HERZLIA, Israel -- Tdsoft Ltd. ("Tdsoft"), a global provider of Voice-over-IP (VoIP) gateways, and VocalTec Communications Ltd. (Nasdaq: VOCL - News; "VocalTec"), a telecom equipment provider offering carrier class packet voice solutions, today announced the signing of an agreement among the companies and shareholders of Tdsoft, pursuant to which Tdsoft's shareholders will be issued VocalTec shares in exchange for all of the share capital of Tdsoft. Following completion of the transaction, the shareholders of Tdsoft will own 75% of the outstanding share capital of VocalTec and the current shareholders of VocalTec will own the remaining 25%. VocalTec will remain a publicly-held company and Tdsoft will become a wholly-owned subsidiary thereof.

The transaction is expected to close by early December 2005. Completion of the transaction will be subject to the approval of VocalTec's and Tdsoft's shareholders and the obtaining of certain regulatory and other approvals.

Following completion of the transaction, Cisco Systems International BV (a subsidiary of Cisco Systems Inc.) and HarbourVest Partners, LLC, currently major shareholders of Tdsoft, and Deutsche Telekom, currently a major shareholder of VocalTec, are expected to hold approximately 36%, 20% and 3.8%, respectively, of VocalTec's share capital.

Following the closing, Ilan Rosen, Tdsoft's current Chairman of the Board, will be appointed as VocalTec's Chairman of the Board, and the company's management team will be led by Joseph (Yosi) Albagli, the current President & CEO of Tdsoft.

VocalTec and Tdsoft believe that combining their businesses will create a stronger player in the growing VoIP market that will benefit from the synergies created by combining and expanding their respective VoIP technologies, channels to market and customer bases. Tdsoft and VocalTec are committed to their existing customers and channel partners and look forward to offering additional products to these partners.

"HarbourVest's strategy is to invest in and support companies that lead in their field," said Robert Wadsworth, a Managing Director at HarbourVest Partners. "Tdsoft has repeatedly proven its ability to identify market trends and to develop and bring to market products that are instrumental in enabling the migration of networks from one technology to the next generation. Harbourvest believes that with the addition of VocalTec's pioneering VoIP technology, talented team and valuable customers, the combined company is well positioned to create new value for its customers and investors."

Tdsoft Ltd.

VocalTec Communications Ltd.