisions of any law, including a permit from the local authority. Notwithstanding the foregoing it is agreed that no such consent is required from the Landlord in respect of the installation of internal signage at the Premises.
	The Landlord will be entitled to remove at the Tenant’s expense any sign that will be installed by the Tenant in breach of the provisions of this clause, provided that 7 days’ advance notice of its intention to do so is given to the Tenant. In addition and in the alternative, the Landlord may determine aggregated signage.
l.	The Landlord’s employees and agents will be entitled to enter upon the Premises at any time during usual business hours by prior arrangement – all for purposes of examining the Premises, making repairs and fulfilling the terms of this Contract.
m.	A breach of this clause will be deemed to be a fundamental breach of this Contract.

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Levies and payments

11.	a.	The Tenant undertakes to pay, as from the date of the commencement of the Tenancy in respect of the Premises, all taxes of their various kinds, fees, municipal rates, levies and other payments, imposed now or hereafter on a tenant of property, during the Tenancy Term (and the Further Tenancy Terms to the extent they are exercised), according to the provisions of any law, directly, and on the legal date on which they are payable to the various authorities this being as distinct from the payments, fees, levies and taxes that are required to be paid by the owners of land.
	b.	For the avoidance of any doubt it is hereby clarified that the Landlord and/or the Management Company will bear no responsibility whatsoever in respect of any damage, to the extent there be such, to the Tenant and/or third parties in consequence of any malfunction whatsoever, including in the electrical supply to the Premises, and that the Tenant must arrange for its own insurances and/or the appropriate protections against the occurrence of such damage.
	c.	The Tenant undertakes to produce to the Landlord from time to time, at the Landlord’s request, copies of all the receipts and certifications testifying to the fact that it has indeed paid the payments applicable to it under this Contract and on the termination of the Tenancy Term and of the Further Tenancy Terms (to the extent exercised) to remit to it the original receipts and/or bills and/or clear photocopies of those documents. The Tenant undertakes to produce to the Landlord receipts and/or certifications testifying to the payments that have been made after the completion of the Tenancy Term and of the Further Tenancy Terms (if exercised) and which relate to the Tenancy Term and the Further Tenancy Terms (if exercised).
	d.	To the extent the Landlord makes, for any reason any payment which, by this Contract, is payable by the Tenant, the Tenant will reimburse the Landlord for any sum so paid immediately upon the Landlord’s first demand together with the linkage differentials to the CPI as well as arrears interest at the rate fixed in clause 8 above from the date of the payment thereof by it until the date of its actual payment thereof.
		It is agreed that prior to such payment by the Landlord, the Landlord will forward to the Tenant any claim and/or demand in respect of such payment for the purpose of making the payment.
		If the Tenant fails to arrange for the payment or cancellation of the claim or demand within 10 business days from the same having been forwarded by the Landlord, the Landlord will be entitled to pay such payment.
	e.	A breach of this clause will be deemed to be a fundamental breach of this Contract.

Management and maintenance

12. a. The Tenant undertakes to sign on the execution of this Agreement with the Landlord (hereinafter also: “the Management Company”), the Management Agreement in the form attached as Appendix “D” hereto (hereinafter: “the

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	Management Agreement”). The Landlord may provide management services pursuant to the Management Agreement directly or by means of a third party to be appointed by it.
b.	The Tenant further undertakes to comply with all its commitments under the Management Agreement including payment of the advances on a quarterly basis in advance in respect of the Management Fees and Electricity User Fees, water, and a proportionate share of the Landlord’s insurance expenses, without derogating from payment of the Rent. The Tenant undertakes to co-operate with any doorman and/or guard that will be placed in the Building, (if at all) on the Landlord’s behalf or on behalf of the Management Company (as hereinbefore defined) and obey all their instructions. Without derogating from the generality of the foregoing, the Tenant undertakes to co-operate with any such body, in every way and form.
c.	As of the date of the execution of this Agreement, the Management and Maintenance Fees and the repayments of electricity amount to some $4.20 for each sq.m., of the leased area, totalling US$ 2,193 (two thousand, one hundred and ninety-three U.S. dollars) for each month being US$ 6,577 (six thousand, five hundred and seventy-seven U.S. dollars) for each quarter, with the addition of lawful VAT.
d.	A breach of any of the conditions or undertakings contained in the Management Agreement by any of the parties will constitute a fundamental breach of this Tenancy Agreement and confer upon the aggrieved party the right to exercise against the counterparty all the relief and remedies conferred upon it under this Agreement and/or under the Management Agreement and/or at law.

Assignment of rights

13.	a.	The Tenant hereby undertakes not to transfer or assign its rights under this Contract to any other body or person nor grant any lease or convey to any other person or persons nor allow or grant any right whatsoever to any person or persons to use the Premises or any part thereof, nor share with any person possession of the Premises or the use thereof or any part thereof in any manner and way whatsoever, for consideration or otherwise, without receiving the Landlord’s prior written consent. Notwithstanding the foregoing, this clause will not apply to affiliated companies, including sister-companies and subsidiaries, as defined in the Securities Law, 5728-1968 provided that the Landlord’s rights will not be diminished and such third party, (as appropriate) will assume performance of all its undertakings under this Agreement towards the Landlord.
	b.	Notwithstanding the foregoing, insofar as the Tenant will be compelled to reduce the areas of the Premises during the Tenancy Term in light of cutbacks for economic reasons, it may sub-lease the Premises or part thereof, provided:

1.	The Landlord will have granted its prior written consent to the person of the sub-tenant or the alternative tenant, and the form of the agreement with it.
2.	That no change will be made to the Purpose of the Lease (as herein defined).

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3.	That the alternative tenant or sub-tenant will lease the Premises on conditions no less favourable than those of this Agreement.
4.	That the replacement or sub-letting will not derogate from the Tenant’s undertakings and guarantees towards the Landlord according to all of the terms contained in this Agreement and/or the Management Agreement.

c.	For the removal of any doubt such transfer of rights will not operate to exempt the Tenant from its undertakings towards the Landlord under this Agreement, and undertakings which are not performed by such third party towards the Landlord will nonetheless be performed by the Tenant.
d.	The Landlord on its part may transfer its rights and obligations under this Contract to any other person or body without requiring the Tenant’s consent, on condition that all the Tenant’s rights under this Contract will not be diminished.

14. Liability and Insurance

a.	The Tenant will bear the liability imposed upon it by law in respect of any injury or damage that may be caused to the person or property of any individual or body (including the Landlord, the Management Company and/or those representing them) in consequence of the activity of Tenant and/or those on its behalf at the Premises and in the surroundings thereof and/or in consequence of any act or omission of the Tenant or of any person on its behalf or those who are employed by it.
b.	The Tenant hereby undertakes to indemnify the Landlord and/or the Management Company for the full amount in respect of which they will have been made liable by judgment, the execution of which has not been stayed, consequent upon a claim in respect of injury or damage for which the Tenant is liable under that stated in clause 14(a) above, and also in respect of the reasonable costs that the Landlord or the Management Company will have borne in order to defend such demand and/or action, provided the Landlord and the Management Company undertake to notify the Tenant in advance prior to receiving any such action and/or demand as stated in clause 14(b) above, and enable the Tenant to defend the same and co-operate with it to the best of their ability in defending such demand or claim.
c.	The Landlord and the Management Company will bear the liability imposed upon them by law in respect of any injury or damage that may be caused to the person or property of any individual or body (including to the Tenant and/or those representing it) in consequence of any defect in the Premises and/or consequent upon the acts or omissions of the Landlord and/or of the Management Company and/or of those who act on their behalf in the Building.
d.	The Landlord and the Management Company hereby undertake to indemnify the Tenant for the entire sum in respect of which the Tenant will have been made liable by judgment whose execution has not been stayed following an action in respect of injury or damage for which the Landlord and/or the Management Company are liable under the provisions contained in clause 14(c) above, and also in respect of the Tenant’s reasonable costs incurred in order to defend such action, provided the Tenant undertakes to give notice to the Landlord and/or to the

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Management Company in good time concerning any claim and/or demand received in respect of that stated in clause 14(c) above, and allow the Landlord and/or the Management Company to defend the same and co-operate with them in the defence of such action.

15. The Tenant’s Insurances

a.	The Tenant undertakes to arrange and maintain the insurances set out in the Tenant’s insurance certificate attached as an integral part hereto in the form of Appendix “E”.
b.	The Tenant undertakes to renew such insurances at the expiration of the insurance term and maintain the same throughout the entire Tenancy Term, including the extension terms thereof.
c.	The Tenant undertakes to adjust the insurance amounts so that they will always reflect the full value of the Property and/or the income that is insured thereunder.
d.	The Tenant will, on the Possession Date and/or the moving of any property into the Premises and/or the carrying out of any works at the Premises (whichever is the earlier) furnish to the Landlord and as a condition for any use or action by it in the Premises, the certificate contained in Appendix “E”, signed by its insurers. The Tenant will continue to furnish the certificate whenever the insurance term expires, as long as such Tenancy Term continues.
e.	The Tenant may effect any additional property insurance at its determination in connection with the use made by it of the Premises, subject to any such insurance including a waiver of the insurer of its right to subrogation against the Landlord and/or the Management Company and/or any person on their behalf, and provided that such waiver will not apply in favour of any person who has caused damage with malicious intent.
f.	The Tenant’s insurances that the Tenant is required to effect under this Agreement will include a condition that the insurances are primary and have priority to the Landlord’s and/or the Management Company’s insurances and that the insurer waives any demand or claim concerning the sharing of the Landlord’s and/or the Management Company’s insurances in respect of damage that is covered by the Tenant’s insurances. The Tenant’s insurances will similarly include a condition stating that they will not be limited nor cancelled without at least 30 days prior written notice being given to the Landlord by registered mail.
g.	The Tenant declares that it will have no claim and/or demand and/or cavil against the Landlord and/or the Management Company and/or those on its behalf as well as against any tenants or occupiers or the other proprietors of rights within the boundaries of the Building in which the Premises are situated (hereinafter: “the Building”), in respect of damage for which it is entitled to indemnity (or to which it would have been entitled to indemnity had it effected the insurance in accordance with that required by this insurance, or had it not been for the deductible specified in the policy, a breach of the conditions of the policy or under-insurance) according to the insurances that are effected according to clauses 1 and 2 of the certificate, and also insurance of the Adaptation Works and/or the renovations in the Premises (if such are made), and it hereby exempts the

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	foregoing persons from liability for such damage. Such exemption will not extend to any person who has caused malicious damage or to the benefit of tenants, occupiers and other proprietors of rights under whose sale and/or tenancy and/or management agreements or any other agreement under which they are conferred rights in the Center, no corresponding clause is included conferring exemption of the Tenant from liability.
h.	The making of such insurances and/or the furnishing of the certificate and/or the examination thereof by the Landlord or the Management Company or any person on its behalf or the failure to examine the same will neither limit nor derogate in any manner whatsoever from the Tenant’s undertaking and responsibility by law. The Tenant waives in advance any claim and demand against the Landlord and/or the Management Company in connection with the making of the insurances as are required of it under the Agreement, including expressly in connection with the nature and conditions thereof and the liability limits required thereunder. For the avoidance of any doubt it is agreed that the liability limits set out in the certificate are to be regarded as the minimum that is required of and imposed on the Tenant and it must examine its exposure to liability and determine the limits of its liability accordingly.
i.	The Tenant undertakes to indemnify the Landlord and/or the Management Company in respect of any damage that will be imposed upon them in consequence of failure to make the insurances as required and/or consequent upon a breach of any of the conditions of the insurance by it and/or by those acting on its behalf.

16. The Landlord’s and Management Company’s Insurances

a. Without derogating from the Landlord’s liability under this Agreement and/or at law, the Landlord undertakes to effect and maintain, either independently or by means of the Management Company, the following insurances (hereinafter: “the Landlord’s Insurances”) with a duly authorized and reputable insurance company as from the Possession Date of the Premises and/or during the entire Tenancy Term under this Agreement, and any additional tenancy term, if it applies:

(1) Insurance of the Building, (including the structure of the Premises) including the parts linked thereto and the systems thereof, as well as any alteration, improvement and addition to the Premises which have been or will be made by means of the Landlord and/or the Management Company and/or by any person on their behalf for the Tenant, in the full reinstatement value thereof against loss or damage following the usual risks in extended fire insurance, including fire, smoke, lightning, explosion, earthquake, disturbances, strikes, malicious damage, storm, tempest, flood, damages caused by liquids and the bursting of pipes, injury by vehicle, aircraft, flooding, damages caused by liquids and bursting, harm caused by vehicles, aircraft, glass, breakage, robbery and burglary damages. The insurance will include a clause whereby the insurer waives the right of subrogation against the Tenant and its successors save that such waiver will not extend to the benefit of any person who has caused malicious damage.

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(2)	Third party liability insurance that insures the Landlord’s and/or the Management Company’s liability by law in respect of bodily injury or damage to property which could be caused to the person or property of any individual or body within or within the vicinity of, the Building, with a liability limit of US$ 2,500,000 per event and cumulatively for the yearly insurance period. This insurance will not be subject to any limitation regarding liability deriving from fire, explosion, panic, hoisting, unloading and loading devices, defective sanitary installations, poisoning, any harmful thing in food or drink, animals, strike and lockout, liability in respect of and towards contractors, sub-contractors and their employees, as well as subrogation claims on the part of the National Insurance Institute. The insurance will be extended to cover the Tenant’s liability for injury or damage which may be caused within the boundaries of the public areas in the Building, outside the leased areas, and also in respect of its liability for acts or defaults of the Landlord and/or the Management Company and those on its behalf, subject to a cross-liability clause whereby the insurance will be deemed to have been made separately for each of the individuals comprising the insured.
(3)	Employers’ liability insurance insuring the Landlord’s and/or the Management Company’s liability towards their employees in respect of bodily injury or professional sickness which might be caused to any of them during the course of and consequent upon their working at the Building, with a liability limit of US$5,000,000 per claimant, per event and cumulatively for the yearly insurance term. This insurance contains no limitation regarding works at height or at depth, working hours, bait and poison as well as the employment of youth. Such insurance will be extended to indemnify the Tenant in the event of it being alleged, with respect to the occurrence of any labour accident or professional sickness whatsoever, that the Tenant bears any duties of an employer towards any of the Landlord’s and/or the Management Company’s employees.
(4)	Loss of Rent and Management Fees insurance in the full value thereof consequent upon damage caused to the Building (including the structure of the Premises) including the parts linked thereto and systems thereof as a result of any of the risks insured according to sub-clause (a)(1) above, for the duration an indemnity period of 12 months. Such insurance will include a clause whereby the insurer waives the right of subrogation against the Tenant and its successors, save that such waiver will not extend to any person who has caused malicious damage.
	It is hereby agreed that the Landlord and/or the Management Company shall be entitled not to effect the loss of Rent and Management Fees insurance mentioned in this clause, in full or in part, save that the exemption stated in clause (b) hereof will apply as if such insurance had been made in full.
	The Landlord’s insurances will include a condition whereby they will not be limited nor cancelled for the duration of the insurance term except by 30 days’ prior written notice given to the Tenant by registered mail.

b. The Landlord exempts, in the name and on behalf of the Management Company, the Tenant and its successors from liability for damage for which the Landlord

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	and/or the Management Company will be entitled to indemnity according to the insurances made according to clauses (a)(1) and (a)(4) above, (or for which they would have been entitled to indemnity had it not been for the deductibles specified in the policies, a breach of a condition of the policies or under-insurance). Save that such exemption from liability will not extend to any person whose caused malicious damage.
c.	The Landlord and/or the Management Company on its behalf will be entitled to effect such additional insurance as they determine in connection with the Building. The property insurances that will be so made will include a cause whereby the insurer waives the right of subrogation against the Tenant and those acting on its behalf, and the insurances of the liabilities that will be made according to this Agreement will be extended to indemnify the Tenant in respect of its liability for the acts and/or omissions of the Landlord and/or the Management Company, subject to a cross-liability clause.
d.	The making of the insurances by the Landlord will not increase or diminish the Tenant’s responsibility under this Agreement and/or at law.

17. Vacation of the Property

a.	The Tenant undertakes to quit the Premises immediately upon the expiration of the Tenancy Term or the additional tenancy terms (to the extent exercised) or in the event of the rescission of this Contract, for any reason whatsoever, all according to the circumstances, and redeliver exclusive possession of the Premises to the Landlord, the Premises being free and clear of all persons and things, and in good and proper condition as received by it, fair wear and tear excepted.
	The Tenant further undertakes to furnish to the Landlord certifications from all relevant parties indicating that all its undertakings as stated in this Contract have been paid, including taxes, electricity, water, fees, levies and the like.
b.	For each day of delay in vacating the Premises as mentioned above and in any case where the Tenant is required to quit the Premises by law and/or agreement, the Tenant undertakes to pay the Landlord the amount in new shekels equal to the daily rent and maintenance fees multiplied three-fold with the addition of linkage differentials and VAT for each day of delay in vacating the Premises as provided by this Agreement, as fixed, agreed and predetermined compensation, this being without derogating from the Landlord’s right to sue for, demand and receive against the Tenant injunctive relief and/or specific performance and/or such other relief as it may be entitled by law.
	Notwithstanding the foregoing it is agreed that the Tenant will owe no such payment in the event of the delay in vacating the Premises not exceeding 7 days.

18.	Cancelled
19.	Breaches and Remedies

a. The Contracts (Remedies by reason of Breach of Contract) Law, 5731-1970, will apply to a breach of this Contract by either of the parties.

/s/ L.S.

20

b.

The Tenant hereby agrees that if it has committed a fundamental breach of this Contract and/or any of the terms thereof, after the Tenant has been given 14 days notice to rectify the breach and the Tenant has failed to rectify such breach within such period, the Landlord will be entitled to rescind this Contract and demand the surrender and exclusive possession of the Premises from the Tenant and the Tenant undertakes to respond to this demand within 14 days, remove the equipment, employees and representatives from the Premises and to the extent it fails to do so, the Landlord will be entitled to act in accordance with this Contract or in accordance with the law.

Without derogating from the foregoing, each of the following events will be deemed to confer upon the Landlord the right to terminate the tenancy hereunder, demand the immediate vacation of the Premises by the Tenant and recoup payment from the Tenant by such legal method as is conferred upon it, including by way of realizing the collateral mentioned in clause 20, to cover all the Landlord’s damages deriving from the Premises:

(1)	The Tenant commits a breach of one or more of its undertakings under this Agreement which breach is described as or is deemed to be a fundamental breach of this Agreement and such breach is not cured within 14 days of written notice to the Tenant to do so, or, in the case of a breach other than a fundamental breach, the same has not been cured within 30 days of written notice having been given to the Tenant;
(2)	In the event of a receivership order being granted against the Tenant or winding-up proceedings being commenced against the Tenant by either the Tenant or any third party, and such proceedings are not vacated within 90 days;
(3)	Any execution proceedings have been taken against the Tenant that prevent the Tenant from performing the conditions of this agreement, and such proceedings are not vacated within 90 days;
(4)	A trustee will be appointed for the Tenant and/or a receiver over all or any part of its property and such appointment will not be removed within 60 days;
(5)	A petition for stay of proceedings is filed against the Tenant and such petition has not been vacated within 50 days.
(6)	Any judicial closure order is issued for the Tenant’s business at the Premises for reasons deriving from the Tenant and which did not result from the Landlord, and such order is not vacated within 90 days of being issued.
(7)	The Tenant has abandoned the Premises or terminated the use thereof for a period exceeding 30 consecutive days for any reason related to the Tenant and has failed to perform its undertakings hereunder, including payment of Rent and Maintenance Fees.

c. Nothing contained in this clause shall derogate from the Landlord’s rights under this Contract and/or at law.

/s/ L.S.

21

20. Collateral

a.	In order to secure the performance of all the Tenant’s undertakings hereunder, the Tenant undertakes to deposit with the Landlord on the execution date of this Agreement, an autonomous bank guarantee in the form attached hereto as Appendix “F” in an amount equal to Rent, Maintenance Fees for a period of 6 months, with the addition of VAT as required by law.
	Such guarantee will be extended from time to time by the Tenant in order to remain in force until three months following the expiration of the Tenancy Term and the additional tenancy terms (to the extent exercised).
	The extended guarantee will be presented to the Landlord 30 days prior to the expiration date of the existing guarantee, failing which the existing guarantee will be called.
	The guarantee will be held by the Landlord to secure the performance by the Tenant of its undertakings and liabilities hereunder and be returned to the Tenant 3 months after the date of an accounting being made between the parties upon the Premises being vacated pursuant to the terms hereof.
	The principal amount of the guarantee will be linked to the CPI, as described in clause 7(h) above.
b.	The Landlord may realize the bank guarantee in the event of a fundamental breach of the Agreement by the Tenant, subject to 14 days prior notice being given, this being without derogating from any other remedy to which the Landlord may be entitled under this Agreement or by law. In no event will the Landlord realize the guarantee for an amount exceeding the Tenant’s debt.

21.	Cancelled
22.	Setoff
	It is hereby agreed that the Tenant will not be entitled to set off the Landlord’s and/or the Management Company’s debts against it under this Agreement and/or under the Management Agreement against the Rent and Management Fees payable by the Tenant to the Landlord and/or to the Management Company under this Agreement and the Management Agreement.
23.	Stamp Duty
	The stamp duty costs of this Agreement and the copies thereof (to the extent it applies) will be borne by the parties in equal shares.
24.	General

a. This Contract supersedes any memorandum of agreement or agreement that may have been signed between the parties and/or any paper and other representation on which negotiations have been conducted, and will replace the same in all respects and all matters relating to the Premises and/or any other agreement (if existing)

/s/ L.S.

22

	orally or in writing, during the course of the negotiations up to the date of the signature.
b.	The parties confer exclusive jurisdiction on the competent court in the city of Tel Aviv — Jaffa.
c.	No waiver, foregiveness or extension given or made by the Landlord and/or the Management Company will be of any effect unless expressly made in writing, and no waiver, forgiveness or extension of any breach of this Agreement will be inferred or deduced from any act or omission that is made otherwise than expressly and in writing.

25. Notices

a.	The addresses of the parties to this Contract are set out in the preamble thereof.
b.	Any notice sent by either party to the other by registered mail will be deemed to have reached its destination and duly served after 72 hours have elapsed following the despatch.

In witness whereof the parties have set their hands:

	Israel Zohar	Lior Shemesh
	General Manager	VP Finance
/s/ Illegible	/s/ Israel Zohar	/s/ Lior Shemesh
Amcol Engineering and Industria	Veraz Networks Ltd.
Company Ltd.

EX-10.36

Exhibit 10.36

INDEMNITY AGREEMENT

      This Indemnity Agreement (the “Agreement”) is made and entered into this ___day of                                         , 2006 by and between Veraz Networks, Inc., a Delaware corporation (the “Corporation”), and                      (“Agent”).

Recitals

      Whereas, Agent has performed and performs a valuable service to the Corporation in his capacity as                      of the Corporation;

      Whereas, the stockholders of the Corporation have adopted bylaws (the “Bylaws”) providing for the indemnification of the directors, officers, employees and other agents of the Corporation, including persons serving at the request of the Corporation in such capacities with other corporations or enterprises, as authorized by the Delaware General Corporation Law, as amended (the “Code”);

      Whereas, the Bylaws and the Code, by their non-exclusive nature, permit contracts between the Corporation and its agents, officers, employees and other agents with respect to indemnification of such persons;

      Whereas, the Corporation believes that it is reasonable, prudent and necessary for the Corporation contractually to obligate itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Corporation free from undue concern that they will not be so indemnified; and

      Whereas, in consideration for Agent’s past service and in order to induce Agent to continue to serve as                      of the Corporation, the Corporation has determined and agreed to enter into this Agreement with Agent.

      Now, Therefore, in consideration of Agent’s past service and/or continued service as                      after the date hereof, the parties hereto agree as follows:

Agreement

      1. Services to the Corporation. Agent will serve, at the will of the Corporation or under separate contract, if any such contract exists, as                      of the Corporation or as a director, officer or other fiduciary of an affiliate of the Corporation (including any employee benefit plan of the Corporation) faithfully and to the best of his ability so long as he is duly elected and qualified in accordance with the provisions of the Bylaws or other applicable charter documents of the Corporation or such affiliate; provided, however, that Agent may at any time and for any reason resign from such position (subject to any contractual obligation that Agent may have assumed apart from this Agreement) and that the Corporation or any affiliate shall have no obligation under this Agreement to continue Agent in any such position.

      2. Indemnity of Agent. The Corporation hereby agrees to hold harmless and indemnify Agent to the fullest extent authorized or permitted by the provisions of the Bylaws and

1.

the Code, as the same may be amended from time to time (but, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than the Bylaws or the Code permitted prior to adoption of such amendment).

      3. Additional Indemnity. In addition to and not in limitation of the indemnification otherwise provided for herein, and subject only to the exclusions set forth in Section 4 hereof, the Corporation hereby further agrees to hold harmless and indemnify Agent:

          (a) against any and all expenses (including attorneys’ fees); witness fees; damages; judgments; fines; premiums and security for, and other costs relating to, any costs bond, supersedes bond, or other appeal bond or its equivalent; any amounts paid in settlement and any other amounts that Agent becomes legally obligated to pay because of any claim or claims made against or by him in connection with any threatened, pending or completed action, suit, proceeding, or any appeal of the foregoing, whether civil, criminal, arbitrational, administrative or investigative (including an action by or in the right of the Corporation or in any instance that Agent is asked to give or forced to give witness testimony where neither Agent nor the Corporation is a party but in which the request is being made by virtue of Agent’s affiliation to the Corporation), whether formal or informal, to which Agent is, was or at any time becomes a party, or is threatened to be made a party, by reason of the fact that Agent is, was or at any time becomes a director, officer, employee or other agent of Corporation, or is or was serving or at any time serves at the request of the Corporation as a director, officer, employee or other agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise; and

          (b) otherwise to the fullest extent as may be provided to Agent by the Corporation under the non-exclusivity provisions of the Code and the Bylaws.

      4. Limitations on Additional Indemnity. No indemnity pursuant to Section 3 hereof shall be paid by the Corporation:

          (a) on account of any claim against Agent solely for an accounting of profits made from the purchase or sale by Agent of securities of the Corporation pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or similar provisions of any federal, state or local statutory law;

          (b) on account of Agent’s conduct that is established by a final judgment as knowingly fraudulent or deliberately dishonest or that constituted willful misconduct;

          (c) on account of Agent’s conduct that is established by a final judgment as constituting a breach of Agent’s duty of loyalty to the Corporation or resulting in any personal profit or advantage to which Agent was not legally entitled;

          (d) for which payment is actually made to Agent under a valid and collectible insurance policy or under a valid and enforceable indemnity clause, bylaw or agreement, except in respect of any excess beyond payment under such insurance, clause, bylaw or agreement;

2.

          (e) if indemnification is not lawful (and, in this respect, both the Corporation and Agent have been advised that the Securities and Exchange Commission believes that indemnification for liabilities arising under the federal securities laws is against public policy and is, therefore, unenforceable and that claims for indemnification should be submitted to appropriate courts for adjudication); or

          (f) in connection with any proceeding (or part thereof) initiated by Agent, or any proceeding by Agent against the Corporation or its directors, officers, employees or other agents, unless (i) such indemnification is expressly required to be made by law, (ii) the proceeding was authorized by the Board of Directors of the Corporation, (iii) such indemnification is provided by the Corporation, in its sole discretion, pursuant to the powers vested in the Corporation under the Code, or (iv) the proceeding is initiated pursuant to Section 11 hereof.

      5. Liability Insurance. For the duration of Agent’s service as a director and/or officer of the Corporation, and thereafter for so long as Agent shall be subject to any pending or possible claim (as set forth in Section 3), the Corporation shall use commercially reasonable efforts (taking into account the scope and amount of coverage available relative to the cost thereof) to cause to be maintained in effect policies of directors’ and officers’ liability insurance providing coverage for directors and/or officers of the Corporation that is at least substantially comparable in scope and amount to that provided by the Corporation’s current policies of directors’ and officers’ liability insurance. The minimum AM Best rating for the insurance carriers of such insurance carrier shall be not less than A- VI.

      6. Continuation of Indemnity.

          (a) All agreements and obligations of the Corporation contained herein shall continue during the period Agent is a director, officer, employee or other agent of the Corporation (or is or was serving at the request of the Corporation as a director, officer, employee or other agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise) and shall continue thereafter so long as Agent shall be subject to any possible claim or threatened, pending or completed action, suit or proceeding, whether civil, criminal, arbitrational, administrative or investigative, by reason of the fact that Agent was serving in the capacity referred to herein.

          (b) The Corporation shall require any successor to the Corporation (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all, substantially all, or a substantial part of the business or assets of the Corporation, by written agreement in form and substance reasonably satisfactory to the Corporation, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform if no such succession had taken place.

      7. Partial Indemnification. Agent shall be entitled under this Agreement to indemnification by the Corporation for a portion of the expenses (including attorneys’ fees), witness fees, damages, judgments, fines and amounts paid in settlement and any other amounts that Agent becomes legally obligated to pay in connection with any action, suit or proceeding referred to in Section 3 hereof even if not entitled hereunder to indemnification for the total

3.

amount thereof, and the Corporation shall indemnify Agent for the portion thereof to which Agent is entitled.

      8. Notification and Defense of Claim. Not later than thirty (30) days after receipt by Agent of notice of the commencement of any action, suit or proceeding, Agent will, if a claim in respect thereof is to be made against the Corporation under this Agreement, notify the Corporation of the commencement thereof; but the omission so to notify the Corporation will not relieve it from any liability which it may have to Agent otherwise than under this Agreement. With respect to any such action, suit or proceeding as to which Agent notifies the Corporation of the commencement thereof:

          (a) the Corporation will be entitled to participate therein at its own expense;

          (b) except as otherwise provided below, the Corporation may, at its option and jointly with any other indemnifying party similarly notified and electing to assume such defense, assume the defense thereof, with counsel reasonably satisfactory to Agent. After notice from the Corporation to Agent of its election to assume the defense thereof, the Corporation will not be liable to Agent under this Agreement for any legal or other expenses subsequently incurred by Agent in connection with the defense thereof except for reasonable costs of investigation or otherwise as provided below. Agent shall have the right to employ separate counsel in such action, suit or proceeding but the fees and expenses of such counsel incurred after notice from the Corporation of its assumption of the defense thereof shall be at the expense of Agent unless (i) the employment of counsel by Agent has been authorized by the Corporation, (ii) Agent shall have reasonably concluded, and so notified the Corporation, that there is an actual conflict of interest between the Corporation and Agent in the conduct of the defense of such action or (iii) the Corporation shall not in fact have employed counsel to assume the defense of such action, in each of which cases the fees and expenses of Agent’s separate counsel shall be at the expense of the Corporation. The Corporation shall not be entitled to assume the defense of any action, suit or proceeding brought by or on behalf of the Corporation or as to which Agent shall have made the conclusion provided for in clause (ii) above; and

          (c) the Corporation shall not be liable to indemnify Agent under this Agreement for any amounts paid in settlement of any action or claim effected without its written consent, which shall not be unreasonably withheld. The Corporation shall be permitted to settle any action except that it shall not settle any action or claim in any manner which would impose any penalty or limitation on Agent without Agent’s written consent, which may be given or withheld in Agent’s sole discretion.

      9. Expenses. To the extent not prohibited by law, the Corporation shall advance the expenses incurred by Agent in connection with any proceeding, and such advancement shall be made within ten (10) business days after the receipt by the Corporation of a statement or statements requesting such advances (which shall include invoices received by Agent in connection with such expenses but, in the case of invoices in connection with legal services, any references to legal work performed or to expenditures made that would cause Agent to waive any privilege accorded by applicable law shall not be included with the invoice) from time to time, whether prior to or after final disposition of any proceeding. Advances shall be unsecured,

4.

interest free and without regard to Agent’s ability to repay the expenses. Advances shall be made without regard to Agent’s ultimate entitlement to indemnification under the other provisions of this Agreement. Advances shall include any and all expenses actually and reasonably incurred by Agent pursuing an action to enforce his right to indemnification under this Agreement, or otherwise and this right of advancement, including expenses incurred preparing and forwarding statements to the Corporation to support the advances claimed. The Agent shall qualify for advances upon the execution and delivery to the Corporation of this Agreement which shall constitute an undertaking providing that the Agent shall, to the fullest extent required by law, repay the advance if and to the extent that it is ultimately determined by a court of competent jurisdiction in a final judgment, not subject to appeal, that Agent is not entitled to be indemnified by the Corporation. The payment of advances pursuant to this Section 9 shall include any and all reasonable expenses incurred pursuing an action to enforce the rights herein, including expenses incurred preparing and forwarding statements to the Corporation to support the advances claimed. The right to advances under this Section shall continue until final disposition of any proceeding, including any appeal therein. This Section 9 shall not apply to any claim made by Agent for which indemnity is excluded pursuant to Section 4(f).

      10. Presumptions Regarding Agent’s Conduct.

          (a) With respect to Section 3 hereof, the Agent shall be conclusively presumed to have acted in good faith and in a manner Agent reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal proceeding to have had no reasonable cause to believe Agent’s conduct was unlawful, unless a determination is made that the Agent has not acted in accordance with the standards set forth above: (i) by the Board of Directors by a majority vote of a quorum thereof consisting of Directors who were not parties to the proceeding the basis of which a claim is made under this Agreement; (ii) by the stockholders of the Corporation by a majority vote of stockholders who were not parties to such a proceeding; or (iii) in a written opinion of independent counsel, selection of whom has been approved by the Agent in writing.

          (b) In making a determination with respect to entitlement to indemnification hereunder, the Directors, stockholders and independent legal counsel making such determination shall presume that Agent is entitled to indemnification under this Agreement if Agent has submitted a request for indemnification in accordance with the terms of this Agreement, and the Corporation shall have the burden of proof, by clear and convincing evidence, to overcome that presumption. For the purposes of any determination of good faith, Agent shall be deemed to have acted in good faith if Agent’s action is based on the records or books of account, including financial statements of the Corporation or any subsidiary, or on information supplied to Agent by the officers, and employees of the Corporation or any subsidiary, in the course of their duties, or on the advice of legal counsel for the Corporation or any subsidiary, or for the Board of Directors or counsel selected by any committee of the Board of Directors or on information or records given or reports made to the Corporation or any subsidiary, by an independent certified public accountant or by an appraiser, investment banker or other expert selected by the Corporation or the Board of Directors or any committee thereof. The knowledge and/or actions, or failure to act, of any director, officer, agent or employee of the Corporation or any subsidiary shall not be imputed to Agent for purposes of determining Agent’s right to indemnification under this

5.

Agreement. The provisions of this Section 10 shall not be exclusive or limit in any way the other circumstances in which the Agent may be deemed to have met the requisite standard of conduct set forth in this Agreement.

      11. Enforcement. Any right to indemnification or advances granted by this Agreement to Agent shall be enforceable by or on behalf of Agent in any court of competent jurisdiction if (i) the claim for indemnification or advances is denied, in whole or in part, or (ii) no disposition of such claim is made within ninety (90) days of request therefor. Agent, in such enforcement action, if successful in whole or in part, shall be entitled to be paid also the expense of prosecuting his claim. It shall be a defense to any action for which a claim for indemnification is made under Section 3 hereof (other than an action brought to enforce a claim for expenses pursuant to Section 9 hereof, provided that the required undertaking has been tendered to the Corporation) that Agent is not entitled to indemnification because of the limitations set forth in Section 4 hereof. Neither the failure of the Corporation (including its Board of Directors or its stockholders) to have made a determination prior to the commencement of such enforcement action that indemnification of Agent is proper in the circumstances, nor an actual determination by the Corporation (including its Board of Directors or its stockholders) that such indemnification is improper shall be a defense to the action or create a presumption that Agent is not entitled to indemnification under this Agreement or otherwise.

      12. Sharing of Information. In the event Agent is the subject of, or is implicated in any way during, an investigation, whether formal or informal, the Corporation shall share with Agent any information it has turned over to any third parties concerning such investigation.

      13. Subrogation. In the event of payment under this Agreement, the Corporation shall be subrogated to the extent of such payment to all of the rights of recovery of Agent, who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Corporation effectively to bring suit to enforce such rights.

      14. No Imputation. The knowledge and/or actions, or failure to act, of any director, officer, agent or employee of the Corporation or the Corporation itself shall not be imputed to Agent for purposes of determining the right to indemnification under this Agreement.

      15. Non-Exclusivity of Rights. The rights conferred on Agent by this Agreement shall not be exclusive of any other right which Agent may have or hereafter acquire under any statute, provision of the Corporation’s Certificate of Incorporation or Bylaws, agreement, vote of stockholders or directors, or otherwise, both as to action in his official capacity and as to action in another capacity while holding office.

      16. Survival of Rights.

          (a) The rights conferred on Agent by this Agreement shall continue after Agent has ceased to be a director, officer, employee or other agent of the Corporation or to serve at the request of the Corporation as a director, officer, employee or other agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise and shall inure to the benefit of Agent’s heirs, executors and administrators.

6.

          (b) The Corporation shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Corporation, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform if no such succession had taken place.

      17. Separability. Each of the provisions of this Agreement is a separate and distinct agreement and independent of the others, so that if any provision hereof shall be held to be invalid for any reason, such invalidity or unenforceability shall not affect the validity or enforceability of the other provisions hereof. Furthermore, if this Agreement shall be invalidated in its entirety on any ground, then the Corporation shall nevertheless indemnify Agent to the fullest extent provided by the Bylaws, the Code or any other applicable law.

      18. Governing Law. This Agreement shall be interpreted and enforced in accordance with the laws of the State of Delaware.

      19. Amendment and Termination. No amendment, modification, termination or cancellation of this Agreement shall be effective unless in writing signed by both parties hereto.

      20. Identical Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute but one and the same Agreement. Only one such counterpart need be produced to evidence the existence of this Agreement.

      21. Headings. The headings of the sections of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction hereof.

      22. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given (i) upon delivery if delivered by hand to the party to whom such communication was directed or (ii) upon the third business day after the date on which such communication was mailed if mailed by certified or registered mail with postage prepaid:

          (a) If to Agent, at the address indicated on the signature page hereof.

          (b) If to the Corporation, to:

Veraz Networks, Inc.
926 Rock Avenue
Suite 20
San Jose, CA 95131

or to such other address as may have been furnished to Agent by the Corporation.

7.

      In Witness Whereof, the parties hereto have executed this Indemnity Agreement on and as of the day and year first above written.

Veraz Networks, Inc.
By:
Agent
By:
	Name:
	Address:

8.

EX-16.1

Exhibit 16.1

(PwC Letterhead)

October 17, 2006

Securities and Exchange Commission
150 Fifth Street, N. E.
Washington D.C. 20549-7561

Commissioners:

We have read the statements made by Veraz Networks, Inc. included in the section entitled “Change In Accountants” (copy attached), which we understand will be filed with the U.S. Securities and Exchange Commission as part of the Registration Statement on Form S-1 of Veraz Networks, Inc. We agree with the statements concerning our Firm in the section entitled “Change In Accountants” in such Form S-1.

Very truly yours,
/s/	PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors
Veraz Networks, Inc.

We consent to the use of our report included herein and to the reference to our firm under the heading “experts” in the prospectus.

Mountain View, California
October 20, 2006

/s/ KPMG LLP

COVER

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