Mellanox Technologies, Ltd. (Form: 10-Q, Received: 07/29/2016 16:07:08)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)



x		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended: June 30, 2016
OR
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission File Number 001-33299

MELLANOX TECHNOLOGIES, LTD.

(Exact name of registrant as specified in its charter)



Israel (State or other jurisdiction of incorporation or organization)		98-0233400 (I.R.S. Employer Identification Number)

Beit Mellanox, Yokneam, Israel 20692

(Address of principal executive offices, including zip code)

+972-4-909-7200

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer x	Accelerated filer o	Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes o No x

The total number of shares outstanding of the registrant's Ordinary Shares, nominal value NIS 0.0175 per share, as of July 25, 2016, was 48,104,259 .

MELLANOX TECHNOLOGIES, LTD.



PART I		Page No.
FINANCIAL INFORMATION

ITEM 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets (Unaudited) — June 30, 2016 and December 31, 2015	3
	Condensed Consolidated Statements of Operations (Unaudited) — Three and Six Months Ended June 30, 2016 and 2015	4
	Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) — Three and Six Months Ended June 30, 2016 and 2015	5
	Condensed Consolidated Statements of Cash Flows (Unaudited) — Six Months Ended June 30, 2016 and 2015	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	28
ITEM 3 .	Quantitative and Qualitative Disclosures About Market Risk	40
ITEM 4.	Controls and Procedures	41

	PART II
	OTHER INFORMATION

ITEM 1	Legal Proceedings	42
ITEM 1A.	Risk Factors	42
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45
ITEM 3 .	Defaults Upon Senior Securities	45
ITEM 4.	Mine Safety Disclosures	45
ITEM 5.	Other Information	45
ITEM 6.	Exhibits	46

PART I. FINANCIAL INFORMATION

ITEM 1 — FINANCIAL STATEMENTS

MELLANOX TECHNOLOGIES, LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)



	June 30,		December 31,
	2016		2015
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	63,501	$	263,199
Short-term investments	212,954		247,314
Accounts receivable, net	117,323		84,273
Inventories	64,651		62,473
Other current assets	20,498		19,979
Total current assets	478,927		677,238
Property and equipment, net	112,264		100,018
Severance assets	15,846		9,514
Intangible assets, net	292,758		32,154
Goodwill	476,037		200,743
Deferred taxes and other long-term assets	31,759		33,715
Total assets	$	1,407,591	$	1,053,382
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	55,217	$	44,600
Accrued liabilities	87,605		74,296
Deferred revenue	21,829		17,743
Capital lease liabilities, current	—		491
Current portion of term debt	29,471		—
Total current liabilities	194,122		137,130
Accrued severance	20,219		12,464
Deferred revenue	14,195		12,439
Term debt	238,904		—
Other long-term liabilities	26,217		24,668
Total liabilities	493,657		186,701
Commitments and Contingencies - (see Note 8)
Shareholders’ equity
Ordinary shares	204		200
Additional paid-in capital	732,590		684,824
Accumulated other comprehensive income (loss)	328		(1,669		)
Retained earnings	180,812		183,326
Total shareholders’ equity	913,934		866,681
Total liabilities and shareholders' equity	$	1,407,591	$	1,053,382

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

MELLANOX TECHNOLOGIES, LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)



	Three Months Ended June 30,					Six Months Ended June 30,
	2016			2015		2016			2015
	(In thousands, except per share data)
Total revenues	$	214,801		$	163,148	$	411,611		$	309,823
Cost of revenues	79,807			47,178		150,288			88,265
Gross profit	134,994			115,970		261,323			221,558
Operating expenses:
Research and development	82,324			62,576		153,358			120,694
Sales and marketing	32,576			23,366		63,804			45,924
General and administrative	13,494			10,670		41,432			20,371
Total operating expenses	128,394			96,612		258,594			186,989
Income from operations	6,600			19,358		2,729			34,569
Interest expense	(2,215		)	—		(3,213		)	—
Other income (loss)	315			912		376			(1,557		)
Other income (loss), net	(1,900		)	912		(2,837		)	(1,557		)
Income (loss) before taxes on income	4,700			20,270		(108		)	33,012
Provision for taxes on income	46			1,022		2,406			3,268
Net income (loss)	$	4,654		$	19,248	$	(2,514	)	$	29,744
Net income (loss) per share — basic	$	0.10		$	0.42	$	(0.05	)	$	0.65
Net income (loss) per share — diluted	$	0.09		$	0.40	$	(0.05	)	$	0.63
Shares used in computing net income (loss) per share:
Basic	47,900			46,191		47,629			45,943
Diluted	49,194			47,568		47,629			47,341

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

MELLANOX TECHNOLOGIES, LTD.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)



	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
	(In thousands)
Net income (loss)	$	4,654		$	19,248		$	(2,514	)	$	29,744
Other comprehensive income (loss), net of tax:
Change in unrealized gains/losses on available-for-sale securities, net of tax	48			(237		)	648			212
Change in unrealized gains/losses on derivative contracts, net of tax	(2,143		)	5,456			1,349			5,832
Other comprehensive income (loss)	(2,095		)	5,219			1,997			6,044
Total comprehensive income (loss), net of tax	$	2,559		$	24,467		$	(517	)	$	35,788

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

MELLANOX TECHNOLOGIES, LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)



	Six Months Ended June 30,
	2016			2015
	(In thousands)
Cash flows from operating activities:
Net (loss) income	$	(2,514	)	$	29,744
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization	46,231			19,775
Deferred income taxes	1,266			134
Share-based compensation	36,360			25,004
Gain on investments, net	(489		)	(2,388		)
Impairment loss on equity investment in a private company	—			3,189
Changes in assets and liabilities, net of effect of acquisition:
Accounts receivable	(16,886		)	3,918
Inventories	10,598			(22,513		)
Prepaid expenses and other assets	3,598			419
Accounts payable	9,679			8,755
Accrued liabilities and other liabilities	5,583			21,063
Net cash provided by operating activities	93,426			87,100

Cash flows from investing activities:
Purchase of severance-related insurance policies	(546		)	(381		)
Purchase of short-term investments	(153,486		)	(188,161		)
Proceeds from sales of short-term investments	200,457			98,742
Proceeds from maturities of short-term investments	97,388			30,717
Purchase of property and equipment	(15,755		)	(20,413		)
Purchase of equity investments in private companies	(107		)	—
Acquisition net of cash acquired of $87.5 million	(698,501		)	—
Net cash used in investing activities	(570,550		)	(79,496		)

Cash flows from financing activities:
Proceeds from term debt	280,000			—
Principal payments on term debt	(7,000		)	—
Term debt issuance costs	(5,521		)	—
Principal payments on capital lease obligations	(491		)	(556		)
Proceeds from exercise of share awards	10,438			9,829
Net cash provided by financing activities	277,426			9,273

Net (decrease) increase in cash and cash equivalents	(199,698		)	16,877
Cash and cash equivalents at beginning of period	263,199			51,326
Cash and cash equivalents at end of period	$	63,501		$	68,203

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1—THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Company

Mellanox Technologies, Ltd., an Israeli corporation (the "Company" or "Mellanox"), was incorporated and commenced operations in March 1999. Mellanox is a supplier of high-performance interconnect products for computing, storage and communications applications.

Principles of presentation

The unaudited condensed consolidated financial statements include the Company's accounts as well as those of its wholly owned subsidiaries after the elimination of all intercompany balances and transactions.

On February 23, 2016, the Company completed its acquisition of EZchip Semiconductor, Ltd. ("EZchip"), a public company formed under the laws of the State of Israel and specializing in network-processing semiconductors. Upon the consummation of the acquisition, EZchip became a wholly owned subsidiary of the Company. The unaudited condensed consolidated financial statements included in this quarterly report on Form 10-Q include the results of operations of EZchip commencing as of the acquisition date.

The unaudited condensed consolidated financial statements included in this quarterly report on Form 10-Q have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The year-end balance sheet data was derived from audited consolidated financial statements, but do not include all disclosures required by accounting principles generally accepted in the United States ("GAAP"). Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures contained in this quarterly report comply with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended, for a quarterly report on Form 10-Q and are adequate to make the information presented not misleading. The unaudited condensed consolidated financial statements included herein reflect all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the financial position, results of operations and cash flows for the interim periods presented. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015, filed with the SEC on February 26, 2016. The results of operations for the three and six months ended June 30, 2016 are not necessarily indicative of the results to be anticipated for the entire year ending December 31, 2016 or thereafter.

Risks and uncertainties

The Company is subject to all of the risks inherent in a company which operates in the dynamic and competitive semiconductor industry. Significant changes in any of the following areas could have a materially adverse impact on the Company's financial position and results of operations: unpredictable volume or timing of customer orders; ordered product mix; the sales outlook and purchasing patterns of the Company's customers based on consumer demands and general economic conditions; loss of one or more of the Company's customers; decreases in the average selling prices of products or increases in the average cost of finished goods; the availability, pricing and timeliness of delivery of components used in the Company's products; reliance on a limited number of subcontractors to manufacture, assemble, package and production test the Company's products; the Company's ability to successfully develop, introduce and sell new or enhanced products in a timely manner; product obsolescence and the Company's ability to manage product transitions; the timing of announcements or introductions of new products by the Company's competitors; and the Company's ability to successfully integrate acquired businesses.

Use of estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the financial statements and the reported amounts of net revenue and expenses in the reporting periods. The Company regularly evaluates estimates and assumptions related to revenue recognition, allowances for doubtful accounts, sales returns and allowances, investment valuation, warranty reserves, inventory reserves, share-based compensation expense, long-term asset valuations, goodwill and purchased intangible asset valuation, hedge effectiveness, deferred income tax asset valuation, uncertain tax positions, litigation and other loss contingencies. These estimates and assumptions are based on current facts, historical experience and various other factors that the Company believes to be reasonable under the circumstances, the results of which form the basis for making judgments

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MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

NOTE 1—THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)

about the carrying values of assets and liabilities and the recording of revenue, costs and expenses that are not readily apparent from other sources. The actual results that the Company experiences may differ materially and adversely from the Company's original estimates. To the extent there are material differences between the estimates and actual results, the Company's future results of operations will be affected.

Significant accounting policies

There have been no changes in the Company’s significant accounting policies that were disclosed in its Annual Report on Form 10-K for the fiscal year ended December 31, 2015. See our Annual Report on Form 10-K for the year ended December 31, 2015, filed with the SEC on February 26, 2016, for a discussion of significant accounting policies and estimates.

Concentration of credit risk

The following table summarizes the revenues from customers (including original equipment manufacturers) in excess of 10% of the total revenues:



	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Hewlett-Packard	12	%	15	%	16	%	14	%

The following table summarizes accounts receivable balances in excess of 10% of total accounts receivable:



	June 30, 2016		December 31, 2015
Hewlett Packard	11	%	16	%
Hon Hai Precision Ind. Co. Ltd.	*		11	%
Ingram Micro	*		15	%
____________________
* Less than 10%

Product warranty

The following table provides changes in the product warranty accrual for the six months ended June 30, 2016 and 2015 :



	Six Months Ended June 30,
	2016			2015
	(In thousands)
Balance, beginning of the period	$	1,642		$	1,932
Assumed warranty liability from acquisition	290			—
New warranties issued during the period	683			1,514
Reversal of warranty reserves	(358		)	(67		)
Settlements during the period	(532		)	(1,572		)
Balance, end of the period	1,725			1,807
Less: long term portion of product warranty liability	(360		)	(450		)
Balance, end of the period	$	1,365		$	1,357

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MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

NOTE 1—THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)

Net income (loss) per share

The following table sets forth the computation of basic and diluted net income (loss) per share for the three and six months ended June 30, 2016 and 2015 :



	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016			2015
	(In thousands, except per share data)
Net income (loss)	$	4,654	$	19,248	$	(2,514	)	$	29,744
Basic and diluted shares:
Weighted average ordinary shares	47,900		46,191		47,629			45,943
Dilutive effect of employee share options and restricted stock units ("RSUs")	1,294		1,377		—			1,398
Shares used to compute diluted net income (loss) per share	49,194		47,568		47,629			47,341
Net income (loss) per share — basic	$	0.10	$	0.42	$	(0.05	)	$	0.65
Net income (loss) per share — diluted	$	0.09	$	0.40	$	(0.05	)	$	0.63

The Company excluded 502,921 and 1,328,654 anti-dilutive employee share-based awards for the three and six months ended June 30, 2016 , respectively, and 508,326 and 1,372,376 anti-dilutive employee share-based awards for the three and six months ended June 30, 2015, respectively, from the computation of diluted net income (loss) per share.

Recent accounting pronouncements

In June 2016, the Financial Accounting Standards Board, "FASB", issued ASU 2016-13 Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The standard introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. Assumptions, models, and methods used in estimating an allowance for loan and lease losses are required disclosures under the standard. A cumulative-effect adjustment to retained earnings is recorded in the period of adoption and a prospective transition approach is applied for certain assets. The standard becomes effective for the Company beginning January 1, 2020. Early application is permitted beginning January 1, 2019. The Company is currently evaluating the effect that the standard will have on its consolidated financial statements and related disclosures.

In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718); Improvements to Employee Share-Based Payment Accounting . The standard requires excess tax benefits to be recognized in the statement of operations as an income tax expense and is applied prospectively by means of a cumulative-effect adjustment of excess tax benefits from equity in the period of adoption. The standard establishes an alternative practical expedient for estimating the expected term of an award by recognizing the effects of forfeitures in compensation cost when the forfeitures occur. Adoption of the alternative practical expedient is applied prospectively on an entity-wide basis. The standard requires that amounts paid to a taxing authority on the employee’s behalf as a result of directly withholding shares for tax-withholding purposes are to be presented on a retrospective basis as a financing activity on the statement of cash flows. The standard becomes effective for the Company beginning January 1, 2017. The Company is currently evaluating the effect that the standard will have on its consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) . The standard requires lessees to recognize almost all leases on the balance sheet as a right-of-use asset and a lease liability and requires leases to be classified as either an operating or a finance type lease. The standard excludes leases of intangible assets or inventory. Early adoption of the standard is allowed. The standard becomes effective for the Company beginning January 1, 2019. The Company is currently evaluating the effect that the standard will have on its consolidated financial statements and related disclosures.

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MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

NOTE 1—THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments-Overall (Subtopic 825-10) . The standard requires entities to carry all investments in equity securities, with certain exceptions, at fair value with adjustment recorded through net income ("FVTNI"). The standard eliminates the requirement of recognizing unrealized gains or losses in other comprehensive income for trading or available-for-sale marketable equity securities. The standard requires the total fair value change attributable to instrument-specific credit risk, excluding derivative liability instruments, to be reflected in other comprehensive income. The standard requires an evaluation for the need of a valuation allowance for deferred tax assets related to debt securities classified as available-for-sale in combination with the Company's other deferred tax assets. The standard becomes effective for the Company beginning January 1, 2018 and early adoption is allowed. The Company is currently evaluating the effect that the standard will have on its consolidated financial statements and related disclosures.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) .The standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either the retrospective or cumulative effect transition method. In August 2015, the FASB issued an update to defer the effective date of this update by one year. The standard becomes effective for the Company beginning January 1, 2018, but allows the Company to adopt the standard one year earlier if it so chooses. The Company has not yet selected a transition method and is currently evaluating the effect that the standard and subsequent updates (see below) will have on its consolidated financial statements and related disclosures.

In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which requires an entity to determine whether the nature of its promise is to provide a good or service to the customer (i.e., the entity is a principal) or to arrange for the good or service to be provided to the customer by the other party (i.e., the entity is an agent). In April, 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing , which clarifies the following two aspects of Topic 606: (a) identifying performance obligations; and (b) the licensing implementation guidance. In May, 2016, the FASB issued ASU No. 2016-12 Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients , which clarifies guidance in certain narrow areas and adds some practical expedients. The above updates do not change the core principles of the guidance in ASU 2014-09.

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MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

NOTE 2—BALANCE SHEET COMPONENTS:



	June 30, 2016			December 31, 2015
	(In thousands)
Accounts receivable, net:
Accounts receivable	$	117,955		$	84,894
Less: allowance for doubtful accounts	(632		)	(621		)
	$	117,323		$	84,273
Inventories:
Raw materials	$	8,878		$	8,304
Work-in-process	28,038			25,716
Finished goods	27,735			28,453
	$	64,651		$	62,473
Other current assets:
Prepaid expenses	$	10,212		$	9,948
Derivative contracts receivable	630			—
VAT receivable	5,734			7,946
Other	3,922			2,085
	$	20,498		$	19,979
Property and equipment, net:
Computer equipment and software	$	198,980		$	172,176
Furniture and fixtures	4,119			3,886
Leasehold improvements	39,062			36,121
	242,161			212,183
Less: Accumulated depreciation and amortization	(129,897		)	(112,165		)
	$	112,264		$	100,018
Deferred taxes and other long-term assets:
Equity investments in private companies	$	7,846		$	7,739
Deferred taxes	21,956			23,222
Other assets	1,957			2,754
	$	31,759		$	33,715
Accrued liabilities:
Payroll and related expenses	$	50,992		$	43,041
Accrued expenses	32,359			26,431
Derivative contracts payable	524			1,157
Product warranty liability	1,365			1,206
Other	2,365			2,461
	$	87,605		$	74,296
Other long-term liabilities:
Income tax payable	$	21,282		$	20,023
Deferred rent	2,000			1,950
Other	2,935			2,695
	$	26,217		$	24,668

MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

NOTE 3—BUSINESS COMBINATION:

On February 23, 2016 , the Company completed its acquisition of EZchip . Under the terms of the Agreement of Merger dated as of September 30, 2015 (as amended on November 17, 2015 ), by and among the Company, Mondial Europe Sub Ltd. and EZchip Semiconductor Ltd. (the "Merger Agreement") the total consideration was $ 787.0 million including $1.0 million attributable to assumed RSUs. The net cash purchase price of $698.5 million consisted of a $786.0 million cash payment for all outstanding common shares of EZchip at the price of $ 25.50 per share and net of $87.5 million cash acquired. In connection with the acquisition, the Company received cash representing the withholding taxes owed related to RSUs from the EZchip acquisition of $17.3 million which it remitted to taxing authorities during the quarter ended June 30, 2016. The Company also assumed 891,822 EZchip RSUs and converted them to 499,894 equivalent Company RSU awards. The fair value of the converted RSUs was determined based on the per share value of the underlying Mellanox ordinary shares of $ 46.40 per share as of the acquisition date. The 499,894 RSUs had a total aggregate value of $23.2 million, of which $1.0 million was recorded as a component of the purchase price for service rendered prior to the acquisition date and $22.2 million will be recognized as share-based compensation expense over the remaining required service period of up to 2.25 years.

In connection with the acquisition, the Company entered into a $280.0 million variable interest rate Term Debt maturing February 21, 2019 . For additional information on the Term Debt, see Note 13 in the notes to the unaudited condensed consolidated financial statements.

The Company accounted for the transaction using the acquisition method, which requires, among other things, that the assets acquired and liabilities assumed in a business combination be recognized at their respective estimated fair values as of the acquisition date. The amount of recognized identifiable acquired assets and liabilities assumed are primarily based on provisional fair values and are subject to revision as the Company finalizes its analysis. Final determination of fair values may result in further adjustments to the values presented below. The following summarizes consideration paid for EZchip at the acquisition date:



	(in thousands)
Consideration:
Cash payment for all outstanding common shares of EZchip at $25.50 per share	$	786,046
Fair value of awards attributable to pre-acquisition services	972
Total consideration:	787,018
Less: cash acquired	87,545
Fair value of total consideration transferred, net of cash acquired	$	699,473

The following summarizes the Company's preliminary allocation of the total purchase price, net of cash acquired for the EZchip acquisition after consultation with third party valuation specialists:



	(in thousands)
Short-term investments	$	108,862
Other current assets	34,114
Other long-term assets	9,638
Intangible assets	288,246
Goodwill	275,294
Total assets	716,154

Current liabilities	(10,253		)
Long-term liabilities	(6,428		)
Total liabilities	(16,681		)

Total preliminary purchase price allocation	$	699,473

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MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

NOTE 3—BUSINESS COMBINATION (Continued):

Acquisition-related expenses for the EZchip acquisition for the three and six months ended June 30, 2016 were $0.5 million and $7.2 million , respectively and primarily consisted of investment banking, consulting and other professional fees.

Identifiable finite-lived intangible assets



	Fair value		Weighted Average Useful Life
	(in thousands)		(in years)
Purchased intangible assets:
Trade names	$	5,600	3
Customer relationships	56,400		9
Backlog	11,300		1
Developed technology	181,246		4 - 6
In process research and development ⁽¹⁾	33,700		-
Total purchased intangible assets	$	288,246

⁽¹⁾ In-process research and development ("IPR&D") will not be amortized until the underlying products reach technological feasibility. Upon completion, each IPR&D project will be amortized over its useful life.

Trade name represents the fair values of brand and name recognition associated with the marketing of EZchip’s products and services. The Company used the income approach and utilized a discount rate of 10.0% to determine the fair value of trade name assets.

Customer relationships represent the fair value of future projected revenues that will be derived from the sale of products to existing customers of EZchip. The Company used the comparative method ("with/without") of the income approach to determine the fair value of this intangible asset and utilized a discount rate of 10.0% .

Backlog represents the fair value of sales order backlog as of the valuation date. The Company used the income approach to determine the fair value of this intangible asset and utilized a discount rate of 8.0% .

Developed technology represents completed technology that has passed technological feasibility and/or is currently offered for sale to customers. The Company used the income approach to value the developed technology. Under the income approach, the expected future cash flows from each technology are estimated and discounted to their net present values at an appropriate risk-adjusted rate of return. Significant factors considered in the calculation of the rate of return are the weighted average cost of capital and the return on assets. The Company applied a discount rate of 9.0% to value the developed technology assets taking into consideration market rates of return on debt and equity capital and the risk associated with achieving forecasted revenues related to these assets.

The in-process research and development ("IPR&D") intangible asset represents the value assigned to an acquired research and development project that, as of the acquisition date had not established technological feasibility. The fair value of IPR&D was determined using a discount rate of 12.0% . This intangible asset will be capitalized on the balance sheet and evaluated periodically for impairment until the project is completed, at which time it will become subject to amortization over its useful life. IPR&D consists of one project related to the development of network processors. The project is expected to be completed over the next two years. The estimated remaining costs to complete the IPR&D project was $ 22.3 million as of the acquisition date, which will be charged to operating expense in the consolidated statements of operations as incurred.

Goodwill

Goodwill arising from the acquisition represents the value of the skilled assembled workforce and projected growth in overall revenues. The EZchip acquisition is a step in the Company's strategy to become a leading broad-line supplier of intelligent interconnect solutions for data centers. The addition of EZchip’s products and expertise in network processing is expected to enhance the Company's leadership position, and ability to deliver complete end-to-end, intelligent 10, 25, 40, 50, and 100Gb/s interconnect and processing solutions for advanced data center and edge platforms. The combined company will have diverse and robust solutions to enable customers to meet the growing demands of data-intensive applications used in high-performance computing, Web 2.0, cloud, secure data center, enterprise, telecom, database, financial services, and storage environments. These significant factors were the basis for the recognition of goodwill. Goodwill is not expected to be

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MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

NOTE 3—BUSINESS COMBINATION (Continued):

deductible for tax purposes. Goodwill will not be amortized but instead will be tested for impairment annually or more frequently if certain indicators are present.

Supplemental pro forma data

The following unaudited pro forma data have been prepared as if the EZchip acquisition had occurred on January 1, 2015, and includes adjustments for amortization of intangible assets acquired, the effect of purchase accounting adjustments including the step-up of inventory, share-based compensation expense, and interest on the Term Debt incurred to partially finance the acquisition. Pro forma results are not indicative of what would have occurred had the acquisition occurred as of January 1, 2015 or of results that may occur in the future.



	Six Months Ended
	June 30,
	2016		2015

Revenues	$	421,535	$	364,993
Net income (loss)	$	17,451	$	(17,665	)
Net income (loss) per share — basic	$	0.37	$	(0.38	)
Net income (loss) per share — diluted	$	0.36	$	(0.38	)

Material non-recurring adjustments included in the unaudited pro forma net income for the six months ended June 30, 2016 for the effect of purchase accounting adjustments includes acquisition-related costs of $14.2 million , composed of acquisition cost of $7.2 million incurred by the Company and $ 7.0 million incurred by EZchip, the stock-based compensation expense related to accelerated RSUs from the acquisition of $ 4.8 million and the effects related to the step-up of inventory of $7.5 million.

The Company immediately integrated EZchip into its ongoing operations. As a result, it is impracticable to determine EZchip's effect on revenue and earnings in the condensed consolidated statement of operations for the reporting period.

NOTE 4—FAIR VALUE MEASUREMENTS:

Fair value hierarchy:

The Company measures its cash equivalents and marketable securities at fair value. The Company’s cash equivalents are classified within Level 1. Cash equivalents are valued primarily using quoted market prices utilizing market observable inputs. The Company's investments in debt securities and certificates of deposits are classified within Level 2 as the market inputs to value these instruments consist of market yields, reported trades and broker/dealer quotes. In addition, foreign currency contracts are classified within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments. The Level 3 valuation inputs include the Company's best estimate of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the instrument's valuation. As of June 30, 2016 and December 31, 2015 , the Company did not have any assets or liabilities valued based on Level 3 valuations.

Financial Liabilities Measured at Fair Value on a Nonrecurring Basis:

As of June 30, 2016 , the remaining principal of $ 273.0 million on the Company's $280.0 million Term Debt is classified as a Level 2 fair value measurement on a nonrecurring basis in the fair value hierarchy. The Company calculated a fair value amount of $271.6 million at June 30, 2016 based on a discounted cash flow model using observable market inputs and taking into consideration variables such as interest rate changes, comparable instruments, and long-term credit ratings.

MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

NOTE 4—FAIR VALUE MEASUREMENTS (continued)

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis:

The following table represents the fair value hierarchy of the Company's financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2016 :



	Level 1		Level 2		Total
	(in thousands)
Money market funds	$	4,985	—		$	4,985
Certificates of deposit	—		57,486		57,486
U.S. Government and agency securities	—		43,908		43,908
Commercial paper	—		28,363		28,363
Corporate bonds	—		74,638		74,638
Municipal bonds	—		3,441		3,441
Foreign government bonds	—		5,118		5,118
	4,985		212,954		217,939
Derivative contracts	—		630		630
Total financial assets	$	4,985	$	213,584	$	218,569
Derivative contracts	$	—	$	524	$	524
Total financial liabilities	$	—	$	524	$	524

The following table represents the fair value hierarchy of the Company's financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2015 :



	Level 1		Level 2		Total
	(in thousands)
Certificates of deposit	$	—	$	110,423	$	110,423
U.S. Government and agency securities	—		131,722		131,722
Commercial paper	—		57,214		57,214
Corporate bonds	—		105,482		105,482
Municipal bonds	—		26,208		26,208
Foreign government bonds	—		13,940		13,940
Total financial assets	$	—	$	444,989	$	444,989
Derivative contracts	$	—	$	1,157	$	1,157
Total financial liabilities	$	—	$	1,157	$	1,157

There were no transfers between Level 1 and Level 2 securities during the six months ended June 30, 2016 and the year ended December 31, 2015 .

MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

NOTE 5—INVESTMENTS:

Cash, cash equivalents and short-term investments:

The short-term investments are classified as available-for-sale securities. The cash, cash equivalents and short-term investments at June 30, 2016 and December 31, 2015 were as follows:



	June 30, 2016
	Amortized Cost			Unrealized Gains		Unrealized Losses			Estimated Fair Value
	(in thousands)
Cash	$	58,516		$	—	$	—		$	58,516
Money market funds	4,985			—		—			4,985
Certificates of deposit	57,486			—		—			57,486
U.S. Government and agency securities	43,873			35		—			43,908
Commercial paper	28,363			—		—			28,363
Corporate bonds	74,608			73		(43		)	74,638
Municipal bonds	3,441			1		(1		)	3,441
Foreign government bonds	5,113			5		—			5,118
Total	276,385			114		(44		)	276,455
Less amounts classified as cash and cash equivalents	(63,501		)						(63,501		)
	$	212,884		$	114	$	(44	)	$	212,954



	December 31, 2015
	Amortized Cost			Unrealized Gains			Unrealized Losses			Estimated Fair Value
	(in thousands)
Cash	$	65,524		$	—		$	—		$	65,524
Certificates of deposit	110,427			3			(7		)	110,423
U.S. Government and agency securities	131,755			5			(38		)	131,722
Commercial paper	57,214			4			(4		)	57,214
Corporate bonds	105,900			2			(420		)	105,482
Municipal bonds	26,283			—			(75		)	26,208
Foreign government bonds	13,988			—			(48		)	13,940
Total	511,091			14			(592		)	510,513
Less amounts classified as cash and cash equivalents	(263,196		)	(5		)	2			(263,199		)
	$	247,895		$	9		$	(590	)	$	247,314

Realized gains upon the sale of marketable securities were $0.6 million and $2.1 million for the three months ended June 30, 2016 and 2015 , respectively. Realized gains upon the sale of marketable securities were $0.5 million and $2.4 million for the six months ended June 30, 2016 and 2015 , respectively. At June 30, 2016 , gross unrealized losses on investments that were in a gross unrealized loss position for greater than 12 months were immaterial. These investments were not deemed to be other-than-temporarily impaired and the gross unrealized losses were recorded in other comprehensive income (loss) ("OCI").

MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

NOTE 5—INVESTMENTS (Continued)

The contractual maturities of short-term investments at June 30, 2016 and December 31, 2015 were as follows:



	June 30, 2016				December 31, 2015
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(in thousands)
Due in less than one year	$	133,643	$	133,686	$	148,041	$	147,914
Due in one to three years	79,241		79,268		99,854		99,400
	$	212,884	$	212,954	$	247,895	$	247,314

Investments in privately-held companies:

As of June 30, 2016 and December 31, 2015 , the Company held a total of $7.8 million and $7.7 million in investments in privately-held companies.

NOTE 6—GOODWILL AND INTANGIBLE ASSETS:

The following table represents changes in the carrying amount of goodwill:



	(in thousands)
Carrying amount of goodwill at December 31, 2015	$	200,743
Acquisitions	275,294
Adjustments	—
Balance as of June 30, 2016	$	476,037

The carrying amounts of intangible assets as of June 30, 2016 were as follows:



	Gross Carrying Value		Accumulated Amortization			Net Carrying Value
	(in thousands)
Licensed technology	$	2,638	$	(1,771	)	$	867
Developed technology	251,074		(56,298		)	194,776
Customer relationships	69,776		(14,205		)	55,571
Backlog	11,300		(8,399		)	2,901
Trade names	5,600		(657		)	4,943
Total finite-lived amortizable intangible assets	340,388		(81,330		)	259,058
In-process research and development	33,700		—			33,700
Total intangible assets	$	374,088	$	(81,330	)	$	292,758

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MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

NOTE 6—GOODWILL AND INTANGIBLE ASSETS (Continued):

The carrying amounts of intangible assets as of December 31, 2015 were as follows:



	Gross Carrying Value		Accumulated Amortization			Net Carrying Value
	(in thousands)
Licensed technology	$	2,554	$	(1,589	)	$	965
Developed technology	69,828		(40,408		)	29,420
Customer relationships	13,376		(11,607		)	1,769
Total intangible assets	$	85,758	$	(53,604	)	$	32,154

Amortization expense of intangible assets totaled approximately $ 16.0 million and $ 2.6 million for the three months ended June 30, 2016 and 2015 , respectively. Amortization expense of intangible assets totaled approximately $27.7 million and $ 4.9 million for the six months ended June 30, 2016 and 2015 , respectively.

The estimated future amortization expense from amortizable intangible assets is as follows:



	(in thousands)
2016 (remaining six months)	$	27,765
2017	49,722
2018	46,736
2019	41,589
2020 and thereafter	93,246
Total	$	259,058

NOTE 7—DERIVATIVES AND HEDGING ACTIVITIES:

As of June 30, 2016 , the Company had derivative contracts in place hedging future Israeli New Shekel ("NIS") denominated operating expenses that the Company expects to incur over the next twelve months. In addition, the Company had derivative contracts in place that hedge the fair value of NIS denominated net assets. The Company recorded gains and losses on both the net assets and the derivative contracts designated as fair value hedges in the consolidated statements of operations as a component of other (loss) income.

Foreign exchange contracts designated as cash flow hedges relate primarily to operating expenses and the associated gains and losses are expected to be recorded in operating expenses when reclassified out of OCI. The Company expects to realize the accumulated OCI balance related to cash flow hedge contracts within the next 12 months .

Fair Value of Derivative Contracts

The fair value of derivatives in the unaudited condensed consolidated balance at June 30, 2016 and December 31, 2015 were as follows:



		Other current assets		Other accrued liabilities		Other accrued liabilities
		June 30, 2016				December 31, 2015
		(in thousands)
Derivatives designated as hedging instruments
	Currency forward contracts	$	630	$	524	$	1,157
Total derivatives		$	630	$	524	$	1,157

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MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

NOTE 7—DERIVATIVES AND HEDGING ACTIVITIES: (Continued)

The gross notional amounts of derivative contracts were NIS denominated. The notional amounts of outstanding derivative contracts at June 30, 2016 and December 31, 2015 were as follows:



	June 30, 2016		December 31, 2015
	(in thousands)
Derivatives designated as hedging instruments
Currency forward contracts	$	93,420	$	98,744
Derivatives not designated as hedging instruments
Currency forward contracts	$	26,019	$	—

Effect of Designated Derivative Contracts on Accumulated Other Comprehensive Income

The following table represents the balance of derivative contracts designated as cash flow hedges as of June 30, 2016 and December 31, 2015 and their impact on OCI for the six months ended June 30, 2016 :



	(in thousands)
December 31, 2015	$	(1,091	)
Amount of gain recognized in OCI (effective portion)	1,510
Amount of gain reclassified from OCI to income (effective portion)	(161		)
June 30, 2016	$	258

Effect of Derivative Contracts on the Unaudited Condensed Consolidated Statement of Operations

The effect of derivative contracts on the unaudited condensed consolidated statements of operations for the three months ended June 30, 2016 and 2015 was:



	Derivatives designated as hedging instruments					Derivatives not designated as hedging instruments
	Three Months Ended June 30,					Three Months Ended June 30,
Location of gains (losses)	2016		2015			2016			2015
	(in thousands)
Operating expenses	$	23	$	(737	)	$	—		$	—
Other (loss) income	$	—	$	—		$	(271	)	$	—

The effect of derivative contracts on the unaudited condensed consolidated statements of operations for the six months ended June 30, 2016 and 2015 was:



	Derivatives designated as hedging instruments					Derivatives not designated as hedging instruments
	Six Months Ended June 30,					Six Months Ended June 30,
Location of gains (losses)	2016		2015			2016			2015
	(in thousands)
Operating expenses	$	161	$	(3,010	)	$	—		$	—
Other (loss) income	$	—	$	—		$	(543	)	$	—

The net gains or losses relating to the ineffective portion of derivative contracts designed as hedging instruments were not material in the three and six months ended June 30, 2016 and 2015 .

MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

NOTE 8—COMMITMENTS AND CONTINGENCIES:

Commitments

Leases

At June 30, 2016 , future minimum payments under non-cancelable operating leases are as follows:



	(in thousands)

2016 due in remaining six months	$	10,679
2017	18,299
2018	14,477
2019	11,046
2020 and thereafter	11,176
Total minimum lease payments	$	65,677

Purchase commitments

At June 30, 2016 , the Company had the following non-cancelable purchase commitments:



	(in thousands)
2016 due in remaining six months	$	100,446
2017	9,230
2018	3,836
2019 and thereafter	25
	$	113,537

Term Debt

For information about the Company's Term Debt, see note 13 to the notes to the condensed consolidated financial statements.

Other Commitments

Operating lease

On May 3, 2016, the Company entered into a lease agreement for additional office space expected to be built in Yokneam, Israel. The lease term expires 10 years after lease inception with no options to extend the lease term. The Company's occupancy of the additional office space and its obligation under the lease agreement is contingent on the lessor's attainment of stated milestones in the lease agreement. As such, the Company cannot make a reliable estimate as to the timing of cash payments under the lease. At June 30, 2016 , the estimated total future lease obligation is approximately $28.7 million . Over a twelve month period an estimated rental expense is approximately $2.9 million , and if recognized, would increase the Company's operating expenses in its consolidated statement of operations.

MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

NOTE 8—COMMITMENTS AND CONTINGENCIES (CONTINUED)

Royalty-bearing grants

We are obliged to pay royalties to the Office of the Israeli National Authority for Technological Innovation or the Office of the Chief Scientist of the Ministry of Economy and Industry of Israel (formerly, the Ministry of Industry, Trade and Labor) (the "OCS") for research and development efforts partially funded through grants from the OCS and under approved plans in accordance with the Israeli Law for Encouragement of Research and Development in the Industry, 1984, (the "R&D Law"). Royalties on the revenues derived from sales of the Company's products incorporating OCS funded know-how are payable to the Israeli government at the rate up to 4.5% of the amount of the received grants. The Company's obligation to pay these royalties is contingent on actual sales of the products, at which time a liability is recorded. In the absence of such sales, we cannot make a reliable estimate as to the timing of cash settlement of the royalties. At June 30, 2016 , the Company estimated a total future royalty obligation of approximately $23.3 million , and if recognized, would increase the Company's cost of revenues in its consolidated statement of operations.

Unrecognized tax benefits

Due to the inherent uncertainty with respect to the timing of future cash outflows associated with the Company's unrecognized tax benefits, it is unable to reliably estimate the timing of cash settlement with respective taxing authorities. As of June 30, 2016 , the Company's unrecognized tax benefits totaled $37.4 million , which would reduce the Company's income tax expense and effective tax rate, if recognized.

Contingencies

Legal proceedings

Settled legal proceedings

Avago Technologies Fiber (IP) Singapore Pte. Ltd. vs. IPtronics, Inc. and IPtronics A/S (the "Parties").

On September 29, 2010, Avago Technologies Fiber (IP) Singapore Pte. Ltd. (“Avago IP”) filed a complaint for patent infringement against IPtronics, Inc. and IPtronics A/S (now Mellanox Technologies Denmark Aps) (collectively, “IPtronics”) in the United States District Court, Northern District of California, San Jose Division (Case No.: 5:10-cv-02863 EJD), asserting infringement of U.S. Patents Number 5,596,456 and 5,359,447. On September 11, 2012, Avago IP along with additional subsidiaries of Avago Technologies Limited (collectively, “Avago”) filed a Second Amended and Supplemental Complaint against IPtronics adding allegations that IPtronics engaged in violations of the Lanham Act, Section 43 (A); misappropriated Avago’s trade secrets; engaged in unfair competition against Avago; intentionally interfered with Avago’s contractual relations; and were unjustly enriched by and through the conduct complained of by Avago. Avago’s motion to file a Fourth Amended and Supplemental Complaint (the “Complaint”) to add the Company and a new claim for interference with prospective economic advantage against IPtronics was granted. The Company and IPtronics answered the new complaint. Pursuant to a Settlement and Patent License Agreement (the "Settlement") dated March 7, 2016, on March 8, 2016 the Parties jointly filed a Stipulation of Dismissal with Prejudice Pursuant to Fed.R.Civ.P. 41(a)(1)(A)(ii), in which the parties stipulated to the dismissal with prejudice of this action, including all claims alleged in the Fourth Amended and Supplemental Complaint and all counterclaims alleged in the answers thereto, with each party to bear its own costs and attorneys’ fees.

IPtronics, Inc. and Mellanox Technologies Denmark ApS vs. Avago Technologies, Inc., et al .

IPtronics filed an antitrust Complaint in the United States District Court, Northern District of California, San Jose Division (Case No.: 5:14-cv-05647-BLF (PSG)), against Avago for pursuing what the Company believed to be a baseless ITC action against IPtronics. Pursuant to the Settlement, the Parties filed a Joint Stipulation of Dismissal with Prejudice Pursuant to Fed.R.Civ.P. 41(a)(1)(A)(ii), in which the parties stipulated to the dismissal of this action with prejudice, with each party to bear its own costs and attorneys’ fees.

Under the settlement, the Company and Avago agreed not to sue each other for a period of 5 years . The contractual patent rights conveyed by the settlement were deemed not contributory to the Company's operations or products sold. As a result, the Company recorded settlement expense in its operating expenses in the amount of $ 5.1 million during its first quarter ended March 31, 2016.

MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

NOTE 8—COMMITMENTS AND CONTINGENCIES (CONTINUED)

Pending legal proceedings

Mellanox Technologies, Ltd. v. Methode Electronics, Inc.

On August 16, 2015, Mellanox filed this action for patent infringement in the federal court for the Northern District of California (Civil Action No. 15-cv-03730-PJH) naming Methode Electronics, Inc. as defendant on claims for infringement of U.S. Patent No. 8,419,444 and U.S. Patent No. 7,934,959. On December 3, 2015, Mellanox filed an Amended Complaint asserting infringement of the 959 patent. Methode moved to dismiss the First Amended Complaint. The court granted in part and denied in part that motion with leave to amend, as confirmed in an Order dated March 4, 2016. On March 17, 2016, Mellanox filed a Second Amended Complaint alleging infringement of the 959 patent and seeking unspecified damages and injunctive relief against Methode. On April 7, 2016 Methode served an Answer and Counterclaims seeking declaratory judgment that the 959 patent is invalid and not infringed. On June 13, 2016, Methode filed a motion for leave to amend its Answer to add additional defenses and counterclaims including alleged unenforceability of the 959 patent in suit. This motion has been briefed and was heard on July 20, 2016. The court denied Methode’s motion to the extent it concerned an alleged failure to state a claim but allowed Methode to add defenses and counterclaims concerning a standards setting body and inventorship. Discovery is proceeding. The parties have exchanged proposed terms for claim construction.

NOTE 9—SHARE INCENTIVE PLANS

Stock Option Plans

The Company has ten option plans. In connection with the EZchip acquisition, the Company assumed the following EZchip plans: the EZchip Semiconductor Ltd. 2003 Amended and Restated Equity Incentive Plan, the EZchip Semiconductor Ltd. 2007 U.S. Equity Incentive Plan, and the Amended and Restated EZchip Semiconductor Ltd. 2009 Equity Incentive Plan. The Company's other option plans include the 1999 United States Equity Incentive Plan, 1999 Israeli Share Option Plan, 2003 Israeli Share Option Plan (collectively, the "Prior Plans"), the Amended and Restated Global Share (2006) Incentive Plan (the "Global Plan"), the Global Share Incentive Assumption Plan 2010 (the "Assumption Plan"), the Kotura, Inc. Second Amended and Restated 2003 Stock Plan (the "Kotura Plan"), and the IPtronics, Inc. 2013 Restricted Stock Unit Plan (the "IPtronics Plan").

Assumed EZchip restricted stock units

In connection with the acquisition of EZchip, the Company assumed 891,822 unvested EZchip RSUs and converted them into 499,894 Mellanox RSUs using an exchange ratio of 0.56 . The aggregate value of the 499,894 Mellanox RSUs was $23.2 million of which $1.0 million related to service prior to the acquisition date and was included in the EZchip purchase price consideration. The remaining fair value of $22.2 million represents post-acquisition share-based compensation expense that will be recognized over the requisite service period of approximately 2.25 years from the date of acquisition. The assumed RSUs retained all applicable terms and vesting periods.

Share option activity

Share option activity under the Company's equity incentive plans in the six months ended June 30, 2016 is set forth below:



	Options Outstanding
	Number of Shares		Weighted Average Exercise Price
Outstanding at December 31, 2015	2,028,595		$	30.81
Options exercised	(198,808	)	$	15.83
Options canceled	(30,982	)	$	83.46
Outstanding at June 30, 2016	1,798,805		$	31.55

The total pretax intrinsic value of options exercised in the six months ended June 30, 2016 and 2015 was $6.5 million and $8.6 million . This intrinsic value represents the difference between the fair market value of the Company's ordinary shares on the date of exercise and the exercise price of each option. Based on the closing price of the Company's ordinary shares of

MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 9—SHARE INCENTIVE PLANS (Continued)

$47.96 on June 30, 2016 , the total pretax intrinsic value of options outstanding at June 30, 2016 and December 31, 2015 was $42.9 million and $40.2 million , respectively.

The total pretax intrinsic value of exercisable options at June 30, 2016 , was $42.7 million . The total pretax intrinsic value of exercisable options at December 31, 2015 was $39.9 million .

Restricted share unit activity

RSU activity under the Company's equity incentive plans in the six months ended June 30, 2016 is set forth below:



	Restricted Share Units Outstanding
	Number of Shares		Weighted Average Grant Date Fair Value
Non-vested restricted share units at December 31, 2015	2,205,083		$	44.39
Assumed restricted share units from acquisition	499,894		$	46.40
Restricted share units granted	1,784,626		$	48.75
Restricted share units vested	(559,048	)	$	45.07
Restricted share units canceled	(151,259	)	$	45.14
Non-vested restricted share units at June 30, 2016	3,779,296		$	46.58

The weighted average fair value of RSUs granted in the six months ended June 30, 2016 and 2015 was $48.75 and $46.15 , respectively.

The total intrinsic value of all outstanding restricted share units as of June 30, 2016 and December 31, 2015 was $181.3 million and $92.9 million , respectively.

Shares reserved for future issuance

The Company had the following ordinary shares reserved for future issuance under its equity incentive plans as of June 30, 2016 :



	Number of Shares
Share options outstanding	1,798,805
Restricted share units outstanding	3,779,296
Shares authorized for future issuance	613,647
ESPP shares available for future issuance	4,267,370
Total shares reserved for future issuance as of June 30, 2016	10,459,118

Share-based compensation

The Company accounts for share-based compensation expense based on the estimated fair value of the share equity awards as of the grant dates.

The following weighted average assumptions were used to value ESPP shares issued pursuant to the Company's share incentive plans for the six months ended June 30, 2016 and 2015 :



	Six Months Ended June 30,
	2016		2015
Dividend yield	—	%	—	%
Expected volatility	37.6	%	38.1	%
Risk free interest rate	0.50	%	0.09	%
Expected life, years	0.5		0.5

MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 9—SHARE INCENTIVE PLANS (Continued)

The following table summarizes the distribution of total share-based compensation expense in the unaudited condensed consolidated statements of operations:



	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
	(in thousands)
Cost of goods sold	$	671	$	610	$	1,146	$	1,157
Research and development	10,770		7,553		19,922		14,321
Sales and marketing	3,889		2,750		7,537		5,144
General and administrative	2,764		2,373		7,755		4,382
Total share-based compensation expense	$	18,094	$	13,286	$	36,360	$	25,004

At June 30, 2016 there was $143.5 million of total unrecognized share-based compensation costs related to non-vested share-based compensation arrangements. The costs are expected to be recognized over a weighted average period of approximately 2.4 years .

NOTE 10—ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):

The following table summarizes the changes in accumulated balances of other comprehensive income (loss) for the six months ended June 30, 2016 and 2015 :



	Unrealized Gains / Losses on Available-for- Sale Securities			Gains / Losses on Derivatives			Total
	(in thousands)
Balance at December 31, 2015	$	(578	)	$	(1,091	)	$	(1,669	)
Other comprehensive income/loss before reclassifications	166			1,510			1,676
Amounts reclassified from accumulated other comprehensive income/loss	482			(161		)	321
Net current-period other comprehensive income/loss, net of taxes	648			1,349			1,997
Balance at June 30, 2016	$	70		$	258		$	328

Balance at December 31, 2014	$	(374	)	$	(3,646	)	$	(4,020	)
Other comprehensive income/loss before reclassifications	195			2,822			3,017
Amounts reclassified from accumulated other comprehensive income/loss	17			3,010			3,027
Net current-period other comprehensive income/loss, net of taxes	212			5,832			6,044
Balance at June 30, 2015	$	(162	)	$	2,186		$	2,024

Table of Contents

MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 10—ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS): (Continued)

The following table provides details about reclassifications out of accumulated other comprehensive income (loss) for the six months ended June 30, 2016 and 2015:



Details about Accumulated Other Comprehensive Income / Loss Components	Amount Reclassified from Other Comprehensive Income / Loss						Affected Line Item in the Statement of Operations
	Six Months Ended June 30,
	2016			2015
	(in thousands)
Gains/losses on Derivatives	$	161		$	(3,010	)	Cost of revenues and Operating expenses
	10			(205		)	Cost of revenues
	112			(2,251		)	Research and development
	17			(234		)	Sales and marketing
	22			(320		)	General and administrative
Gains/losses on Available-for-Sale Securities	(482		)	(17		)	Other income, net
Total reclassifications for the period	$	(321	)	$	(3,027	)	Total

NOTE 11—INCOME TAXES:

As of June 30, 2016 and December 31, 2015 , the Company had gross unrecognized tax benefits of $37.4 million and $25.4 million , respectively. It is the Company’s policy to classify accrued interest and penalties as part of the unrecognized tax benefits and record the expense in the provision for income taxes. The amount of accrued interest and penalties related to unrecognized tax benefits totaled $ 1.5 million at June 30, 2016 and $1.2 million at December 31, 2015 .

On January 4, 2016 the Israeli Government legislated a reduction in corporate income tax rates from 26.5% to 25.0% , effective in 2016. Deferred tax assets and liabilities at December 31, 2015 were measured using the 26.5% tax rate. In 2016, the Company measured deferred tax assets and liabilities using the 25.0% tax rate. The immediate change in the corporate income tax rates from 26.5% to 25.0% resulted in a reduction of $ 1.3 million to the Company's deferred tax assets and a corresponding increase in the Company's income tax expense for the six months ended June 30, 2016 .

As of June 30, 2016 , the 2012 through 2015 tax years are open and may be subject to potential examinations in the United States. The Company has net operating losses in the United States from prior tax periods beginning in 2002 which may be subject to examination upon utilization in future tax periods. As of June 30, 2016 , the 2011 through 2015 tax years are open and may be subject to potential examinations in Israel. As of June 30, 2016 , the income tax returns of the Company and one of its subsidiaries in Israel are under examination by the Israeli Tax Authority for certain years from 2011 to 2014 . As of June 30, 2016, the 2011 through 2015 tax years are open and may be subject to potential examinations in Denmark.

The Beneficiary Enterprise and Approved Enterprise tax holiday associated with the Company's Yokneam and Tel Aviv operations began in 2011 . The tax holiday for the Company's Yokneam operations will expire in 2021 and the tax holiday for the Company's Tel Aviv operation will expire between the years 2017 and 2021 . The tax holiday has resulted in a cash tax savings of $ 21.0 million and $13.0 million for the six months ended June 30, 2016 and 2015 , respectively, increasing diluted earnings per share by approximately $0.44 and $ 0.27 in the six months ended June 30, 2016 and 2015 , respectively.

The Company’s effective tax rate is highly dependent upon the geographic distribution of its worldwide earnings or losses, tax regulations and tax holiday benefits in Israel, and the effectiveness of the Company’s tax planning strategies. The Company’s effective tax rates were 1.0% and 5.0% for the three months ended June 30, 2016 and 2015 , respectively. The Company’s effective tax rates were ( 2,227.8% ) and 9.9% for the six months ended June 30, 2016 and 2015 , respectively. During the six months ended June 30, 2016, the ( 2,227.8% ) effective tax rate is due to a loss before taxes on income that is near break-even. The difference between the Company’s effective tax rates and the 35% federal statutory rate for the six months ended June 30, 2016 resulted primarily from the reduction of deferred tax assets resulting from the reduction in the Israeli corporate income tax as discussed above, the accrual of unrecognized tax benefits, interest and penalties associated with unrecognized tax positions, non-tax-deductible expenses such as share-based compensation expense and losses generated from subsidiaries without tax benefits, partially offset by the tax holiday in Israel and foreign earnings taxed at rates lower than the federal statutory rates.

MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

NOTE 11—INCOME TAXES (Continued):

The application of income tax law is inherently complex. Laws and regulations in this area are voluminous and are often ambiguous, and the Company is required to make many subjective assumptions and judgments regarding its income tax exposures. In addition, interpretations of and guidance surrounding income tax laws and regulations are subject to change over time. Any changes in the Company’s subjective assumptions and judgments could materially affect amounts recognized in its consolidated balance sheets and statements of operations.

The Company has maintained a valuation allowance against deferred tax assets of certain subsidiaries. The Company assesses its ability to recover its deferred tax assets on an ongoing basis. Significant management judgment is required in determining any valuation allowance recorded against deferred tax assets. In evaluating the ability to recover deferred tax assets, the Company considers available positive and negative evidence including its recent cumulative losses, its ability to carry-back losses against prior taxable income and its projected financial results. The Company also considers, commensurate with its objective verifiability, the forecast of future taxable income including the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies. A valuation allowance may be recorded in the event it is deemed to be more-likely-than-not that the deferred tax asset cannot be realized. Previously established valuation allowances may also be released in the event it is deemed to be more-likely-than-not that the deferred tax asset can be realized. Any release of valuation allowance will be recorded as a tax benefit which will positively impact the Company’s operating results. Management has determined on the basis of the quarterly assessment performed at June 30, 2016, that these deferred tax assets are not more likely than not to be realized.

NOTE 12—OTHER INCOME (LOSS):

Other income (loss) is summarized in the following table:



	Three Months Ended June 30,					Six Months Ended June 30,
	2016			2015		2016			2015
	(in thousands)
Interest income and gains (losses) on sale of investments, net	$	674		$	817	$	744		$	1,480
Impairment loss on equity investment in a private company	—			—		—			(3,189		)
Foreign exchange gain (loss)	(359		)	95		(368		)	152
Other income (loss)	$	315		$	912	$	376		$	(1,557	)

NOTE 13—TERM DEBT:

In connection with the Company’s acquisition of EZchip, on February 22, 2016 , the Company and its wholly-owned subsidiary, Mellanox Technologies, Inc., entered into a $280.0 million variable interest rate Term Debt note maturing February 21, 2019 . Debt issuance costs on the Term Debt are being amortized to interest expense at the effective interest rate over the contractual term of the Term Debt.

The following table presents the Term Debt at June 30, 2016 :



	(in thousands)
Term Debt, principal amount	$	273,000
Less unamortized debt issuance costs	$	(4,625	)
Term Debt, principal net of unamortized debt issuance costs	$	277,625
Effective interest rate	3.1		%

Principal on the Term Debt is paid in quarterly installments. Principal payments are made at a rate of (i) 2.50 % of the original principal amount beginning on June 30, 2016 and ending on March 31, 2017 , (ii) 3.75 % of the original principal amount beginning on June 30, 2017 and ending on March 31, 2018 and (iii) 6.25 % of the original principal amount beginning on June 30, 2018 and ending on December 31, 2018 , with the balance due on February 21, 2019 . The Company is also required to make mandatory prepayments of loans under the Term Debt, subject to specified exceptions, with the proceeds of asset sales, debt issuances and specified other events.

MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

NOTE 13—TERM DEBT (Continued)

At June 30, 2016 , future scheduled principal payments on the Company's Term Debt is summarized as follows:



	(in thousands)
2016 due in remaining six months	$	14,000
2017	38,500
2018	63,000
2019	157,500
	$	273,000

The Term Debt was issued with $ 5.5 million in debt issuance costs and bears interest through maturity at a variable rate based upon, at the Company’s option, either the Eurodollar rate or the base rate (which is the highest of (i) the administrative agent’s prime rate, (ii) one-half of 1.00% in excess of the overnight U.S. Federal Funds rate, and (iii) 1.00% in excess of the one-month Eurodollar rate ), plus in each case, an applicable margin. The applicable margin for Eurodollar rate loans ranges, based on the applicable total net leverage ratio, from 1.25% to 2.00% per annum and the applicable margin for base rate loans ranges, based on the applicable total net leverage ratio, from 0.25% to 1.00% per annum.

The Company’s obligations under the Term Debt are guaranteed by all of its domestic and foreign subsidiaries, subject to certain agreed upon exceptions. The obligations under the Term Debt are also, subject to certain agreed upon exceptions, secured by a lien on substantially all of the Company's and certain of its subsidiaries tangible and intangible property, including 100 % of the Company's equity interests in shares of its domestic and certain foreign subsidiaries.

The Term Debt contains a number of covenants and restrictions that among other things, and subject to certain agreed upon exceptions, require the Company and its subsidiaries to satisfy certain financial covenants and restricts the ability of the Company and its subsidiaries to incur liens, incur additional indebtedness, make loans and investments, engage in mergers and acquisitions, engage in asset sales, declare dividends or redeem or repurchase capital stock, prepay, redeem or purchase subordinated debt and amend or otherwise alter debt agreements, in each case, subject to certain agreed upon exceptions. A failure to comply with these covenants could permit the lenders under the Term Debt to declare all amounts borrowed under the Term Debt, together with accrued interest and fees, to be immediately due and payable. At June 30, 2016 , the Company was in compliance with the covenants for the Term Debt.

ITEM 2—MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition as of June 30, 2016 and results of operations for the three and six months ended June 30, 2016 and 2015 should be read together with our financial statements and related notes included elsewhere in this report. This discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve risks, uncertainties and assumptions. Words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “predict,” “potential” and similar expressions, as they relate to us, our business and our management, are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements in this report. The identification of certain statements as “forward-looking” is not intended to mean that other statements not specifically identified are not forward-looking. All statements other than statements about historical facts are statements that could be deemed forward-looking statements, including, but not limited to, statements that relate to our future revenues, product development and introductions, customer demand, our dependence on key customers for a substantial portion of our revenue, performance of our subcontractors, growth rates, market adoption of our products, competitive factors, gross margins, levels of research, development and other related costs, expenditures, protection of our proprietary rights and patents, tax expenses and benefits, cash flows, management’s plans and objectives for current and future operations, and worldwide economic conditions.

Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those set forth under the section entitled “Risk Factors” in Part II, Item 1A of this report and in the section entitled “Risk Factors” in Part 1, Item 1A of our Annual Report on Form 10-K for fiscal year ended December 31, 2015. We urge you not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. All forward-looking statements included in this report are based on information available to us on the date of this report, and we assume no obligation to update any forward-looking statements contained in this report. Quarterly financial results may not be indicative of the financial results of future periods.

Unless the context requires otherwise, references in this report to the “Company,” “we,” “us” and “our” refer to Mellanox Technologies, Ltd. and its wholly owned subsidiaries.

Overview

General

We are a fabless semiconductor company that designs, manufactures and sells high-performance interconnect products and solutions primarily based on the InfiniBand and Ethernet standards. Our products facilitate efficient data transmission between servers, storage systems, communications infrastructure equipment and other embedded systems. We operate our business globally and offer products to customers at various levels of integration. The products we offer include integrated circuits ("ICs"), adapter cards, switch systems, cables, modules, software, services and accessories as an integral part of a total end-to-end networking solution focused on computing, storage and communication applications used in multiple markets, including high-performance computing ("HPC"), Web 2.0, storage, financial services, enterprise data center and cloud. These solutions increase performance, application efficiency and improve return on investment. Through the successful development and implementation of multiple generations of our products, we have established significant expertise and competitive advantages.

We are one of the pioneers of InfiniBand, an industry-standard architecture for high-performance interconnects. We believe InfiniBand interconnect solutions deliver industry-leading performance, efficiency and scalability for clustered computing and storage systems that incorporate our products. In addition to supporting InfiniBand, our products also support industry-standard Ethernet transmission protocols providing unique product differentiation and connectivity flexibility. Our products serve as building blocks for creating reliable and scalable InfiniBand and Ethernet solutions with leading performance. We also believe that we are one of the early suppliers of 25/50/100Gb/s Ethernet adapters to the market, and the only end-to-end 25, 40, 50 and 100Gb/s Ethernet supplier on the market today, which provides us with the opportunity to gain additional share in the Ethernet market as users upgrade from one or 10Gb/s directly to 25/40/50 or 100Gb/s.

As a leader in developing multiple generations of high-speed interconnect solutions, we have established strong relationships with our customers. Our products are incorporated in servers and associated networking solutions produced by server vendors. We supply our products to leading storage and communications infrastructure equipment vendors. Additionally, our products are used in embedded solutions.

EZchip Acquisition

On February 23, 2016 , we completed our acquisition of EZchip , a public company formed under the laws of the State of Israel, at which time EZchip became our wholly owned subsidiary. Under the terms of the Merger Agreement the net cash purchase price of $698.5 million consisted of a $786.0 million cash payment for all outstanding common shares of EZchip at the price of $ 25.50 per share, net of $87.5 million cash received. We also assumed 891,822 EZchip RSUs and converted them to 499,894 equivalent Mellanox RSU awards. The fair value of the converted RSUs was determined based on the per share value of the underlying Mellanox ordinary shares of $ 46.40 per share as of the acquisition date. The 499,894 RSUs had a total aggregate value of $23.2 million, of which $1.0 million was recorded as a component of the purchase price for service rendered prior to the acquisition date and $22.2 million will be recognized as share-based compensation expense over the remaining required service period of up to 2.25 years.

In connection with the acquisition, we entered into a $280.0 million variable interest rate Term Debt maturing February 21, 2019 . At June 30, 2016 , the principal and carrying value of the Term Debt was $273.0 million and $277.6 million , respectively.

We accounted for the transaction using the acquisition method, which requires, among other things, that the assets acquired and liabilities assumed in a business combination be recognized at their respective estimated fair values as of the acquisition date. The amount of recognized identifiable acquired assets and liabilities assumed are primarily based on provisional fair values and are subject to revision as we finalize our analysis. Final determination of values may result in further adjustments to the values of acquired assets and assumed liabilities.

Acquisition-related expenses for the EZchip acquisition for the three and six months ended June 30, 2016 were $ 0.5 million and $7.2 million , respectively, and consisted primarily of investment banking, consulting and other professional fees.

Amortization of Intangible Assets from Acquisitions

Intangible assets from acquisitions subject to amortization are comprised of trade names, customer relationships, backlog, and developed technology. In connection with the EZchip acquisition, we recognized $254.5 million of finite-lived intangible assets subject to amortization over their useful lives of 1 to 9 years. Amortization of intangible assets, including acquired intangible assets, was $16.0 million and $2.6 million for the three months ended June 30, 2016 and 2015, respectively. Amortization of intangible assets was $27.7 million and $4.9 million for the six months ended June 30, 2016 and 2015, respectively. The increased amortization is primarily associated with the EZchip acquisition. For additional information about intangible assets from acquisitions, see Note 6 in the notes to the unaudited condensed consolidated financial statements.

Patent Settlement

On March 7, 2016, we entered into a settlement and patent license agreement that resolved all litigation matters between Avago, IPtronics, Inc., IPtronics A/S (now Mellanox Technologies Denmark Aps) and Mellanox. Under the settlement, we agreed with Avago not to sue each other for a period of 5 years . The settlement was deemed not contributory to our operations or products sold. As a result, we recorded a settlement expense in our operating expenses in the amount of $ 5.1 million in our first quarter ended March 31, 2016.

Our Business

Revenues. We derive revenues from sales of our ICs, boards, switch systems, cables, modules, software, accessories and other product groups. Revenues for the three months ended June 30, 2016 were $214.8 million compared to $163.1 million for the three months ended June 30, 2015 , representing an increase of approximately 32% . Revenues for the six months ended June 30, 2016 were $411.6 million compared to $309.8 million for the six months ended June 30, 2015 . Our revenues for the three months and six months ended June 30, 2016 are not necessarily indicative of our future results. In order to increase our annual revenues, we must continue to achieve design wins over other InfiniBand and Ethernet providers and providers of competing interconnect technologies. We consider a design win to occur when an original equipment manufacturer ("OEM"), or contract manufacturer notifies us that it has selected our products to be incorporated into a product or system under development. Because the life cycles for our customers' products can last for several years if these products have successful commercial introductions, we expect to continue to generate revenues over an extended period of time for each successful design win.

Our products have broad adoption with multiple end customers across HPC, Web 2.0, cloud, enterprise data center, financial services and storage markets. These markets are mainly served by leading server, storage and communications infrastructure OEMs. Therefore, we have derived a substantial portion of our revenues from a relatively small number of OEM customers. Sales to our top ten customers represented 59% and 60% of our total revenues for the six months ended June 30, 2016 and 2015 , respectively. Sales to customers representing 10% or more of revenues accounted for 16% and 14% of our total revenues for the six months ended June 30, 2016 and 2015 , respectively. The loss of one or more of our principal customers, the reduction or deferral of purchases, or changes in the mix of our products ordered by any one of these customers could cause our revenues to decline materially if we are unable to increase our revenues from other customers. Our customers, including our most significant customers, are not obligated by

long-term contracts to purchase our products and may cancel orders with limited potential penalties. If any of our large customers reduces or cancels its purchases from us for any reason, it could have an adverse effect on our revenues and results of operations.

Cost of revenues and gross profit. The cost of revenues consists primarily of the cost of silicon wafers purchased from our foundry supplier, costs associated with the assembly, packaging and production testing of our ICs, outside processing costs associated with the manufacture of our products, royalties due to third parties, warranty costs, excess and obsolete inventory costs, depreciation and amortization, and costs of personnel associated with production management, quality assurance and services. In addition, after we purchase wafers from our foundries, we also face yield risk related to manufacturing these wafers into semiconductor devices. Manufacturing yield is the percentage of acceptable product resulting from the manufacturing process, as identified when the product is tested as a finished IC. If our manufacturing yields decrease, our cost per unit increases, which could have a significant adverse impact on our cost of revenues. We do not have long-term pricing agreements with foundry suppliers and contract manufacturers. Accordingly, our costs are subject to price fluctuations based on the overall cyclical demand for semiconductors.

We purchase our inventory pursuant to standard purchase orders. We estimate that lead times for delivery of our finished semiconductors from our foundry supplier and assembly, packaging and production testing subcontractor are approximately three to four months, lead times for delivery from our adapter card manufacturing subcontractor are approximately eight to ten weeks, and lead times for delivery from our switch systems manufacturing subcontractors are approximately twelve weeks. We build inventory based on forecasts of customer orders rather than the actual orders themselves.

We expect our cost of revenues as a percentage of sales to increase in the future as a result of a reduction in the average sale price of our products and a lower percentage of revenue deriving from sales of ICs and boards, which generally yield higher gross margins than sales of switches and cables. This trend will depend on overall customer demand for our products, our product mix, competitive product offerings and related pricing and our ability to reduce manufacturing costs.

Operational expenses

Research and development expenses. Our research and development expenses consist primarily of salaries, share-based compensation and associated costs for employees engaged in research and development, costs associated with computer aided design software tools, depreciation, amortization of intangibles, allocable facilities related and administrative expenses and tape-out costs. Tape-out costs are expenses related to the manufacture of new ICs, including charges for mask sets, prototype wafers, mask set revisions and testing incurred before releasing new ICs into production. We anticipate research and development expenses will increase in future periods based on an increase in personnel to support our product development activities and the introduction of new products.

Sales and Marketing Expenses. Sales and marketing expenses consist primarily of salaries, incentive compensation, share-based compensation and associated costs for employees engaged in sales, marketing and customer support, commission payments to third party sales representatives, advertising, trade shows and promotions, travel, amortization of intangibles, and allocable facilities related and administrative expenses. We expect these expenses will increase in absolute dollars in future periods based on an increase in sales and marketing personnel and increased marketing activities.

General and Administrative Expenses. General and administrative expenses consist primarily of salaries, share-based compensation and associated costs for employees engaged in finance, legal, human resources and administrative activities, professional service expenses for accounting, corporate legal fees and allocable facilities related expenses. We expect these expenses will increase in absolute dollars in future periods based on an increase in personnel and professional services required to support our business activities.

Taxes on Income

Our operations in Israel have been granted "Approved Enterprise" status by the Investment Center of the Israeli Ministry of Economy and Industry (formerly, the Ministry of Industry, Trade and Labor) and "Beneficiary Enterprise" status by the Israeli Income Tax Authority, which makes us eligible for tax benefits under the Israeli Law for Encouragement of Capital Investments, 1959. Under the terms of the Beneficiary Enterprise program, income that is attributable to our operations in Yokneam, Israel will be exempt from income tax for a period of ten years commencing fiscal year 2011. Income that is attributable to our operations in Tel Aviv, Israel is subject to a reduced income tax rate (generally between 10% and the current corporate tax rate, depending on the percentage of foreign investment in the Company) for five to eight years beginning fiscal year 2013. The tax holiday for our Yokneam operations will expire in 2021 and the tax holiday for our Tel-Aviv operations will expire between the years 2017 and 2021. The corporate tax rate was reduced from 26.5% in 2015 to 25% in 2016. Deferred tax assets and liabilities at December 31, 2015 were measured using the 26.5% tax rate. In 2016, we measured deferred tax assets and liabilities using the 25% tax rate. The immediate change in the corporate income tax rates from 26.5% to 25% resulted in a reduction of $1.3 million to our deferred tax assets and a corresponding increase in income tax expense in our first quarter ended March 31, 2016 and six months ended June 30, 2016.

To prepare our unaudited condensed consolidated financial statements, we estimate our income taxes in each of the jurisdictions in which we operate. This process involves estimating our actual tax exposure together with assessing temporary differences resulting from the differing treatment of certain items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our consolidated balance sheet.

Critical Accounting Policies and Estimates

Our unaudited condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.

We believe that the assumptions and estimates associated with revenue recognition, allowances for doubtful accounts, sales returns and allowances, investment valuation, warranty reserves, inventory reserves, share-based compensation expense, long-term asset valuations, goodwill and purchased intangible asset valuation, hedge effectiveness, deferred income tax asset valuation, uncertain tax positions, litigation and other loss contingencies have the greatest potential impact on our unaudited condensed consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates. For further information on all of our significant accounting policies, please see note 1, "The Company and Summary of Significant Accounting Policies," in the accompanying notes to our unaudited condensed consolidated financial statement.

See our Annual Report on Form 10-K for the year ended December 31, 2015, filed with the SEC on February 26, 2016, for a discussion of additional critical accounting policies and estimates. There have been no changes in our critical accounting policies as compared to what was disclosed in the Form 10-K for the year ended December 31, 2015.

Results of Operations

The following table sets forth our consolidated statements of operations as a percentage of revenues for the periods indicated:



	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2016			2015		2016			2015
Total revenues	100		%	100	%	100		%	100		%
Cost of revenues	37			29		37			28
Gross profit	63			71		63			72
Operating expenses:
Research and development	38			38		37			39
Sales and marketing	15			14		16			15
General and administrative	7			7		9			7
Total operating expenses	60			59		62			61
Income from operations	3			12		1			11
Other income (loss), net	(1	)		—		(1	)		—
Income (loss) before taxes	2			12		—			11
Provision for taxes on income	—			—		(1	)		(1	)
Net income (loss)	2		%	12	%	(1	)	%	10		%

Comparison of the Three Months Ended June 30, 2016 to the Three Months Ended June 30, 2015

The following tables represent our total revenues for the three months ended June 30, 2016 and 2015 by product type and interconnect protocol:



	Three Months Ended June 30,
	2016		% of Revenues	2015		% of Revenues
	(In thousands)			(In thousands)
ICs	$	46,539	21.7	$	28,981	17.8
Boards	82,481		38.4	64,061		39.3
Switch systems	49,873		23.2	42,027		25.8
Cables, accessories and other	35,908		16.7	28,079		17.1
Total Revenue	$	214,801	100.0	$	163,148	100.0



	Three Months Ended June 30,
	2016		% of Revenues	2015		% of Revenues
	(In thousands)			(In thousands)
InfiniBand:
EDR	$	24,779	11.5	$	5,847	3.6
FDR	74,510		34.7	90,680		55.6
QDR/DDR/SDR	11,715		5.5	17,358		10.6
Total	111,004		51.7	113,885		69.8
Ethernet	88,027		41.0	38,984		23.9
Other	15,770		7.3	10,279		6.3
Total revenue	$	214,801	100.0	$	163,148	100.0

Revenues. Revenues were $214.8 million for the three months ended June 30, 2016 compared to $163.1 million for the three months ended June 30, 2015 , representing an increase of approximately 32% . The year-over-year revenue increase in 2016 from 2015 was primarily attributable to increased demand for our Ethernet adapters and incremental revenues from the EZchip acquisition. Our InfiniBand customers continued transitioning from FDR and lower data rates products to the EDR product generation. The increase in other product revenues was primarily due to higher cable sales. The 2016 revenues are not necessarily indicative of future results.

Gross Profit and Margin. Gross profit was $135.0 million for the three months ended June 30, 2016 compared to $116.0 million for the three months ended June 30, 2015 , representing an increase of approximately 16% . As a percentage of revenues, gross margin declined to 62.8% in the three months ended June 30, 2016 from approximately 71.1% in the three months ended June 30, 2015 . The gross margin percentage decrease was primarily due to an increase in intangible asset amortization costs and an increase in inventory step-up amortization costs, both related to the EZchip acquisition. Gross margin for 2016 is not necessarily indicative of future results.

Research and Development.

The following table presents details of our research and development expenses for the periods indicated:



	Three Months Ended June 30,
	2016		% of Revenues		2015		% of Revenues
	(In thousands)				(In thousands)
Salaries and benefits	$	45,291	21.1	%	$	32,143	19.7	%
Share-based compensation	10,770		5.0	%	7,553		4.6	%
Development and tape-out costs	9,284		4.3	%	9,945		6.1	%
Other	16,979		7.9	%	12,935		8.0	%
Total Research and development	$	82,324	38.3	%	$	62,576	38.4	%

Research and development expenses were $82.3 million for the three months ended June 30, 2016 compared to $62.6 million for the three months ended June 30, 2015 , representing an increase of $19.7 million , or approximately 32% . The increase in salaries and benefits expenses was primarily attributable to headcount additions, including those associated with the EZchip acquisition in the prior quarter, merit increases and higher accrued bonuses under our annual discretionary bonus award program. The increase in other expenses reflects higher professional service expenses, depreciation expenses, and facilities costs. We expect that research and development expenses will increase in absolute dollars in future periods as we continue to devote more resources to develop new products, meet the changing requirements of our customers, expand into new markets and technologies and hire additional personnel.

For a further discussion of share-based compensation included in research and development expense, see “Share-based Compensation Expense” below.

Sales and Marketing.

The following table presents details of our sales and marketing expenses for the periods indicated:



	Three Months Ended June 30,
	2016		% of Revenues		2015		% of Revenues
	(In thousands)				(In thousands)
Salaries and benefits	$	18,935	8.8	%	$	14,036	8.6	%
Share-based compensation	3,889		1.8	%	2,750		1.7	%
Trade shows and promotions	4,262		2.0	%	3,794		2.3	%
Other	5,490		2.6	%	2,786		1.7	%
Total Sales and marketing	$	32,576	15.2	%	$	23,366	14.3	%

Sales and marketing expenses were $32.6 million for the three months ended June 30, 2016 compared to $23.4 million for the three months ended June 30, 2015 , representing an increase of $9.2 million , or approximately 39% . The increase in salaries and benefits expenses was primarily related to headcount additions, including those associated with the EZchip acquisition in the prior quarter, merit increases, and higher accrued bonuses under our annual discretionary bonus awards program. The increase in trade show and promotions was due primarily to higher trade show exhibit costs. The increase in other expenses primarily reflects higher amortization costs related to acquired intangible assets associated with the EZchip acquisition and facilities costs.

For a further discussion of share-based compensation included in sales and marketing expense, see “Share-based Compensation Expense” below.

General and Administrative.

The following table presents details of our general and administrative expenses for the periods indicated:



	Three Months Ended June 30,
	2016		% of Revenues		2015		% of Revenues
	(In thousands)				(In thousands)
Salaries and benefits	$	5,210	2.4	%	$	4,060	2.5	%
Share-based compensation	2,764		1.3	%	2,373		1.5	%
Professional services	3,516		1.6	%	2,876		1.8	%
Other	2,004		1.0	%	1,361		0.7	%
Total General and administrative	$	13,494	6.3	%	$	10,670	6.5	%

General and administrative expenses were $13.5 million for the three months ended June 30, 2016 compared to $10.7 million for the three months ended June 30, 2015 , representing an increase of $2.8 million , or approximately 26% . The increase in salaries and benefits expenses was primarily related to headcount additions, including those associated with the EZchip acquisition in the prior quarter, merit increases, and higher accrued bonuses under our annual discretionary bonus awards program. The increase in professional services expenses was primarily related to human resources services, consulting and outsourcing fees. The increase in other expenses was primarily related to higher facilities costs.

For further discussion of share-based compensation included in general and administrative expense, see “Share-based Compensation Expense” below.

Share-based Compensation Expense.

The following table presents details of our share-based compensation expense that is included in each functional line item in our consolidated statements of income:



	Three Months Ended June 30,
	2016		2015
	(in thousands)
Cost of goods sold	$	671	$	610
Research and development	10,770		7,553
Sales and marketing	3,889		2,750
General and administrative	2,764		2,373
	$	18,094	$	13,286

Share-based compensation expenses were $18.1 million for the three months ended June 30, 2016 , compared to $13.3 million for the three months ended June 30, 2015 , representing an increase of 36% . The increase was primarily attributable to RSUs granted to existing employees during 2016 as part of our annual review process, RSUs granted to employees in conjunction with the acquisition of EZchip, and RSUs granted to new hires.

At June 30, 2016 there was $143.5 million of total unrecognized share-based compensation costs related to non-vested share-based compensation arrangements. The weighted-average period over which the unearned share-based compensation is expected to be recognized is approximately 2.4 years. If there are any modifications or cancellations of the underlying unvested awards, we may be required to accelerate, increase or cancel any remaining unearned share-based compensation expense. Future share-based compensation expense and unearned share-based compensation will increase to the extent that we grant additional equity awards to employees or assume unvested equity awards in connection with other acquisitions.

Other income (loss), net. Other income (loss), net in the three months ended June 30, 2016 was a loss of $1.9 million as compared to income of $0.9 million for the three months ended June 30, 2015. The change was primarily attributable to $2.2 million of interest expense associated with the Term Debt and $0.6 million in foreign exchange losses.

Provision for Taxes on Income. Our provision for taxes on income was $46.0 thousand for the three months ended June 30, 2016 as compared to $1.0 million for the three months ended June 30, 2015 .

Our effective tax rate was 1.0% and 5.0% for three months ended June 30, 2016 and 2015 , respectively. For the three months ended June 30, 2016 , the difference between the 1.0% effective tax rate and the 35% federal statutory rate resulted primarily from the tax holiday in Israel, foreign earnings taxed at rates lower than the federal statutory rates, partially offset by the accrual of unrecognized tax positions, interest and penalties associated with unrecognized tax positions, non-tax-deductible expenses such as share-based compensation expense and losses generated from subsidiaries without tax benefits.

We assess our ability to recover our deferred tax assets on an ongoing basis. Significant management judgment is required in determining any valuation allowance recorded against deferred tax assets. In evaluating the ability to recover deferred tax assets, we consider available positive and negative evidence including our recent cumulative losses, our ability to carry-back losses against prior taxable income and our projected financial results. We also consider, commensurate with objective verifiability, the forecast of future taxable income including the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies. A valuation allowance may be recorded in the event it is deemed to be more-likely-than-not that the deferred tax asset cannot be realized. Previously established valuation allowances may also be released in the event it is deemed to be more-likely-than-not that the deferred tax asset can be realized. Any release of valuation allowance will be recorded as a tax benefit which will positively impact our operating results.

Comparison of the Six Months Ended June 30, 2016 to the Six Months Ended June 30, 2015

The following tables represent our total revenues for the six months ended June 30, 2016 and 2015 by product type and interconnect protocol:



	Six Months Ended June 30,
	2016		% of Revenues	2015		% of Revenues
	(In thousands)			(In thousands)
ICs	$	75,070	18.2	$	58,288	18.8
Boards	175,413		42.6	122,567		39.6
Switch systems	93,696		22.8	76,494		24.7
Cables, accessories and other	67,432		16.4	52,474		16.9
Total Revenue	$	411,611	100.0	$	309,823	100.0



	Six Months Ended June 30,
	2016		% of Revenues	2015		% of Revenues
	(In thousands)			(In thousands)
InfiniBand:
EDR	$	45,782	11.1	$	6,788	2.2
FDR	154,852		37.6	172,605		55.7
QDR/DDR/SDR	23,543		5.8	35,800		11.5
Total	224,177		54.5	215,193		69.4
Ethernet	156,652		38.1	73,665		23.8
Other	30,782		7.4	20,965		6.8
Total revenue	$	411,611	100.0	$	309,823	100.0

Revenues. Revenues were $411.6 million for the six months ended June 30, 2016 compared to $309.8 million for the six months ended June 30, 2015 , representing an increase of approximately 33% . The year-over-year revenue increase in 2016 from 2015 was primarily attributable to increased demand for our Ethernet adapters and incremental revenues from the EZchip acquisition. Revenues from our InfiniBand products also increased primarily due to increased sales into HPC and cloud markets. Revenues from InfiniBand EDR products increased as customers continued transitioning from FDR and lower data rates to the EDR product generation. The increase in other product revenues was primarily due to higher cable sales. The 2016 revenues are not necessarily indicative of future results.

Gross Profit and Margin. Gross profit was $261.3 million for the six months ended June 30, 2016 compared to $221.6 million for the six months ended June 30, 2015 , representing an increase of approximately 18% . As a percentage of revenues, gross margin decreased to 63.5% in the six months ended June 30, 2016 from approximately 71.5% in the six months ended June 30, 2015 . The gross margin percentage decrease was primarily due to an increase in intangible asset amortization costs and inventory step-up amortization costs, both related to the EZchip acquisition. Gross margin for 2016 is not necessarily indicative of future results.

Research and Development.

The following table presents details of our research and development expenses for the periods indicated:



	Six Months Ended June 30,
	2016		% of Revenues		2015		% of Revenues
	(In thousands)				(In thousands)
Salaries and benefits	$	82,269	20.0	%	$	63,850	20.6	%
Share-based compensation	19,922		4.8	%	14,321		4.6	%
Development and tape-out costs	18,150		4.4	%	16,788		5.4	%
Other	33,017		8.1	%	25,735		8.4	%
Total Research and development	$	153,358	37.3	%	$	120,694	39.0	%

Research and development expenses were $153.4 million for the six months ended June 30, 2016 compared to $120.7 million for the six months ended June 30, 2015 , representing an increase of $32.7 million , or approximately 27% . The increase in salaries and benefits was primarily attributable to headcount additions, including those associated with the EZchip acquisition, merit increases and higher accrued bonuses under our annual discretionary bonus award program. The increase in development and tape-out costs was attributable to higher material costs as a result of our development activities. The increase in other reflects higher professional service expenses, depreciation expenses, and facilities costs. We expect that research and development expenses will increase in absolute dollars in future periods as we continue to devote more resources to develop new products, meet the changing requirements of our customers, expand into new markets and technologies and hire additional personnel.

For a further discussion of share-based compensation included in research and development expense, see “Share-based Compensation Expense” below.

Sales and Marketing.

The following table presents details of our sales and marketing expenses for the periods indicated:



	Six Months Ended June 30,
	2016		% of Revenues		2015		% of Revenues
	(In thousands)				(In thousands)
Salaries and benefits	$	36,228	8.8	%	$	27,836	9.0	%
Share-based compensation	7,537		1.8	%	5,144		1.7	%
Trade shows and promotions	9,935		2.4	%	6,875		2.2	%
Other	10,104		2.5	%	6,069		1.9	%
Total Sales and marketing	$	63,804	15.5	%	$	45,924	14.8	%

Sales and marketing expenses were $63.8 million for the six months ended June 30, 2016 compared to $45.9 million for the six months ended June 30, 2015 , representing an increase of $17.9 million , or approximately 39% . The increase in salaries and benefits was primarily attributable to headcount additions, including those associated with the EZchip acquisition, merit increases and higher accrued bonuses under our annual discretionary bonus award program. The increase in trade shows and promotions was due primarily to higher trade show exhibit costs and related travel costs. The increase in other expenses primarily reflects higher amortization costs related to acquired intangible assets acquired in the EZchip transaction and facilities costs.

For a further discussion of share-based compensation included in sales and marketing expense, see “Share-based Compensation Expense” below.

General and Administrative.

The following table presents details of our general and administrative expenses for the periods indicated:



	Six Months Ended June 30,
	2016		% of Revenues		2015		% of Revenues
	(In thousands)				(In thousands)
Salaries and benefits	$	10,509	2.6	%	$	7,934	2.6	%
Share-based compensation	7,755		1.9	%	4,382		1.4	%
Professional services	19,273		4.7	%	5,302		1.7	%
Other	3,895		0.9	%	2,753		0.9	%
Total General and administrative	$	41,432	10.1	%	$	20,371	6.6	%

General and administrative expenses were $41.4 million for the six months ended June 30, 2016 compared to $20.4 million for the six months ended June 30, 2015 , representing an increase of $21.1 million , or approximately 103% . The increase in salaries and benefits was primarily attributable to headcount additions, including those associated with the EZchip acquisition, merit increases and higher accrued bonuses under our annual discretionary bonus award program. The increase in professional services expenses was related to investment banking costs, consulting expenses and other professional fees related to the EZchip acquisition, litigation settlement costs and legal fees. The increase in other expenses was primarily related to higher depreciation and facilities costs.

For further discussion of share-based compensation included in general and administrative expense, see “Share-based Compensation Expense” below.

Share-based Compensation Expense.

The following table presents details of our share-based compensation expense that is included in each functional line item in our consolidated statements of income:



	Six Months Ended June 30,
	2016		2015
	(in thousands)
Cost of goods sold	$	1,146	$	1,157
Research and development	19,922		14,321
Sales and marketing	7,537		5,144
General and administrative	7,755		4,382
	$	36,360	$	25,004

Share-based compensation expenses were $36.4 million for the six months ended June 30, 2016 , compared to $25.0 million for the six months ended June 30, 2015 , representing an increase of 45% . The increase was primarily attributable to RSUs granted to existing employees during 2016 as part of our annual review process, RSUs granted to employees in conjunction with the acquisition of EZchip, RSUs granted to new hires, and expenses related to the acceleration of EZchip RSUs for employees terminated on the closing date.

Other income (loss), net. Other income (loss), net in the six months ended June 30, 2016 was a loss of $2.8 million as compared to a loss of $1.6 million for the six months ended June 30, 2015. The change was primarily attributable to $3.2 million in interest expense associated with the Term Debt and a $0.5 million decrease in interest income, partially offset by a $3.2 million impairment loss on an equity investment in a privately held company in the six months ended June 30, 2015 .

Provision for Taxes on Income. Our provision for taxes on income was $2.4 million for the six months ended June 30, 2016 as compared to $3.3 million for the six months ended June 30, 2015 .

On January 4, 2016 the Israeli Government legislated a reduction in the corporate income tax rate from 26.5% to 25% , effective in 2016. Deferred tax assets and liabilities at December 31, 2015 were measured using the 26.5% tax rate. In 2016, we measured deferred tax assets and liabilities using the 25% tax rate. In the quarter ended March 31, 2016, we recorded a change in the corporate income tax rates from 26.5% to 25% which resulted in a reduction of $ 1.3 million to our deferred tax assets and a corresponding increase in our income tax expense.

Our effective tax rate was ( 2,227.8% ) and 9.9% for the six months ended June 30, 2016 and 2015 , respectively. During the six months ended June 30, 2016 the ( 2,227.8% ) effective tax rate is due to a loss before taxes on income that is near break-even. For the six months ended June 30, 2016 , the difference between the ( 2,227.8% ) effective tax rate and the 35% federal statutory rate resulted primarily from the reduction of our deferred tax assets resulting from the reduction in the Israeli corporate income tax as discussed above, the accrual of unrecognized tax positions, interest and penalties associated with unrecognized tax positions, non-tax-deductible expenses such as share-based compensation expense and losses generated from subsidiaries without tax benefits, partially offset by the tax holiday in Israel and foreign earnings taxed at rates lower than the federal statutory rates.

Liquidity and Capital Resources

As of June 30, 2016 , our principal sources of liquidity consisted of cash and cash equivalents of $63.5 million and short-term investments of $213.0 million . In our first quarter ended March 31, 2016, we completed the acquisition of EZchip and acquired its cash of approximately $87.5 million and short term investments of $108.9 million. We financed the acquisition and related transaction expenses with cash on hand and with $280.0 million from a variable-interest rate three-year Term Debt. At June 30, 2016 , the total amount of future payments related to the Term Debt was estimated at $286.8 million . After taking into consideration expected increases in operating expenses and increases in capital expenditures to support our infrastructure and growth, we expect our current cash and cash equivalents, short-term investments, and cash flows from operating and financing activities will be sufficient to fund our operations and both our short-term and long-term liquidity requirements arising from the Term Debt.

We are an Israeli company and as of June 30, 2016 our subsidiaries outside of Israel held approximately $11.2 million in cash, cash equivalents and short-term investments.

Our cash, cash equivalents, short-term investments and working capital balances at June 30, 2016 and December 31, 2015 were as follows:



	June 30, 2016		December 31, 2015
	(in thousands)
Cash and cash equivalents	$	63,501	$	263,199
Short-term investments	212,954		247,314
Total	$	276,455	$	510,513
Working capital	$	284,805	$	540,108

Our ratio of current assets to current liabilities was 2.5 :1 at June 30, 2016 and 4.9:1 at December 31, 2015 .

Operating Activities

Net cash provided by our operating activities amounted to $93.4 million in the six months ended June 30, 2016 . Net cash provided by our operating activities was attributable to net non-cash items of $83.3 million and changes in assets and liabilities of $12.6 million, partially offset by a net loss of $2.5 million. Non-cash expenses consisted primarily of $46.2 million of depreciation and amortization, $36.4 million of share-based compensation, and $1.3 million of deferred income taxes. The $12.6 million cash inflow from changes in assets and liabilities, excluding the changes to the assets and liabilities as a result of the EZchip acquisition, is attributed to a decrease in inventory of $10.6 million, an increase in accounts payable of $9.7 million due to timing of payments, an increase of $5.6 million in accrued liabilities and other liabilities, and a decrease in prepaid expenses and other assets of $3.6 million. These were partially offset by an increase in accounts receivable of $16.9 million, primarily due to the timing sales and higher revenues.

Net cash provided by our operating activities amounted to $87.1 million in the six months ended June 30, 2015. Net cash provided by operating activities in the six months ended June 30, 2015 was primarily attributable to net income of $29.7 million adjusted by net non-cash items of $45.7 million and changes in assets and liabilities of $11.6 million. The non-cash items consisted primarily of $25.0 million of share-based compensation, $19.8 million for depreciation and amortization, and $3.2 million of loss on impairment of an equity investment in a private company. These increases were partially offset by gains on investments of $2.4 million. The $11.6 million cash inflow from changes in assets and liabilities resulted primarily from a decrease in accounts receivable of $3.9 million primarily due to the timing of sales, an increase in accounts payable of $8.8 million primarily due to the timing of payments, an increase of $21.1 million in accrued and other liabilities, and an increase in deferred revenue by $2.8 million, partially offset by an increase in inventories of $22.5 million as a result of our effort to fulfill forecasted sales.

Investing Activities

Net cash used in investing activities was $570.6 million in the six months ended June 30, 2016 . Cash used in investing activities was primarily attributable to $698.5 million of net cash used to acquire EZchip and $15.8 million for purchases of property and equipment. These uses were partially offset by net sales and maturities of short-term investments of $144.4 million.

Net cash used by investing activities was $79.5 million in the six months ended June 30, 2015. Cash used by investing activities was primarily attributable to net purchases of short-term investments of $58.7 million and purchases of property and equipment of $20.4 million.

Financing Activities

Net cash provided by financing activities was $277.4 million in the six months ended June 30, 2016 . Cash provided by financing activities was primarily due to $280.0 million of proceeds from the Term Debt and $10.4 million from share option exercises and purchases pursuant to our employee share purchase plan. These were offset by $7.0 million principal payment on the Term Debt, $5.5 million of debt issuance costs and $0.5 million of principal payments on capital lease obligations.

Our financing activities generated $9.3 million in the six months ended June 30, 2015. Cash provided by financing activities was primarily due to proceeds of $9.8 million from the exercise of share awards, partially offset by principal payments on capital lease obligations of $0.6 million.

Contractual Obligations

The following table summarizes our contractual obligations at June 30, 2016 and the effect those obligations are expected to have on our liquidity and cash flows in future periods:



	Contractual Obligations:
	Total		Non-cancelable operating lease commitments		Purchase commitments		Term Debt including interest
	(in thousands)
2016 (remaining 6 months)	$	128,289	$	10,679	$	100,446	$	17,164
2017	71,652		18,299		9,230		44,123
2018	85,818		14,477		3,836		67,505
2019	169,082		11,046		25		158,011
2020 and thereafter	11,176		11,176		—		—
Total	$	466,017	$	65,677	$	113,537	$	286,803

Purchase commitments. Purchase commitments are defined as agreements that are enforceable and legally binding and that specify all significant terms including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Purchase orders for inventory are based on our current manufacturing needs and are generally fulfilled by our subcontractors within an eight to twelve week period. We do not have significant agreements for the purchase of raw materials or other goods specifying minimum quantities or set prices that exceed our expected requirements.

Term Debt including interest. Term Debt commitment represents principal and interest payable. For additional information about the Term Debt, see note 13 "Term Debt" in the notes to the unaudited condensed consolidated financial statements .

Other Commitments

We also have contingent commitments primarily related to a facility lease agreement based on the achievement of certain agreed-upon milestones, and royalty payment contingencies based on revenue we may generate from the sales of certain products, the know-how of which was funded by Israeli government grants. For additional information about other commitments, see note 8 "Commitments and Contingencies" in the notes to the unaudited condensed consolidated financial statements .

Recent Accounting Pronouncements

See note 1, "The Company and Summary of Significant Accounting Policies—Recent accounting pronouncements" in the notes to the unaudited condensed consolidated financial statements for a full description of recent accounting standards, including the respective dates of adoption and effects on our consolidated financial position, results of operations and cash flows.

Off-Balance Sheet Arrangements

As of June 30, 2016 , we did not have any off-balance sheet arrangements.

ITEM 3— QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest rate fluctuation risk

Investments. Our investments include cash and cash equivalents, time deposits, money market funds and interest bearing investments in government debt securities, commercial paper and corporate bonds with an average remaining maturity of up to 12 months. The primary objective of our investment activities is to preserve principal and ensure liquidity while maximizing income without significantly increasing risk. By policy, we limit the amount of our credit exposure through diversification and restricting our investments to highly rated securities. At the time of purchase, our investment policy generally limits the amount of credit exposure to any one issuer and type of security, except U.S. Treasury or agency securities. Highly rated long-term securities are defined as having a minimum Moody's, Standard & Poor's or Fitch rating of A2 or A, respectively. Highly rated short-term securities are defined as having a minimum Moody's, Standard & Poor's or Fitch rating of P-1, A-1 or F-1, respectively. We have not experienced any significant losses on our cash equivalents or short-term investments. We do not enter into investments for trading or speculative purposes. Our investments are exposed to market risk due to a fluctuation in interest rates, which may affect our interest income and the fair market value of our investments. Due to the short-term nature of our investment portfolio, we do not believe an immediate 1% change in interest rates would have a material effect on the fair market value of our portfolio, and therefore we do not expect our operating results or cash flows to be materially affected by a sudden change in market interest rates.

Term Debt. At June 30, 2016 , we had $273.0 million in principal of variable-interest rate Term Debt outstanding. The impact to our interest expense and pre-tax earnings over the next twelve months, based on hypothetical increases or decreases in LIBOR is as follows:



	Hypothetical Change in Interest Rate
	Increase (Decrease) of X Basis Points (bps)
	150 bps		100 bps		50 bps		(25 bps)
	(in thousands)
Interest expense on Term Debt	$	3,993	$	2,662	$	1,331	$	(665	)

The modeling technique used above measures the change in interest expense arising from selected potential changes in LIBOR. Market changes reflect immediate hypothetical parallel shifts in the yield curve of minus 25 basis points, plus 50 basis points, plus 100 basis points, and plus 150 basis points, which are representative of potential movements in the U.S. Federal Funds rate and the Euro Dollar Rate.

Foreign currency exchange risk

We derive all of our revenues in U.S. dollars. The U.S. dollar is our functional and reporting currency in all of our foreign locations. However, a significant portion of our headcount related expenses, consisting principally of salaries and related personnel and facilities expenses, are denominated in new Israeli shekels, or NIS. This foreign currency exposure gives rise to market risk associated with exchange rate movements of the U.S. dollar against the NIS. Furthermore, we anticipate that a material portion of our expenses will continue to be denominated in NIS. To the extent the U.S. dollar weakens against the NIS, we will experience a negative impact on our net income.

To protect against reductions in value and the volatility of future cash flows caused by changes in foreign currency exchange rates, we have established a balance sheet and anticipated transaction risk management program. Currency derivative instruments and natural hedges are generally utilized in this hedging program. We do not enter into derivative instruments for trading or speculative purposes. Our hedging program reduces, but does not eliminate the impact of currency exchange rate movements. If we were to experience a strengthening of USD against NIS of 10%, the impact on assets and liabilities denominated in NIS, after taking into account hedges and offsetting positions, would result in a loss before taxes of approximately $0.4 million at June 30, 2016 . There would also be an impact on future operating expenses denominated in currencies other than the U.S. dollar. As of June 30, 2016 , we had derivative contracts in place of approximately 358.5 million NIS, or approximately $93.4 million based upon the exchange rate on that day. The derivative contracts cover a significant portion of future NIS denominated operating expenses expected to occur over the next twelve months. Our derivatives expose us to credit risk to the extent that the counterparties may be unable to meet the terms of the agreement. We seek to mitigate such risk by limiting our counterparties to major financial institutions and by spreading the risk across a number of major financial institutions. However, under current market conditions, failure of one or more of these financial institutions is possible and could result in incurred losses.

Inflation related risk

We believe that the rate of inflation in both Israel and the United States has not had a material impact on our business to date. Our cost in Israel in U.S. dollar terms will increase if inflation in Israel exceeds the devaluation of the NIS against the U.S. dollar or if the timing of such devaluation lags behind inflation in Israel.

ITEM 4— CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934, as amended (the "Exchange Act") is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our CEO (principal executive officer) and CFO (principal financial officer), as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of our management, including our CEO and CFO, of the effectiveness of our disclosure controls and procedures as of June 30, 2016 . Based on this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of June 30, 2016 to provide the reasonable assurance described above.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1— LEGAL PROCEEDINGS

See note 8, "Commitments and Contingencies—Legal proceedings" in the notes to the unaudited condensed consolidated financial statements, included in Part I, Item 1 of this report, for a full description of legal proceedings and related contingencies and their effects on our consolidated financial position, results of operations and cash flows.

We may, from time to time, become a party to various other legal proceedings arising in the ordinary course of business. We may also be indirectly affected by administrative or court proceedings or actions in which we are not involved, but which have general applicability to the semiconductor industry.

ITEM 1A— RISK FACTORS

Investing in our ordinary shares involves a high degree of risk. You should carefully consider the following risk factors, in addition to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2015, the other information set forth in this report, and other filings with the SEC, before purchasing our ordinary shares. Each of these risk factors could harm our business, financial condition or operating results, as well as decrease the value of an investment in our ordinary shares.

Risks Related to Our Business

We depend on a small number of customers for a significant portion of our sales, and the loss of any one of these customers will adversely affect our revenues.

A small number of customers account for a significant portion of our revenues. For the three months ended June 30, 2016 , sales to Hewlett-Packard accounted for 12% of our total revenues, while sales to our top ten customers accounted for 59% of our revenues. For the three months ended June 30, 2015, sales to Hewlett-Packard accounted for 15% of our total revenues, while sales to our top 10 customers accounted for 63% of our revenues. For the year ended December 31, 2015, sales to Hewlett-Packard accounted for 14% of our total revenues, while sales to our top ten customers accounted for 57% of our revenues. Because the majority of servers, storage, communications, infrastructure equipment and embedded systems are sold by a relatively small number of vendors, we expect that we will continue to depend on a small number of customers to account for a significant percentage of our revenues for the foreseeable future. Our customers, including our most significant customers, are not obligated by long-term contracts to purchase our products and may cancel orders with limited potential penalties. If any of our large customers reduces or cancels its purchases from us for any reason, it could have an adverse effect on our revenues and results of operations.

We are susceptible to additional risks from our international operations.

We derived 47% of our revenues in the three months ended June 30, 2016 and 2015 , from sales outside North America. As a result, we face additional risks from doing business internationally, including:


•	reduced protection of intellectual property rights in some countries;


•	difficulties in staffing and managing foreign operations;


•	longer sales and payment cycles;


•	greater difficulties in collecting accounts receivable;


•	adverse economic conditions;


•	seasonal reductions in business activity;


•	potentially adverse tax consequences;


•	laws and business practices favoring local competition;


•	costs and difficulties of customizing products for foreign countries;


•	compliance with a wide variety of complex foreign laws and treaties;


•	compliance with the United States' Foreign Corrupt Practices Act and similar anti-bribery laws in other jurisdictions;


•	compliance with export control and regulations;


•	licenses, tariffs, other trade barriers, transit restrictions and other regulatory or contractual limitations on our ability to sell or develop our products in certain foreign markets;


•	restrictive governmental actions, such as restrictions on the transfer or repatriation of funds and foreign investments;


•	foreign currency exchange risks;


•	fluctuations in freight rates and transportation disruptions;


•	political and economic instability;


•	variance and unexpected changes in local laws and regulations;


•	natural disasters and public health emergencies; and


•	trade and travel restrictions.

A significant legal risk associated with conducting business internationally is compliance with various and differing anti-corruption and anti-bribery laws and regulations of the countries in which we do business, including the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and similar laws in China. In addition, the anti-corruption laws in various countries are constantly evolving and may, in some cases, conflict with each other. Our Code of Ethics and Business Conduct and other policies prohibit us and our employees from offering or giving anything of value to a government official for the purpose of obtaining or retaining business and from engaging in unethical business practices, including kick-backs to or from purely private parties. However, there can be no assurance that all of our employees or agents will refrain from acting in violation of such laws and our related anti-corruption policies and procedures. Any violations of these anti-corruption or trade control laws, or even allegations of such violations, can lead to an investigation, which could disrupt our operations, involve significant management distraction, and lead to significant costs and expenses, including legal fees. If we, or our employees or agents acting on our behalf, are found to have engaged in practices that violate these laws and regulations, we could suffer severe fines and penalties, profit disgorgement, injunctions on future conduct, securities litigation, and other consequences that may have a material adverse effect on our business, financial condition and results of operations. In addition, our reputation, sales activities or stock price could be adversely affected if we become the subject of any negative publicity related to actual or potential violations of anti-corruption, anti-bribery, or trade control laws and regulations.

Our principal research and development facilities are located in Israel, and our directors, executive officers and other key employees are located primarily in Israel and the United States. In addition, we engage sales representatives in various countries throughout the world to market and sell our products in those countries and surrounding regions. If we encounter any of the above risks in our international operations, we could experience slower than expected revenue growth and our business could be harmed.

The results of the United Kingdom’s referendum on withdrawal from the European Union may have a negative effect on global economic conditions, financial markets and our business.

In June 2016, a majority of voters in the United Kingdom elected to withdraw from the European Union in a national referendum. The referendum was advisory, and the terms of any withdrawal are subject to a negotiation period that could last at least two years after the government of the United Kingdom formally initiates a withdrawal process. Nevertheless, the referendum has created significant uncertainty about the future relationship between the United Kingdom and the European Union, including with respect to the laws and regulations that will apply as the United Kingdom determines which European Union laws to replace or replicate in the event of a withdrawal. The referendum has also given rise to calls for the governments of other European Union member states to consider withdrawal. These developments, or the perception that any of them could occur, have had and may continue to have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets. Any of these factors could depress economic activity and restrict our access to capital, which could have a material adverse effect on our business, financial condition and results of operations and reduce the price of our ordinary shares.

The government tax benefits that we currently receive require us to meet several conditions and may be terminated or reduced in the future, which would increase our costs.

Some of our operations in Israel have been granted "Approved Enterprise" and "Beneficiary Enterprise" status by the Investment Center in the Israeli Ministry of Economy and Industry (formerly the Ministry of Industry, Trade and Labor) and the Israeli Income Tax Authority, which makes us eligible for tax benefits under the Israeli Law for Encouragement of Capital Investments, 1959. The availability of these tax benefits is subject to certain requirements, including, among other things, making specified investments in fixed assets and equipment, financing a percentage of those investments with our capital contributions, complying with our marketing program which was submitted to the Investment Center, filing of certain reports

with the Investment Center, limiting manufacturing outside of Israel and complying with Israeli intellectual property laws. If we do not meet these requirements in the future, these tax benefits may be cancelled and we could be required to refund any tax benefits that we have already received plus interest and penalties thereon. The tax benefits that our current "Approved Enterprise" and "Beneficiary Enterprise" program receives may not be continued in the future at their current levels or at all. If these tax benefits were reduced or eliminated, the amount of taxes that we pay would likely increase, which could adversely affect our results of operations. Additionally, if we increase our activities outside of Israel, for example, by acquisitions, our increased activities may not be eligible for inclusion in Israeli tax benefit programs.

If we elect to distribute dividends out of income derived from "Approved Enterprise" operations during the tax exemption period, we will be subject to tax on the gross amount distributed. The tax rate will be the rate which would have been applicable had we not been granted the beneficial status. This rate is generally between 10% and the corporate tax rate in Israel, depending on the percentage of our shares held by foreign shareholders. The dividend recipient is subject to withholding tax at the source at the reduced rate applicable to dividends from Approved Enterprises, which is 15% if the dividend is distributed during the tax exemption period (subject to the applicable double tax treaty) or within 12 years after the period. This 12 year limitation does not apply to foreign investment companies. These dividend tax rules may also apply to our acquisitions if they are made with cash from tax benefited income.

We have significant intangible assets and goodwill. Consequently, the future impairment of our intangible assets and goodwill may significantly impact our profitability.

Our intangible assets and goodwill are significant. As of June 30, 2016, we had recorded $769 million of intangible assets and goodwill related to our past acquisitions. Intangible assets and goodwill are subject to an impairment analysis whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. Additionally, goodwill and indefinite-lived assets are subject to an impairment test at least annually. The impairment of any goodwill and other intangible assets may have a negative impact on our consolidated results of operations.

Risks Related to Our Ordinary Shares

The price of our ordinary shares may continue to be volatile, and the value of an investment in our ordinary shares may decline.

During the three months ended June 30, 2016 , our shares traded as low as $40.54 per share and as high as $55.45 per share. During the twelve month period ended June 30, 2016 our shares traded as low as $32.24 and as high as $55.80 per share. Factors that could cause volatility in the market price of our ordinary shares include, but are not limited to:


•	quarterly variations in our results of operations or those of our competitors;


•	announcements by us, our competitors, our customers or rumors from sources other than our company related to acquisitions, new products, significant contracts, commercial relationships, capital commitments or changes in the competitive landscape;


•	our ability to develop and market new and enhanced products on a timely basis;


•	disruption to our operations;


•	geopolitical instability;


•	the emergence of new sales channels in which we are unable to compete effectively;


•	any major change in our board of directors or management;


•	changes in financial estimates, including our ability to meet our future revenue and operating profit or loss projections;


•	changes in governmental regulations or in the status of our regulatory approvals;


•	general economic conditions and slow or negative growth of related markets;


•	commencement of, or our involvement in, litigation;


•	whether our operating results meet our guidance or the expectations of investors or securities analysts;


•	continuing international conflicts and acts of terrorism; and


•	changes in accounting rules.

ITEM 2 — UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 3 — DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4 — MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5 — OTHER INFORMATION

None.

ITEM 6 — EXHIBITS



3.1	†		Amended and Restated Articles of Association of Mellanox Technologies, Ltd. a Company Limited by Shares
4.1	†	*	First Amendment to the Mellanox Technologies, Ltd. Amended and Restated Employee Share Purchase Plan.
4.2	†	*	Mellanox Technologies, Ltd. Amended and Restated Global Share Incentive Plan (2006).
10.1	†		Addendum to Unprotected Lease Agreement Dated March 1, 2011, by and between the Company, as tenant, and Sha'ar Yokneam, Registered Limited Partnership, as landlord. (as translated from Hebrew) dated May 3, 2016.
31.1			Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2			Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1			Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2			Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS			XBRL Instance Document
101.SCH			XBRL Taxonomy Extension Schema Document
101.CAL			XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB			XBRL Taxonomy Extension Label Linkbase Document
101.PRE			XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF			XBRL Taxonomy Extension Definition Linkbase Document

_______________________________________________________________________________


†	Filed herewith.

* Indicates management contract or compensatory plan, contract or arrangement.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



Date:	July 29, 2016	Mellanox Technologies, Ltd.


		/s/ Jacob Shulman
		Jacob Shulman
		Chief Financial Officer
		(Duly Authorized Officer and Principal Financial Officer)

Exhibit Index



3.1	†		Amended and Restated Articles of Association of Mellanox Technologies, Ltd. a Company Limited by Shares
4.1	†	*	First Amendment to the Mellanox Technologies, Ltd. Amended and Restated Employee Share Purchase Plan.
4.2	†	*	Mellanox Technologies, Ltd. Amended and Restated Global Share Incentive Plan (2006).
10.1	†		Addendum to Unprotected Lease Agreement Dated March 1, 2011, by and between the Company, as tenant, and Sha'ar Yokneam, Registered Limited Partnership, as landlord. (as translated from Hebrew) dated May 3, 2016.
31.1			Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2			Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1			Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2			Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS			XBRL Instance Document
101.SCH			XBRL Taxonomy Extension Schema Document
101.CAL			XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB			XBRL Taxonomy Extension Label Linkbase Document
101.PRE			XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF			XBRL Taxonomy Extension Definition Linkbase Document

_______________________________________________________________________________

† Filed herewith.

* Indicates management contract or compensatory plan, contract or arrangement.

Amended and Restated Articles of Association

AMENDED AND RESTATED
ARTICLES OF ASSOCIATION

OF

MELLANOX TECHNOLOGIES, LTD.

A COMPANY LIMITED BY SHARES

1. COMPANY NAME

The name of the company is "Mellanox Technologies Ltd." (the "Company").

2. INTERPRETATION

(a) In these Articles, the following terms shall bear the meanings set forth below, unless inconsistent with the subject or context.

"Antitrust Law" shall mean the Israeli Restrictive Trade Practices Law, 5748-1988, as amended and as may be amended from time to time, and any regulations promulgated thereunder.

"Office Holder" shall mean every director and every other person included in the definition of "office holder" under the Companies Law, including the executive officers of the Company.

"External Directors" shall mean directors appointed and serving in accordance with Sections 239 through 249 of the Companies Law.

"Companies Law" shall mean the Israeli Companies Law, 5759-1999, as amended and as may be amended from time to time, and any regulations promulgated thereunder.

"Securities Law" shall mean the Israeli Securities Law 5728-1968, as amended and as may be amended from time to time, and any regulations promulgated thereunder.

"Articles" shall mean these Amended and Restated Articles of Association as originally adopted or as amended from time to time.

"Office" shall mean the registered office of the Company.

"Year" and "Month" shall mean a Gregorian month or year.

(b) Defined terms used herein, but not defined, shall have the meaning given them in the Companies Law.

(c) Unless the subject or the context otherwise requires: words and expressions importing the masculine gender shall include the feminine gender; and words and expressions importing persons shall include bodies corporate.

3. PUBLIC COMPANY; LIMITED LIABILITY AND COMPANY OBJECTIVES

(a) The Company is a Public Company, as such term is defined in the Companies Law.

(b) The liability of the Company's Shareholders is limited and, accordingly, the liability of each Shareholder for the Company's obligations shall be limited to the payment of the nominal value of the shares held by such Shareholder, subject to the provisions of these Articles and the Companies Law.

(c) The Company's objectives are to carry on any business and perform any act which is not prohibited by law. The Company may also make contributions of reasonable sums to worthy purposes even if such contributions are not made on the basis of business considerations

SHARE CAPITAL

4. SHARE CAPITAL

(a) The authorized share capital of the Company is three million five hundred thousand New Israeli Shekels (NIS 3,500,000) divided into two hundred million (200,000,000) Ordinary Shares, par value 0.0175 per share.

(b) The Ordinary Shares all rank pari passu in all respects.

5. INCREASE OF AUTHORIZED SHARE CAPITAL

(a) The Company may, from time to time, by resolution of its shareholders, whether or not all the shares then authorized have been issued and whether or not all the shares theretofore issued have been called up for payment, increase its authorized share capital by the creation of new shares. Any such increase shall be in such amount and shall be divided into shares of such nominal amounts, and such shares shall confer such rights and preferences, and shall be subject to such restrictions, as such resolution shall provide.

(b) Except to the extent otherwise provided in such resolution, any new shares included in the authorized share capital increased as aforesaid shall be subject to all the provisions of these Articles which are applicable to shares of the same class included in the existing share capital.

6. SPECIAL RIGHTS; MODIFICATION OF RIGHTS

(a) Subject to the provisions of these Articles, and without prejudice to any special rights previously conferred upon the holders of existing shares in the Company, the Company may, from time to time, by resolution of its shareholders, provide for shares with such preferred or deferred rights or rights of redemption or other special rights and/or such restrictions, whether in regard to liquidation, dividends, voting, repayment of share capital or otherwise, as may be stipulated in such resolution provided that any resolution with respect to the issuance of shares will be made only by the Board of Directors.

(b)

(i) If at any time the share capital is divided into different classes of shares, the rights attached to any class, unless otherwise provided by these Articles, may be modified or abrogated by the Company, by a resolution of the shareholders, subject to the consent in writing of the holders of at least a majority of the issued shares of such class or the adoption of a resolution passed at a separate General Meeting of the holders of the shares of such class.

(ii) The provisions of these Articles relating to General Meetings shall, mutatis mutandis, apply to any separate General Meeting of the holders of the shares of a particular class, provided, however, that the requisite quorum at any such separate General Meeting shall be two or more members present in person or by proxy and holding not less than thirty three and a third percent (33 ¹ / 3 %) of the issued shares of such class.

(iii) Unless otherwise provided by these Articles, the enlargement of an authorized class of shares, or the issuance of additional shares thereof out of the authorized and unissued share capital, shall not be deemed, for purposes of this Article 6(b), to modify or abrogate the rights attached to previously issued shares of such class or of any other class.

7. CONSOLIDATION, SUBDIVISION, CANCELLATION AND REDUCTION OF SHARE CAPITAL

(a) The Company may, from time to time, by resolution of its shareholders (subject, however, to the provisions of Article 6(b) hereof and to applicable law):

(i) consolidate and divide all or part of its issued or un-issued authorized share capital into shares of a per share nominal value which is larger than the per share nominal value of its existing shares;

(ii) subdivide its shares (issued or un-issued) or any of them, into shares of smaller nominal value;

(iii) cancel any shares which, at the date of the adoption of such resolution, have not been taken or agreed to be taken by any person, and diminish the amount of its share capital by the amount of the shares so canceled; or

(iv) reduce its share capital in any manner, subject to any consent required by law.

(b) With respect to any consolidation of issued shares into shares of a larger nominal value per share, and with respect to any other action which may result in fractional shares, the Board of Directors may settle any difficulty which may arise with regard thereto, as it deems fit, and, in connection with any such consolidation or other action which could result in fractional shares, may, without limiting its aforesaid power:

(i) determine, as to the holder of shares so consolidated, which issued shares shall be consolidated into a share of a larger nominal value per share;

(ii) allot, in contemplation of or subsequent to such consolidation or other action, shares or fractional shares sufficient to preclude or remove fractional share holdings;

(iii) redeem, in the case of redeemable preference shares, and subject to applicable law, such shares or fractional shares sufficient to preclude or remove fractional share holdings; and/or

(iv) cause the transfer of fractional shares by certain shareholders of the Company to other shareholders thereof so as to most expediently preclude or remove any fractional shareholdings, and cause the transferees of such fractional shares to pay the transferors thereof the fair value thereof, and the Board of Directors is hereby authorized to act in connection with such transfer, as agent for the transferors and transferees of any such fractional shares, with full power of substitution, for the purposes of implementing the provisions of this sub-Article 7(b)(iv).

8. ISSUANCE OF SHARE CERTIFICATES; REPLACEMENT OF LOST CERTIFICATES

(a) Share Certificates shall be issued under the corporate seal of the Company and shall bear the signature of one Director, or of any other person or persons so authorized by the Board of Directors.

(b) Each shareholder shall be entitled to one or several numbered certificates for all the shares of any class registered in his name, each for one or more of such shares. Each certificate shall specify the serial numbers of the shares represented thereby and may also specify the amount paid up thereon.

(c) A share certificate registered in the names of two or more persons shall be delivered to the person first named in the Shareholder Register in respect of such co-ownership.

(d) A share certificate which has been defaced, lost or destroyed, may be replaced, and the Company shall issue a new certificate to replace such defaced, lost or destroyed certificate upon payment of such fee, and upon the furnishing of such evidence of ownership and such indemnity, as the Board of Directors in its discretion deems fit.

9. REGISTERED HOLDER

Except as otherwise provided in these Articles, the Company shall be entitled to treat the registered holder of each share as the absolute owner thereof, and accordingly, shall not, except as ordered by a court of competent jurisdiction, or as

required by statute, be obligated to recognize any equitable or other claim to, or interest in, such share on the part of any other person.

10. ALLOTMENT OF SHARES

The un-issued shares from time to time shall be under the sole control of the Board of Directors, who shall have the power to allot, issue or otherwise dispose of shares to such persons, on such terms and conditions (including inter alia terms relating to calls as set forth in Article 12(f) hereof), and either at par or at a premium, or, subject to the provisions of the Companies Law, at a discount and/or with payment of commission, and at such times, as the Board of Directors deems fit, and the power to give to any person the option to acquire from the Company any shares, either at par or at a premium, or, subject as aforesaid, at a discount and/or with payment of commission, during such time and for such consideration as the Board of Directors deems fit.

11. PAYMENT IN INSTALLMENTS

If pursuant to the terms of allotment or issue of any share, all or any portion of the price thereof shall be payable in installments, every such installment shall be paid to the Company on the due date thereof by the then registered holder(s) of the share or the person(s) then entitled thereto.

12. CALLS ON SHARES

(a) The Board of Directors may, from time to time, as it, in its discretion, deems fit, make calls for payment upon shareholders in respect of any sum which has not been paid up in respect of shares held by such shareholders and which is not pursuant to the terms of allotment or issue of such shares or otherwise, payable at a fixed time, and each shareholder shall pay the amount of every call so made upon him or her (and of each installment thereof if the same is payable in installments), to the Company at the time(s) and place(s) designated by the Board of Directors, as any such time(s) may be thereafter extended or place(s) changed. Unless otherwise stipulated in the resolution of the Board of Directors (and in the notice hereafter referred to), each payment in response to a call shall be deemed to constitute a pro rata payment on account of all the shares in respect of which such call was made.

(b) Notice of any call for payment by a shareholder shall be given in writing to such shareholder not less than fourteen (14) days prior to the time of payment fixed in such notice, and shall specify the time and place of payment. Prior to the time for any such payment fixed in a notice of a call given to a shareholder, the Board of Directors may in its absolute discretion, by notice in writing to such member, revoke such call in whole or in part, extend the time fixed for payment thereof, or designate a different place of payment. In the event of a call payable in installments, only one notice thereof need be given.

(c) If pursuant to the terms of allotment or issue of a share or otherwise, an amount is made payable at a fixed time (whether on account of such share or by way of premium), such amount shall be payable at such time as if it were payable by virtue of a call made by the Board of Directors and for which notice was given in accordance with paragraphs (a) and (b) of this Article 12, and the provisions of these Articles with regard to calls (and the non-payment thereof) shall be applicable to such amount (and the non-payment thereof).

(d) Joint holders of a share shall be jointly and severally liable to pay all calls for payment in respect of such share and all interest payable thereon.

(e) Any amount called for payment which is not paid when due shall bear interest from the date fixed for payment until actual payment thereof, at such rate (not exceeding the then prevailing debitory rate charged by leading commercial banks in Israel), and payable at such time(s) as the Board of Directors may prescribe.

(f) Upon the allotment of shares, the Board of Directors may provide for differences among the allottees of such shares as to the amounts and times for payment of calls in respect of such shares.

13. PREPAYMENT

With the approval of the Board of Directors, any shareholder may pay to the Company any amount not yet payable in respect of his shares, and the Board of Directors may approve the payment by the Company of interest on any such amount until the same would be payable if it had not been paid in advance, at such rate and time(s) as may be approved by

the Board of Directors. The Board of Directors may at any time cause the Company to repay all or any part of the money so advanced, without premium or penalty. Nothing in this Article 13 shall derogate from the right of the Board of Directors to make any call for payment before or after receipt by the Company of any such advance.

14. FORFEITURE AND SURRENDER

(a) If any shareholder fails to pay an amount payable by virtue of a call, or interest thereon as provided for in accordance herewith, on or before the day fixed for payment of the same, the Board of Directors may at any time after the day fixed for such payment, so long as such amount (or any portion thereof) or interest thereon (or any portion thereof) remains unpaid, resolve to forfeit all or any of the shares in respect of which such payment was called for. All expenses incurred by the Company in attempting to collect any such amount or interest thereon, including, without limitation, attorney's fees and costs of legal proceedings, shall be added to, and shall, for all purposes (including the accrual of interest thereon), constitute a part of, the amount payable to the Company in respect of such call.

(b) Upon the adoption of a resolution as to the forfeiture of a shareholder's share, the Board of Directors shall cause notice thereof to be given to such shareholder, which notice shall state that, in the event of the failure to pay the entire amount so payable by a date specified in the notice (which date shall be not less than fourteen (14) days after the date such notice is given and which may be extended by the Board of Directors), such shares shall be ipso facto forfeited, provided, however, that, prior to such date, the Board of Directors may nullify such resolution of forfeiture, but no such nullification shall stop the Board of Directors from adopting a further resolution of forfeiture in respect of the non-payment of the same amount.

(c) Without derogating from Articles 54 and 59 hereof, whenever shares are forfeited as herein provided, all dividends, if any, theretofore declared in respect thereof and not actually paid shall be deemed to have been forfeited at the same time.

(d) The Company, by resolution of the Board of Directors, may accept the voluntary surrender of any share not fully paid for.

(e) Any share forfeited or surrendered as provided herein, shall become the property of the Company, and the same, subject to the provisions of these Articles, may be sold, re-allotted or otherwise disposed of as the Board of Directors deems fit.

(f) Any shareholder whose shares have been forfeited or surrendered shall cease to be a shareholder in respect of the forfeited or surrendered shares, but shall, notwithstanding, be liable to pay, and shall forthwith pay, to the Company, all calls, interest and expenses owing upon or in respect of such shares at the time of forfeiture or surrender, together with interest thereon from the time of forfeiture or surrender until actual payment, at the rate prescribed in Article 12(e) above, and the Board of Directors, in its discretion, may, but shall not be obligated to, enforce the payment of such moneys, or any part thereof. In the event of such forfeiture or surrender, the Company, by resolution of the Board of Directors, may accelerate the date(s) of payment of any or all amounts then owing to the Company by the shareholder in question (but not yet due) in respect of all shares owned by such shareholder, solely or jointly with another.

(g) The Board of Directors may at any time, before any share so forfeited or surrendered shall have been sold, re-allotted or otherwise disposed of, nullify the forfeiture or surrender on such conditions as it deems fit, but no such nullification shall stop the Board of Directors from re-exercising its powers of forfeiture pursuant to this Article 14.

15. LIEN

(a) Except to the extent the same may be waived or subordinated in writing, the Company shall have a first and paramount lien upon all the shares registered in the name of each shareholder (without regard to any equitable or other claim or interest in such shares on the part of any other person), and upon the proceeds of the sale thereof, for his debts, liabilities and engagements to the Company arising from any amount payable by such shareholder in respect of any unpaid or partly paid share, whether or not such debt, liability or engagement has matured. Such lien shall extend to all dividends from time to time declared or paid in respect of such share. Unless otherwise provided, the registration by the Company of a transfer of shares shall be deemed to be a waiver on the part of the Company of the lien (if any) existing on such shares immediately prior to such transfer.

(b) The Board of Directors may cause the Company to sell a share subject to such a lien when the debt, liability or engagement giving rise to such lien has matured, in such manner as the Board of Directors deems fit, but no such sale

shall be made unless such debt, liability or engagement has not been satisfied within fourteen (14) days after written notice of the intention to sell shall have been served on such shareholder, his executors or administrators.

(c) The net proceeds of any such sale, after payment of the costs thereof, shall be applied in or toward satisfaction of the debts, liabilities or engagements of such member in respect of such share (whether or not the same have matured), and the residue (if any) shall be paid to the shareholder, his executors, administrators or assigns.

16. SALE AFTER FORFEITURE OR SURRENDER OR IN ENFORCEMENT OF LIEN

Upon any sale of a share after forfeiture or surrender or for enforcing a lien, the Board of Directors may appoint any person to execute an instrument of transfer of the share so sold and cause the purchaser's name to be entered in the Shareholder Register in respect of such share. The purchaser shall be registered as the shareholder and shall not be bound to see to the regularity of the sale proceedings, or to the application of the proceeds of such sale, and after his name has been entered in the Shareholder Register in respect of such share, the validity of the sale shall not be impeached by any person, and the remedy of any person aggrieved by the sale shall be in damages only and against the Company exclusively.

17. REDEEMABLE SHARES

The Company may, subject to applicable law, issue redeemable shares and redeem the same.

TRANSFER OF SHARES

18. REGISTRATION OF TRANSFER

(a) No transfer of shares shall be registered unless a proper writing or instrument of transfer (in any customary form or any other form satisfactory to the Board of Directors) has been submitted to the Company (or its transfer agent), together with the share certificate(s) and such other evidence of title as the Board of Directors may reasonably require. Until the transferee has been registered in the Shareholder Register (or with the transfer agent) in respect of the shares so transferred, the Company may continue to regard the transferor as the owner thereof. The Board of Directors, may, from time to time, prescribe a fee for the registration of a transfer.

(b) The Board of Directors may, in its discretion to the extent it deems necessary, close the Shareholder Register for registrations of transfers of shares during any year for a period determined by the Board of Directors, and no registrations of transfers of shares shall be made by the Company during any such period during which the Shareholder Register is so closed.

19. RECORD DATE FOR NOTICES OF GENERAL MEETINGS AND OTHER ACTION

(a) Notwithstanding any provision of these Articles to the contrary, and to allow the Company to determine the shareholders entitled to notice of, or to vote at, any Annual or Extraordinary General Meeting or any adjournment thereof, or to express consent to or dissent from any corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of, or to take or be the subject to, any other action, the Board of Directors may fix, a record date, which shall not be more than forty (40), or any longer period required under the Companies Law, nor less than four (4) days, or any longer period required under the Companies Law, before the date of such meeting or other action. A determination of shareholders of record entitled to notice of or to vote at a meeting 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) Any shareholder or shareholders of the Company holding, at least one percent (1%) of the voting rights in the issued share capital of the Company may, pursuant to the Companies Law, request that the Board of Directors include a subject in the agenda of a General Meeting to be held in the future. Any such request must be in writing, must include all information related to subject matter and the reason that such subject is proposed to be brought before the General Meeting and must be signed by the shareholder or shareholders making such request. In addition, subject to the Companies Law and the provisions of Article 39, the Board of Directors may include such subject in the agenda of a General Meeting only if the request has been delivered to the Secretary of the Company not later than sixty (60) days and not more than one hundred and twenty (120) days prior to the General Meeting in which the subject is to be considered by

the shareholders of the Company. Each such request shall also set forth: (a) the name and address of the shareholder making the request; (b) a representation that the shareholder is a holder of record of shares of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting; (c) a description of all arrangements or understandings between the shareholder and any other person or persons (naming such person or persons) in connection with the subject which is requested to be included in the agenda; and (d) a declaration that all the information that is required under the Companies Law and any other applicable law to be provided to the Company in connection with such subject, if any, has been provided. Furthermore, the Board of Directors, may, in its discretion to the extent it deems necessary, request that the shareholders making the request provide additional information necessary so as to include a subject in the agenda of a General Meeting, as the Board of Directors may reasonably require.

TRANSMISSION OF SHARES

20. DECEDENTS' SHARES

(a) In case of death of a registered holder of a share registered in the names of two or more holders, the Company may recognize the survivor(s) as the sole owner(s) thereof unless and until the provisions of Article 20(b) have been effectively invoked.

(b) Any person becoming entitled to a share in consequence of the death of any shareholder, upon producing evidence of the grant of probate or letters of administration or declaration of succession (or such other evidence as the Board of Directors may reasonably deem sufficient), shall be registered as a shareholder in respect of such share, or may, subject to the regulations as to transfer herein contained, transfer such share.

21. RECEIVERS AND LIQUIDATORS

(a) The Company may recognize any receiver, liquidator or similar official appointed to wind-up, dissolve or otherwise liquidate a corporate shareholder, and a trustee, manager, receiver, liquidator or similar official appointed in bankruptcy or in connection with the reorganization of, or similar proceeding with respect to a shareholder or its properties, as being entitled to the shares registered in the name of such member.

(b) Such receiver, liquidator or similar official appointed to wind-up, dissolve or otherwise liquidate a corporate shareholder and such trustee, manager, receiver, liquidator or similar official appointed in bankruptcy or in connection with the reorganization of, or similar proceedings with respect to a shareholder or its properties, upon producing such evidence as the Board of Directors may deem sufficient as to his authority to act in such capacity or under this Article, shall with the consent of the Board of Directors (which the Board of Directors may grant or refuse in its absolute discretion), be registered as a shareholder in respect of such shares, or may, subject to the regulations as to transfer herein contained, transfer such shares.

GENERAL MEETINGS

22. ANNUAL GENERAL MEETING

(a) An Annual General Meeting shall be held once in every calendar year at such time (within a period of not more than fifteen (15) months after the last preceding Annual General Meeting) and at such place, either within or without the State of Israel, as may be determined by the Board of Directors.

(b) Subject to the provisions of these Articles, the function of the Annual General Meeting shall be to elect the members of the Board of Directors; to receive the Financial Statements; to appoint the Company's auditors and to fix their remuneration and to transact any other business which under these Articles or the Companies Law are to be transacted at a General Meeting.

23. EXTRAORDINARY GENERAL MEETINGS

All General Meetings other than Annual General Meetings shall be called "Extraordinary General Meetings". The Board of Directors may, whenever it thinks fit, convene an Extraordinary General Meeting, at such time and place, within or out

of the State of Israel, as may be determined by the Board of Directors, and shall be obliged to do so upon a requisition in writing in accordance with Section 63 of the Companies Law.

24. NOTICE OF GENERAL MEETINGS; OMISSION TO GIVE NOTICE

(a) Not less than twenty-one (21) days' prior notice, or thirty-five (35) days' prior notice to the extent required under regulations promulgated under the Companies Law, shall be given of every General Meeting. Each such notice shall. specify the place and the day and hour of the meeting and the general nature of each item to be acted upon thereat, said notice to be given to all members who would be entitled to attend and vote at such meeting. Anything therein to the contrary notwithstanding, with the consent of all members entitled to vote thereon, a resolution may be proposed and passed at such meeting although a lesser notice than hereinabove prescribed has been given.

(b) The accidental omission to give notice of a meeting to any member, or the non-receipt of notice sent to such member, shall not invalidate the proceedings at such meeting.

(c) Notwithstanding anything to the contrary in this Article 24, and subject to any applicable stock exchange rules or regulations, notice of general meetings does not have to be delivered to shareholders, and notice by the Company of a General Meeting which is published in two daily newspapers in Israel shall be deemed to have been duly given on the date of such publication to any shareholder whose address as listed in the Register of Shareholders (or as designated in writing for the receipt of notices and other documents) is located in the State of Israel, and notice by the Company of a General Meeting which is publicized on the United States Securities and Exchange Commission's EDGAR Database or similar publication via the internet shall be deemed to have been duly given on the date of such publication to any shareholder whose address as registered in the Register of Shareholders (or as designated in writing for the receipt of notices and other documents) is located outside of Israel.

25. MANNER OF MEETING

The Board may, in its absolute discretion, resolve to enable persons entitled to attend a general meeting to do so by simultaneous attendance and participation at the principal meeting place and a satellite meeting place or places anywhere in the world and the shareholders present in person, by proxy or by written ballot at satellite meeting places shall be counted in the quorum for and entitled to vote at the general meeting in question, and that meeting shall be duly constituted and its proceedings valid, provided that the chairman of the general meeting is satisfied that adequate facilities are available throughout the general meeting to ensure that shareholders attending at all the meeting places are able to:

(a) participate in the business for which the meeting has been convened;

(b) hear all persons who speak (whether by the use of microphones, loudspeakers audio-visual communications equipment or otherwise) in the principal meeting place and any satellite meeting place(s); and

PROCEEDINGS AT GENERAL MEETINGS

26. QUORUM

(a) No business shall be transacted at a General Meeting, or at any adjournment thereof, unless the quorum required under these Articles for such General Meeting or such adjourned meeting, as the case may be, is present when the meeting proceeds to business.

(b) In the absence of contrary provisions in these Articles, two or more shareholders (not in default in payment of any sum referred to in Article 32(a) hereof), present in person or by proxy and holding shares conferring in the aggregate more than thirty three and a third (33 ¹ / 3 %) percent of the voting power of the Company, shall constitute a quorum of General Meetings.

(c) If within half an hour from the time appointed for the meeting a quorum is not present, the meeting, if convened upon requisition under Sections 64 or 65 of the Companies Law, shall be dissolved, but in any other case it shall be adjourned to the same day in the next week, at the same time and place, or to such day and at such time and place as the Chairman may determine. No business shall be transacted at any adjourned meeting except business which might lawfully have been transacted at the meeting as originally called.

(d) The Board of Directors may determine, in its discretion, the matters that may be voted upon at the meeting by proxy or written ballot in addition to the matters listed in Section 87(a) to the Companies Law.

27. CHAIRMAN

The Chairman, if any, of the Board of Directors, shall preside as Chairman at every General Meeting of the Company. If at any meeting the Chairman is not present within fifteen (15) minutes after the time fixed for holding the meeting or is unwilling to act as Chairman, the Co-Chairman shall preside at the meeting. If at any such meeting both the Chairman and the Co-Chairman are not present or are unwilling to act as Chairman, the shareholders present shall choose someone of their number to be Chairman. The office of Chairman shall not, by itself, entitle the holder thereof to vote at any General Meeting nor shall it entitle such holder to a second or casting vote (without derogating, however, from the rights of such Chairman to vote as a shareholder or proxy of a shareholder if, in fact, he is also a shareholder or proxy).

28. ADOPTION OF RESOLUTIONS AT GENERAL MEETINGS

(a) A resolution shall be deemed adopted if approved by the holders of a majority of the voting power represented at the meeting in person or by proxy or by written ballot and voting thereon.

(b) Every question submitted to a General Meeting shall be decided by a show of hands, but the Chairman of the Meeting may determine that a resolution shall be decided by a written ballot. A written ballot may be implemented before the proposed resolution is voted upon or immediately after the declaration by the Chairman of the results of the vote by a show of hands. If a vote by written ballot is taken after such declaration, the results of the vote by a show of hands shall be of no effect, and the proposed resolution shall be decided by such written ballot.

(c) A declaration by the Chairman of the meeting that a resolution has been carried unanimously, or carried by a particular majority, or lost, and an entry to that effect in the minute book of the Company, shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favor of or against such resolution.

(d) Notwithstanding any of the other provisions of these Articles, any resolution to consummate a Merger, as defined in Section 1 of the Law, shall require the approval of the holders of at least a majority of the voting power of the Company. For the avoidance of doubt, any amendment to this Article 28(d) shall require the approval of the holders of at least a majority of the voting power of the Company.

29. RESOLUTIONS IN WRITING

A resolution in writing signed by all shareholders of the Company then entitled to attend and vote at General Meetings or to which all such shareholders have given their written consent (by letter, telegram, telex, facsimile, e-mail or otherwise) shall be deemed to have been unanimously adopted by a General Meeting duly convened and held.

30. POWER TO ADJOURN

(a) The Chairman of a General Meeting at which a quorum is present may, with the consent of the holders of a majority of the voting power represented in person or by proxy and voting on the question of adjournment (and shall if so directed by the meeting), adjourn the meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting except business which might lawfully have been transacted at the meeting as originally called.

(b) It shall not be necessary to give notice of an adjournment, whether pursuant to Article 26(c) or Article 30(a), unless the meeting is adjourned for twenty-one (21) days or more in which event notice thereof shall be given in the manner required for the meeting as originally called.

31. VOTING POWER

Subject to the provisions of Article 32(a) and subject to any provision hereof conferring special rights as to voting, or restricting the right to vote, every shareholder shall have one vote for each share held by him of record, on every resolution, without regard to whether the vote thereon is conducted by a show of hands, by written ballot or by any other means.

32. VOTING RIGHTS

(a) No shareholder shall be entitled to vote at any General Meeting (or be counted as a part of the quorum thereat), unless all calls and other sums then payable by him in respect of his shares in the Company have been paid, but this Article 32(a) shall not apply to separate General Meetings of the holders of a particular class of shares pursuant to Article 6(b).

(b) A company or other corporate body being a shareholder of the Company may duly authorize any person to be its representative at any meeting of the Company or to execute or deliver a proxy on its behalf. Any person so authorized shall be entitled to exercise on behalf of such shareholder all the power which the latter could have exercised if it were an individual shareholder. Upon the request of the Chairman of the meeting, written evidence of such authorization (in form acceptable to the Chairman) shall be delivered to him.

(c) Any shareholder entitled to vote may vote either in person or by proxy (who need not be a shareholder of the Company), or, if the shareholder is a company or other corporate body, by a representative authorized pursuant to Article 32(b).

(d) If two or more persons are registered as joint holders of any share, the vote of the senior who tenders a vote, in person or by proxy, shall be accepted to the exclusion of the vote(s) of the other joint holder(s). For the purpose of this Article 32(d), seniority shall be determined by the order of registration of the joint holders in the Shareholder Register.

PROXIES

33. INSTRUMENT OF APPOINTMENTS

(a) An instrument appointing a proxy shall be in writing and shall be substantially in the following form:




"I, [insert name of shareholder] of [insert address of shareholder], being a member of Mellanox Technologies Ltd. (the "Company"), hereby appoints [insert name of proxy] or [insert address of proxy] as my proxy to vote for me and on my behalf at the [Annual / Extraordinary] General Meeting of the Company to be held on the day of , 20 and at any adjournment(s) thereof.
Signed this day of , 20 .
(Signature of Appointor)"

or in any usual or common form or in such other form as may be approved by the Board of Directors. Such proxy shall be duly signed by the appointor or such person's duly authorized attorney or, if such appointor is a company or other corporate body, under its common seal or stamp or the hand of its duly authorized agent(s) or attorney(s).

(b) The instrument appointing a proxy (and the power of attorney or other authority, if any, under which such instrument has been signed) shall either be presented to the Chairman at the meeting at which the person named in the instrument proposes to vote or be delivered to the Company (at its Registered Office, at its principal place of business, or at the offices of its registrar or transfer agent, or at such place as the Board of Directors may specify) not less than two (2) hours before the time fixed for such meeting, except that the instrument shall be delivered (i) twenty-four (24) hours before the time fixed for the meeting where the meeting is to be held in the United States of America and the instrument is delivered to the Company at its Registered Office or principal place of business, or (ii) forty-eight (48) hours before the time fixed for the meeting where the meeting is to be held outside of the United States of America and Israel and the instrument is delivered to the Company's registrar or transfer agent. Notwithstanding the above, the Chairman shall have the right to

waive the time requirement provided above with respect to all instruments of proxies and to accept any and all instruments of proxy received prior to the beginning of a General Meeting.

34. EFFECT OF DEATH OF APPOINTOR OR TRANSFER OF SHARE OR REVOCATION OF APPOINTMENT

(a) A vote cast in accordance with an instrument appointing a proxy shall be valid notwithstanding the prior death or bankruptcy of the appointing member (or of his attorney-in-fact, if any, who signed such instrument), or the transfer of the share in respect of which the vote is cast, unless written notice of such matters shall have been received by the Company or by the Chairman of such meeting prior to such vote being cast.

(b) An instrument appointing a proxy shall be deemed revoked (i) upon receipt by the Company or the Chairman, subsequent to receipt by the Company of such instrument, of written notice signed by the person signing such instrument or by the member appointing such proxy canceling the appointment thereunder (or the authority pursuant to which such instrument was signed) or of an instrument appointing a different proxy (and such other documents, if any, required under Article 33(b) for such new appointment), provided such notice of cancellation or instrument appointing a different proxy were so received at the place and within the time for delivery of the instrument revoked thereby as referred to in Article 33(b) hereof, or (ii) if the appointing shareholder is present in person at the meeting for which such instrument of proxy was delivered, upon receipt by the Chairman of such meeting of written notice from such member of the revocation of such appointment, or if and when such shareholder votes at such meeting. A vote cast in accordance with an instrument appointing a proxy shall be valid notwithstanding the revocation or purported cancellation of the appointment, or the presence in person or vote of the appointing shareholder at a meeting for which it was rendered, unless such instrument of appointment was deemed revoked in accordance with the foregoing provisions of this Article 34(b) at or prior to the time such vote was cast.

BOARD OF DIRECTORS

35. POWERS OF BOARD OF DIRECTORS

(a) General . The management of the business of the Company shall be vested in the Board of Directors, which may exercise all such powers and do all such acts and things as the Company is authorized to exercise and do, and are not by these Articles or by law required to be exercised or done by the Company by action of its shareholders at a General Meeting. The authority conferred on the Board of Directors by this Article 35 shall be subject to the provisions of the Companies Law, these Articles and any regulation or resolution consistent with these Articles adopted from time to time by the Company by action of its shareholders at a General Meeting, provided, however, that no such regulation or resolution shall invalidate any prior act done by or pursuant to a decision of the Board of Directors which would have been valid if such regulation or resolution had not been adopted.

(b) Borrowing Power . The Board of Directors may from time to time, at its discretion, cause the Company to borrow or secure the payment of any sum or sums of money for the purposes of the Company, and may secure or provide for the repayment of such sum or sums in such manner, at such times and upon such terms and conditions as it deems fit, and, in particular, by the issuance of bonds, perpetual or redeemable debentures, debenture stock, or any mortgages, charges, or other securities on the undertaking or the whole or any part of the property of the Company, both present and future, including its uncalled or called but unpaid capital for the time being.

(c) Reserves . The Board of Directors may, from time to time, set aside any amount(s) out of the profits of the Company as a reserve or reserves for any purpose(s) which the Board of Directors, in its absolute discretion, shall deem fit, including without limitation, capitalization and distribution of bonus shares, and may invest any sum so set aside in any manner and from time to time deal with and vary such investments and dispose of all or any part thereof, and employ any such reserve or any part thereof in the business of the Company without being bound to keep the same separate from other assets of the Company, and may subdivide or redesignate any reserve or cancel the same or apply the funds therein for another purpose, all as the Board of Directors may from time to time think fit.

36. EXERCISE OF POWERS OF BOARD OF DIRECTORS

(a) A meeting of the Board of Directors at which a quorum is present shall be competent to exercise all the authorities, powers and discretion vested in or exercisable by the Board of Directors, whether in person or by any other means by which the Directors may hear each other simultaneously.

(b) A resolution proposed at any meeting of the Board of Directors shall be deemed adopted if approved by a majority of the Directors present when such resolution is put to a vote and voting thereon.

(c) The Board of Directors may adopt resolutions without holding a meeting of the Board of Directors, provided that all of the Directors then in office and lawfully entitled to vote thereon shall have agreed to vote on the matters underlying such resolutions without convening a meeting of the Board of Directors. If the Board of Directors adopts resolutions as set forth in the immediately preceding sentence, minutes including such resolutions, including a resolution to vote on such matters without convening a meeting of the Board of Directors, shall be prepared and the Chairman of the Board of Directors (or in his or her absence the Co-Chairman) will sign such minutes.

37. DELEGATION OF POWERS

(a) The Board of Directors may, subject to the provisions of the Companies Law, delegate any or all of its powers to committees, each consisting of one or more persons (who are Directors), and it may from time to time revoke such delegation or alter the composition of any such committee. Any Committee so formed (in these Articles referred to as a "Committee of the Board of Directors"), shall, in the exercise of the powers so delegated, conform to any regulations imposed on it by the Board of Directors. The meetings and proceedings of any such Committee of the Board of Directors shall, mutatis mutandis, be governed by the provisions herein contained for regulating the meetings of the Board of Directors, so far as not superseded by any regulations adopted by the Board of Directors under this Article. Unless otherwise expressly provided by the Board of Directors in delegating powers to a Committee of the Board of Directors, such Committee shall not be empowered to further delegate such powers.

(b) Without derogating from the provisions of Article 50, the Board of Directors may from time to time appoint a Secretary to the Company, as well as officers, agents, employees and independent contractors, as the Board of Directors deems fit, and may terminate the service of any such person. The Board of Directors may, subject to the provisions of the Companies Law, determine the powers and duties, as well as the salaries and emoluments, of all such persons, and may require security in such cases and in such amounts as it deems fit.

(c) The Board of Directors may from time to time, by power of attorney or otherwise, appoint any person, company, firm or body of persons to be the attorney or attorneys of the Company at law or in fact for such purpose(s) and with such powers, authorities and discretions, and for such period and subject to such conditions, as it deems fit, and any such power of attorney or other appointment may contain such provisions for the protection and convenience of persons dealing with any such attorney as the Board of Directors deems fit, and may also authorize any such attorney to delegate all or any of the powers, authorities and discretion vested in him.

38. NUMBER OF DIRECTORS

The Board of Directors of the Company shall consist of not less than two (2) nor more than eleven (11) Directors.

39. ELECTION AND REMOVAL OF DIRECTORS

(a) Subject to the provisions of these Articles and the Companies Law, Directors shall be elected at the Annual General Meeting or an Extraordinary Meeting of the Company by the vote of the holders of a majority of the voting power represented at such meeting in person or by proxy and voting on the election of directors.

(b) Nominations for the election of Directors may be made by the Board of Directors or a committee appointed by the Board of Directors or by any shareholder holding at least 1% of the outstanding voting power in the Company. However, and without limitation of Sections 63 or 64 of the Companies Law, any such shareholder may nominate one or more persons for election as Directors at a General Meeting only if a written notice of such shareholder's intent to make such nomination or nominations has been given to the Secretary of the Company not later than (i) with respect to an election to be held at an Annual General Meeting of shareholders, ninety (90) days prior to the anniversary date of the immediately preceding annual meeting, and (ii) with respect to an election to be held at a Extraordinary General Meeting of

shareholders for the election of Directors, at least ninety (90) days prior to the date of such meeting. Each such notice shall set forth: (a) the name and address of the shareholder who intends to make the nomination and of the person or persons to be nominated; (b) a representation that the shareholder is a holder of record of shares of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (c) a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder; and (d) the consent of each nominee to serve as a Director of the Company if so elected and a declaration signed by each of the nominees declaring that there is no limitation under the Companies Law for the appointment of such a nominee and that all the information that is required under the Companies Law to provided to the Company in connection with such an appointment has been provided. The Chairman of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure.

(c) The General Meeting may, by a vote of the holders of at least 75% of the voting power represented at the meeting, remove any Director(s) from office, and elect Directors instead of Directors so removed or fill any Vacancy (as defined in Article 41), however created, in the Board of Directors unless such Vacancy was filled by the Board of Directors under Article 41.

(d) In the event of any contradiction between the provisions of this Article 39 and the provisions of the Companies Law relating to the election and term of External Directors, the applicable provisions of the Companies Law shall govern, and the External Directors shall be elected and hold office in accordance with the provisions of the Companies Law.

40. QUALIFICATION OF DIRECTORS

No person shall be disqualified to serve as a Director by reason of his not holding shares in the Company or by reason of his having served as a Director in the past.

41. CONTINUING DIRECTORS IN THE EVENT OF VACANCIES

(a) In the event that one or more vacancies is created in the Board of Directors, including without limitation, a situation in which the number of Directors is less than the minimum number permitted under Article 38 (a "Vacancy"), the continuing Directors may continue to act in every matter, and, may appoint Directors to temporarily fill any such Vacancy, provided, however, that if the number of Directors is less than two (2), they may only act in (i) an emergency; or (ii) to fill the office of director which has become vacant; or (iii) in order to call a General Meeting of the Company for the purpose of electing Directors to fill any or all Vacancies, so that at least two (2) Directors are in office as a result of said meeting. Notwithstanding the foregoing, in the event of Vacancy of an External Director, the Company shall call a General Meeting to elect a new External Director or take such other action as required under the Companies Law.

(b) As long as the number of Directors is less than the maximum number of Directors permitted under Article 38, the continuing directors may appoint additional Directors, up to the maximum number permitted under Article 38, to hold office until the next Annual General Meeting following such appointment by the continuing Directors.

42. VACATION OF OFFICE

(a) The office of a Director shall be vacated, ipso facto, upon his or her death, or if he or she be found lunatic or become of unsound mind, or if he or she becomes bankrupt, or if the Director is a company, upon its winding-up, or if he is found by a court guilty of any of the felonies listed in Section 226 of the Companies Law.

(b) The office of a Director may also be vacated by the written resignation of the Director. Such resignation shall become effective on the date fixed therein, or upon the delivery thereof to the Company, whichever is later. Such written resignation shall include the reasons that lead the Director to resign from his office.

43. REMUNERATION OF DIRECTORS

A Director shall be paid remuneration by the Company for his services as Director to the extent such remuneration shall have been approved by the Company in accordance with the Companies Law.

44. CONFLICT OF INTEREST

Subject to the provisions of the Companies Law, no Director shall be disqualified by virtue of his office from holding any office or place of profit in the Company or in any company in which the Company shall be a shareholder or otherwise interested, or from contracting with the Company as vendor, purchaser or otherwise, nor shall any such contract, or any contract or arrangement entered into by or on behalf of the Company in which any Director shall be in any way interested, be voided, nor, other than as required under the Companies Law, shall any Director be liable to account to the Company for any profit arising from any such office or place of profit or realized by any such contract or arrangement by reason only of such Director's holding that office or of the fiduciary relations thereby established, but the nature of his interest, as well as any material fact or document, must be disclosed by him at the meeting of the Board of Directors at which the contract or arrangement is first considered, if his interest then exists, or, in any other case, at no later than the first meeting of the Board of Directors after the acquisition of his interest.

45. [RESERVED]

PROCEEDINGS OF THE BOARD OF DIRECTORS

46. MEETINGS

(a) The Board of Directors may meet and adjourn its meetings and otherwise regulate such meetings and proceedings as the Directors think fit.

(b) Any Director may at any time, and the Secretary, upon the request of such Director, shall, convene a meeting of the Board of Directors, but not less than two (2) days' notice shall be given of any meetings so convened. Notice of any such meeting shall be given to all the Directors and may be given orally, by telephone, in writing or by mail, email or facsimile. Notwithstanding anything to the contrary herein, failure to deliver notice to a director of any such meeting in the manner required hereby may be waived by such Director, and a meeting shall be deemed to have been duly convened notwithstanding such defective notice if such failure or defect is waived prior to action being taken at such meeting, by all Directors entitled to participate at such meeting to whom notice was not duly given as aforesaid.

47. RESOLUTIONS IN WRITING

A resolution in writing signed by the Chairman of the Board of Directors, or of a committee, provided that all the members of the Board of Directors or a committee have agreed to adopt such resolution without convening a meeting, shall be valid for every purpose as a resolution adopted at a Board of Directors' or committee meeting, as the case may be, that was duly convened and held. In place of a Director the aforesaid resolution may be signed and delivered by his attorney.

48. QUORUM

Until otherwise unanimously decided by the Board of Directors, a quorum at a meeting of the Board of Directors shall be constituted by the presence in person or by telephone conference of half (50%) of the Directors then in office who are lawfully entitled to participate in the meeting. No business shall be transacted at a meeting of the Board of Directors unless the requisite quorum is present (in person or by telephone conference or by other means by which all directors may hear and be heard) when the meeting proceeds to business.

49. CHAIRMAN OF THE BOARD OF DIRECTORS

The Board of Directors may from time to time, elect one of its members to be the Chairman of the Board of Directors, and another of its members as Co-Chairman, remove such Chairman and Co-Chairman from office and appoint others in their place. The Chairman of the Board of Directors shall preside at every meeting of the Board of Directors, but if there is no such Chairman, or if at any meeting he is not present within fifteen (15) minutes of the time fixed for the meeting or if he is unwilling to take the chair, the Co-Chairman shall preside. If both the Chairman and the Co-Chairman are not present within such fifteen (15) minutes or are unwilling to take the chair the Directors present shall choose one of their number to be the Chairman of such meeting.

50. VALIDITY OF ACTS DESPITE DEFECTS

All acts done bona fide at any meeting of the Board of Directors, or of a Committee of the Board of Directors, or by any person(s) acting as Director(s), shall, notwithstanding that it may afterwards be discovered that there was some defect in the appointment of the participants in such meetings or any of them or any person(s) acting as aforesaid, or that they or any of them were disqualified, be as valid as if there were no such defect or disqualification.

CHIEF EXECUTIVE OFFICER AND PRESIDENT

51. CHIEF EXECUTIVE OFFICER AND PRESIDENT

The Board of Directors may from time to time appoint one or more persons, whether or not Directors, as Chief Executive Officer or Officers, General Manager or Managers, or President of the Company and may confer upon such person(s), and from time to time modify or revoke, such title(s) and such duties and authorities of the Board of Directors as the Board of Directors may deem fit, subject to such limitations and restrictions as the Board of Directors may from time to time prescribe. Unless otherwise determined by the Board of Directors, the Chief Executive Officer shall have authority with respect of the management of the Company in the ordinary course of business. Such appointment(s) may be either for a fixed term or without any limitation of time, and the Board of Directors may from time to time (subject to the provisions of the Companies Law and of any contract between any such person and the Company) fix his or their salaries and emoluments, remove or dismiss him or them from office and appoint another or others in his or their place or places.

MINUTES

52. MINUTES

(a) Minutes of each General Meeting and of each meeting of the Board of Directors or of any Committee of the Board of Directors shall be recorded and duly entered in books provided for that purpose, and shall be held by the Company at its principal place of office or its Registered Office or such other place as shall have been determined by the Board of Directors. Such minutes shall, in all events, set forth the names of the persons present at the meeting and all resolutions adopted thereat.

(b) Any minutes as aforesaid, if purporting to be signed by the chairman of the meeting or by the chairman of the next succeeding meeting, shall constitute prima facie evidence of the matters recorded therein.

DIVIDENDS

53. DECLARATION OF DIVIDENDS

The Board of Directors may, subject to the applicable provisions of the Companies Law, from time to time declare, and cause the Company to pay, such dividend as may appear to the Board of Directors to be justified by the profits of the Company. The Board of Directors shall determine the time for payment of such dividends, both interim and final, and the record date for determining the shareholders entitled thereto.

54. FUNDS AVAILABLE FOR PAYMENT OF DIVIDEND

No dividend shall be paid otherwise than out of the profits of the Company.

55. AMOUNT PAYABLE BY WAY OF DIVIDENDS

Subject to the provisions of these Articles and subject to any rights or conditions attached at that time to any share in the capital of the Company granting preferential, special or deferred rights or not granting any rights with respect to dividends, the profits of the Company which shall be declared as dividends shall be distributed according to the proportion of the nominal value paid up on account of the shares held at the date so appointed by the Company, without regard to the premium paid in excess of the nominal value, if any. No amount paid or credited as paid on a share in advance of calls shall be treated for purposes of this Article as paid on a share.

56. INTEREST

No dividend shall carry interest as against the Company.

57. PAYMENT IN SPECIE

Upon the determination of the Board of Directors, the Company (i) may cause any monies, investments, or other assets forming part of the undivided profits of the Company, standing to the credit of a reserve fund, or to the credit of a reserve fund for the redemption of capital, or in the hands of the Company and available for dividends, or representing premiums received on the issuance of shares and standing to the credit of the share premium account, to be capitalized and distributed among such of the shareholders as would be entitled to receive the same if distributed by way of dividend and in the same proportion, on the footing that they become entitled thereto as capital, or may cause any part of such capitalized fund to be applied on behalf of such shareholders in paying up in full, either at par or at such premium as the resolution may provide, any unissued shares or debentures or debenture stock of the Company which shall be distributed accordingly or in payment, in full or in part, of the uncalled liability on all issued shares or debentures or debenture stock if such liability exists, on a pro rata basis; and (ii) may cause such distribution or payment to be accepted by such shareholders in full satisfaction of their interest in the said capitalized sum.

58. IMPLEMENTATION OF POWERS UNDER ARTICLE 57

For the purpose of giving full effect to any resolution under Article 57, and without derogating from the provisions of Article 7(b) hereof, the Board of Directors may settle any difficulty which may arise in regard to the distribution as it thinks expedient, and, in particular, may issue fractional certificates, and may fix the value for distribution of any specific assets, and may determine that cash payments shall be made to any members upon the footing of the value so fixed, or that fractions of less value than the nominal value of one share may be disregarded in order to adjust the rights of all parties, and may vest any such cash, shares, debentures, debenture stock or specific assets in trustees upon such trusts for the persons entitled to the dividend or capitalized fund as may seem expedient to the Board of Directors.

59. DIVIDEND ON UNPAID SHARES

Without derogating from Article 54 hereof, the Board of Directors may give an instruction which shall prevent the distribution of a dividend to the registered holders of share the full nominal amount of which has not been paid up.

60. RETENTION OF DIVIDENDS

(a) The Board of Directors may retain any dividend or other monies payable or property distributable in respect of a share on which the Company has a lien, and may apply the same in or towards satisfaction of the debts, liabilities, or engagements in respect of which the lien exists.

(b) The Board of Directors may retain any dividend or other monies payable or property distributable in respect of a share in respect of which any person is, under Article 20 or 21, entitled to become a member, or which any person, is, under said Articles, entitled to transfer, until such person shall become a member in respect of such share or shall transfer the same.

61. UNCLAIMED DIVIDENDS

All unclaimed dividends or other moneys payable in respect of a share may be invested or otherwise made use of by the Board of Directors for the benefit of the Company until claimed. The payment by the Directors of any unclaimed dividend or such other moneys into a separate account shall not cause the Company to be a trustee in respect thereof . The principal (and only the principal) of an unclaimed dividend or such other moneys shall be, if claimed, paid to the person entitled thereto.

62. MECHANICS OF PAYMENT

The Board of Directors may fix the mechanics for payment of dividends as it deems fit. However, if nothing to the contrary is provided in the resolution of the Board of Directors, than all dividends or other moneys payable in cash in respect of a share may be paid by check or warrant sent through the post to, or left at, the registered address of the person entitled thereto or by transfer to a bank account specified by such person (or, if two or more persons are registered as joint holders of such share or are entitled jointly thereto in consequence of the death or bankruptcy of the holder or otherwise, to the joint holder whose name is registered first in the Shareholder Register or his bank account or the person who the Company may then recognize as the owner thereof or entitled thereto under Article 20 or 21 hereof, as applicable, or such person's bank account), or to such person and at such other address as the person entitled thereto may by writing direct. Every such check or warrant shall be made payable to the order of the person to whom it is sent, or to such person as the person entitled thereto as aforesaid may direct, and payment of the check or warrant by the banker upon whom it is drawn shall be a good discharge to the Company.

63. RECEIPT FROM A JOINT HOLDER

If two or more persons are registered as joint holders of any share, or are entitled jointly thereto in consequence of the death or bankruptcy of the holder or otherwise, any one of them may give effectual receipts for any dividend or other moneys payable or property distributable in respect of such share.

ACCOUNTS

64. BOOKS OF ACCOUNT

The Board of Directors shall cause accurate books of account to be kept in accordance with the provisions of the Companies Law and of any other applicable law. Such books of account shall be kept at the Registered Office of the Company, or at such other place or places as the Board of Directors may think fit, and they shall always be open to inspection by all Directors. No member, not being a Director, shall have any right to inspect any account or book or other similar document of the Company, except as conferred by law or authorized by the Board of Directors or by resolution of the shareholders of the Company.

65. AUDIT

At least once in every fiscal year the accounts of the Company shall be audited and the correctness of the profit and loss account and balance sheet certified by one or more duly qualified auditors.

66. AUDITORS

The appointment, authorities, rights and duties of the auditor(s) of the Company, shall be regulated by applicable law, provided, however, that in exercising its authority to fix the remuneration of the auditor(s), the shareholders by resolution in a General Meeting may act (and in the absence of any action in connection therewith shall be deemed to have so acted) to authorize the Board of Directors or a committee thereof to fix such remuneration subject to such criteria or standards, if any, as may be provided in such resolution, and if no such criteria or standards are so provided, such remuneration shall be fixed in an amount commensurate with the volume and nature of the services rendered by such auditor(s).

BRANCH REGISTERS

67. BRANCH REGISTERS

Subject to and in accordance with the provisions of Sections 130 to 139, inclusive, of the Companies Law and to all orders and regulation issued thereunder, the Company may cause branch registers to be kept in any place outside Israel as the Board of Directors may think fit, and, subject to all applicable requirements of law, the Board of Directors may from time to time adopt such rules and procedures as it may think fit in connection with the keeping of such branch registers.

INSURANCE, INDEMNITY AND EXEMPTION

68. INDEMNITY, INSURANCE AND EXEMPTION

(a) Exemption From Liability . Subject to the provisions of the Companies Law, the Company may exempt an Office Holder in advance from all or part of such Office Holder's responsibility or liability for damages caused to the Company due to any breach of such Office Holder's duty of care towards the Company to the maximum extent permitted by law. Notwithstanding, the Company shall not exempt a director in advance from its responsibility or liability towards the Company due to a breach of such director's duty of care in distribution.

(b) Indemnification.

(i) Subject to the provisions of the Companies Law and the Securities Law, the Company may indemnify an Office Holder to the fullest extent permitted by the Companies Law and the Securities Law, with respect to the following liabilities,

expenses and payments, provided that such liabilities, expenses and payments were incurred by such Office Holder in such Office Holder's capacity as an Office Holder of the Company:

(A) a financial obligation imposed on an Office Holder in favor of another person by a court judgment, including a compromise judgment or an arbitrator's award approved by a court of law;

(B) reasonable litigation expenses, including legal fees, incurred by an Office Holder as a result of Criminal Inquiry or an investigation or proceeding instituted against such Office Holder by a competent authority, which inquiry or investigation or proceeding has ended without the filing of an indictment and without an imposition of financial liability in lieu of a criminal proceeding, or has ended in the imposition of a financial obligation in lieu of a criminal proceeding without the filing of an indictment for an offense that does not require proof of mens rea (the phrases "proceeding that has ended without the filing of an indictment" and "financial obligation in lieu of a criminal proceeding" shall have the meanings ascribed to such phrases in Section 260(a)(1a) of the Companies Law);

(C) expenses, including reasonable litigation expenses and legal fees, incurred by an Office Holder as a result of a proceeding instituted against such Office Holder in relation to (1) infringements that may impose financial sanction pursuant to the provisions of Chapter H'3 under the Securities Law or (2) administrative infringements pursuant to the provisions of Chapter H'4 under the Securities Law or (3) infringements pursuant to the provisions of Chapter I'1 under the Securities Law;

(D) reasonable legal expenses, including attorney's fees, which the Office Holder incurred or with which the Office Holder was charged by a court of law, in a proceeding brought against the Office Holder, by the Company or on its behalf or by another person, or in a criminal prosecution in which the Office Holder was acquitted, or in a criminal prosecution in which the Office Holder was convicted of an offense that does not require proof of mens rea (criminal intent); and

(E) payments to an injured party of infringement under Section 52ND(a)(1)(a) of the Securities Law.

(F) expenses, including reasonable litigation expenses and legal fees, incurred by an Office Holder as a result of a proceeding instituted against such Office Holder under the Antitrust Law.

(ii) Subject to the provisions of the Companies Law and the Securities Law, the Company may undertake to indemnify an Office Holder in advance with respect to (i) financial obligations as specified in Article 68(i)(b)(A), provided, that the undertaking is limited to categories of events which, in the opinion of the Board of Directors can be foreseen, based on the Company's actual activities at the time the undertaking to indemnify is given, and in amounts set by the Board of Directors as reasonable, and (ii) expenses, fees and payments as specified in Sub-Sections 68(i)(b)(B), (C), (D), (E) and (F). Subject to the provisions of the Companies Law and the Securities Law, the Company may also undertake to indemnify an Office Holder retroactively for expenses, fees and payments as specified in Section 68(b)(i).

(i) Subject to the provisions of the Companies Law and the Securities Law, the Company may enter into a contract to insure an Office Holder for all or part of the liability that may be imposed on such Office Holder in connection with an act performed by such Office Holder in such Office Holder's capacity as an Office Holder of the Company, with respect to each of the following:

(A) breach of his duty of care to the Company or to another person;

(B) breach of his duty of loyalty to the Company, provided that the Office Holder acted in good faith and had reasonable grounds to assume that the action in question would not prejudice the interests of the

Company;

(ii) Subject to the provisions of the Companies Law and the Securities Law, the Company may also enter into a contract to insure an Office Holder for (A) expenses, including reasonable litigation expenses and legal fees, incurred by the Office Holder as a result of a proceeding instituted against such Office Holder in relation to (1) infringements that may impose financial sanction pursuant to the provisions of Chapter H'3 under the Securities Law or (2) administrative infringements pursuant to the provisions of Chapter H'4 under the Securities Law or (3) infringements pursuant to the provisions of Chapter I'1 under the Securities Law and (B) payments made to the injured parties of such infringement under Section 52ND(a)(1)(a) of the Securities Law.

(iii) Subject to the provisions of the Companies Law and the Antitrust Law, the Company may also enter into a contract to insure an Office Holder for expenses, including reasonable litigation expenses and legal fees, incurred by an Office Holder as a result of a proceeding instituted against such Office Holder under the Antitrust Law.

(d) (i) The Company shall not indemnify, exculpate or insure any Office Holder under any of the following circumstances:

(A) a breach of duty of loyalty, except, with respect to indemnification and insurance, to the extent that the Office Holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the company;

(B) a breach of duty of care committed intentionally or recklessly, excluding a breach arising out of the negligent conduct of the office holder;

(D) a fine, civil fine, financial sanction or levied against the office holder.

(ii) The Company shall not indemnify or insure any Office Holder for a proceeding instituted against such Office Holder pursuant to the provisions of Chapter H'3, H'4 and I'1 under the Securities Law.

(e) Any amendment to the Companies Law and the Securities Law adversely affecting the right of any Office Holder to be indemnified or insured pursuant to this Article 68 shall be prospective in effect, and shall not affect the Company's obligation or ability to indemnify or insure an Office Holder for any act or omission occurring prior to such amendment, unless otherwise provided by the Companies Law and the Securities Law.

(f) The provisions of this Article 68 are not intended, and shall not be interpreted so as to restrict the Company, in any manner in respect of the procurement of insurance and/or indemnification and/or exculpation, in favor of any person who is not an Office Holder, including, without limitation, any employee, agent, consultant or contractor of the Company who is not an Office Holder.

WINDING UP

69. WINDING UP

If the Company is wound up, then subject to applicable law and to the rights of the holders of shares with special rights upon winding up, the assets of the Company available for distribution among the shareholders shall be distributed to them in proportion to the respective holdings of the shares in respect of which such distribution is being made.

RIGHTS OF SIGNATURE, STAMP, AND SEAL

70. RIGHTS OF SIGNATURE, STAMP, AND SEAL

(a) The Board of Directors shall be entitled to authorize any person or persons (who need not be Directors) to act and sign on behalf of the Company, and the acts and signature of such person (s) on behalf of the Company shall bind the Company insofar as such person (s) acted and signed within the scope of his or their authority.

(b) The Board of Directors may provide for a seal. If the Board of Directors so provides, it shall also provide for the safe custody thereof. Such seal shall not be used except by the authority of the Board of Directors and in the presence of the person (s) authorized to sign on behalf of the Company, who shall sign every instrument to which such seal is affixed.

NOTICES

71. NOTICES

(a) Any written notice or other document may be served by the Company upon any shareholder either personally or by sending it by prepaid mail (airmail if sent internationally) addressed to such member at his address as described in the Shareholder Register. Any written notice or other document may be served by any shareholder upon the Company by tendering the same in person to the Secretary or the General Manager or Chief Executive Officer of the Company at the principal office of the Company or by sending it by prepaid registered mail (airmail if posted outside Israel) to the Company at it Registered Address. Any such notice or other document shall be deemed to have been served two (2) business days after it has been posted (seven (7) business days if posted internationally), or when actually tendered in person, to such shareholder (or to the Secretary or the General Manager), whichever is earlier. Notice sent by email or facsimile shall be deemed to have been served two business days after the notice is sent to the addressee, or when in fact received, whichever is earlier, notwithstanding that if it was defectively addressed or failed, in some other respect, to comply with the provisions of this Article 71(a).

(b) All notices to be given to the shareholders shall, with respect to any share to which persons are jointly entitled, be given to whichever of such persons is named first in the Shareholder Register, and any notice so given shall be sufficient notice to the holders of such share.

(c) If requested by the Company, each shareholder shall provide the Company with the shareholder's full street and mailing address, as well, if available with facsimile number and email address. Any shareholder whose address is not set out in the Shareholder Register, and who shall not have designated in writing delivered to the Company an address for the receipt of notices, shall not be entitled to receive any notice from the Company.

A-24

FIRST AMENDMENT TO THE MELLANOX TECHNOLOGIES,

LTD.

AMENDED AND RESTATED EMPLOYEE SHARE PURCHASE PLAN

( effective as of February 23, 2016)

This First Amendment (this " Amendment ") to the Mellanox Technologies, Ltd. Amended and Restated Employee Share Purchase Plan (as amended and restated on February 22, 2012, the " Plan "), is made and adopted by the Board of Directors (the " Board ") of Mellanox Technologies, Ltd., a company organized under the laws of the State of Israel (the " Company "), effective as of February 23, 2016 (the " Effective Date "), subject to the approval of the Company's shareholders within 12 months following the Effective Date.

RECITALS

WHEREAS, the Company maintains the Plan;

WHEREAS, pursuant to Section 20 of the Plan, the Board has the authority to amend the Plan from time to time, provided that the Company shall obtain shareholder approval for any such amendment to the extent necessary to comply with Section 423 of the U.S. Internal Revenue Code of 1986, as amended; and

WHEREAS, the Board desires to amend the Plan to increase the number of shares reserved for issuance thereunder.

NOW, THEREFORE, BE IT RESOLVED, that the Plan is hereby amended as follows, effective as of the Effective Date, subject to the approval of the Company's shareholders within 12 months following the Effective Date:

AMENDMENT

1. Section 13(a) of the Plan is hereby amended and restated in its entirety as follows:

"(a)Subject to adjustment upon changes in capitalization of the Company as provided in Section 19 hereof, the maximum number of Shares which shall be made available for sale under the Plan shall be 6,585,712 Shares."

2. Notwithstanding anything in the Plan to the contrary, the Plan remain in effect until the tenth (10 ^th ) anniversary of the Effective Date of this Amendment.

3. This Amendment shall be and hereby is incorporated into and forms a part of the Plan.

4. Except as expressly provided herein, all terms and conditions of the Plan shall remain in full force and effect.

* * *

I hereby certify that the foregoing Amendment was duly adopted by the Board of

Directors of Mellanox Technologies, Ltd. on February 23, 2016.

I hereby certify that the foregoing Amendment was duly adopted by the

shareholders of Mellanox Technologies, Ltd. on May 9, 2016.

Executed on this 9th day of May, 2016.




By:		/s/ JACOB SHULMAN
	Name:	Jacob Shulman
	Title:	Chief Financial Officer

MELLANOX TECHNOLOGIES, LTD.
AMENDED AND RESTATED GLOBAL SHARE INCENTIVE PLAN (2006)

1. Name and Purpose .

1.1 This plan shall be known as the Mellanox Technologies, Ltd. Amended and Restated Global Share Incentive Plan (2006) (the “ Plan ”).

The Board of Directors adopted the Mellanox Technologies, Ltd. Global Share Incentive Plan (2006) (the “ 2006 Plan ”) on October 26, 2006, and the 2006 Plan was approved by the Company’s shareholders on December 5, 2006. The 2006 Plan is hereby amended and restated effective as of March 14, 2016 (the “ Effective Date ”), subject to the approval by the Company’s shareholders within twelve months of the date it is approved by the Board of Directors.

1.2 The purposes of the Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to Service Providers of the Company and its affiliates and subsidiaries, if any, and to promote the Company’s business by providing such individuals with opportunities to receive Awards pursuant to the Plan and to strengthen the sense of common interest between such individuals and the Company’s shareholders.

1.3 Awards granted under the Plan to Service Providers in various jurisdictions may be subject to specific terms and conditions for such grants may be set forth in one or more separate appendix to the Plan, as may be approved by the Board of Directors of the Company from time to time.

2. Definitions .

1 “ Administrator ” shall mean the Board of Directors or a Committee.

2 “ Appendix ” shall mean any appendix to the Plan adopted by the Board of Directors containing country-specific or other special terms relating to Awards including grants of restricted shares and other equity-based Awards.

3 “ Award ” shall mean a grant of Options, other equity-based awards granted in accordance with the provisions of an Appendix, including a Performance-Based Award, or other allotment of Shares hereunder. All Awards shall be confirmed by an Award Agreement, and subject to the terms and conditions of such Award Agreement.

4 “ Award Agreement ” shall mean a written instrument setting forth the terms applicable to a particular Award.

5 “ Board of Directors ” shall mean the board of directors of the Company.

6 “ Cause ” shall have the meaning ascribed to such term or a similar term as set forth in the Participant’s employment agreement or the agreement governing the provision of services by a non-employee Service Provider, or, in the absence of such a definition: (i) conviction (or plea of nolo contendere ) of any felony or crime involving moral turpitude or affecting the Company; (ii) repeated and unreasonable refusal to carry out a reasonable and lawful directive of the Company or of Participant’s supervisor which involves the business of the Company or its affiliates and was capable of being lawfully performed; (iii) fraud or embezzlement of funds of the Company or its affiliates; (iv) any breach by a director of his / her fiduciary duties or duties of care towards the Company; and (v) any disclosure of confidential information of the Company or breach of any obligation not to compete with the Company or not to violate a restrictive covenant.

7 “ Change in Control ” shall mean and includes each of the following:

(a) A transaction or series of transactions (other than an offering of Shares to the general public through a registration statement filed under the laws of any applicable jurisdiction) whereby any person or related group of persons (other than the

Company, any of its subsidiaries, an employee benefit plan maintained by the Company or any of its subsidiaries or a person that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficial ownership of securities of the Company possessing more than 50% of the total combined voting power of the Company’s securities outstanding immediately after such acquisition; or

(b) During any period of two consecutive years, individuals who, at the beginning of such period, constitute the Board of Directors together with any new director(s) (other than a director designated by a person who shall have entered into an agreement with the Company to effect a transaction described in Subsections (a) or (c) hereof) whose election by the Board of Directors or nomination for election by the Company’s shareholders was approved by a vote of at least two thirds of the directors then still in office who either were directors at the beginning of the two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or

(c) The consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of the Company’s assets in any single transaction or series of related transactions or (z) the acquisition of assets or shares of another entity, in each case other than a transaction:

(i) Which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “ Successor Entity ”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction, and

(ii) After which no person or group beneficially owns voting securities representing 50% or more of the combined voting power of the Successor Entity; provided, however, that no person or group shall be treated for purposes of this Subsection (c)(ii) as beneficially owning 50% or more of combined voting power of the Successor Entity solely as a result of the voting power held in the Company prior to the consummation of the transaction; or

(d) The Company’s shareholders approve a liquidation or dissolution of the Company.

Notwithstanding the foregoing, if a Change in Control constitutes a payment event with respect to any Award (or any portion of an Award) that provides for the deferral of compensation that is subject to Section 409A, to the extent required to avoid the imposition of additional taxes under Section 409A, the transaction or event described in subsection (a), (b), (c) or (d) with respect to such Award (or portion thereof) shall only constitute a Change in Control for purposes of the payment timing of such Award if such transaction also constitutes a “change in control event,” as defined in Treasury Regulation Section 1.409A-3(i)(5).

The Administrator shall have full and final authority, which shall be exercised in its discretion, to determine conclusively whether a Change in Control of the Company has occurred pursuant to the above definition, and the date of the occurrence of such Change in Control and any incidental matters relating thereto; provided that any exercise of authority in conjunction with a determination of whether a Change in Control is a “change in control event” as defined in Treasury Regulation Section 1.409A-3(i)(5) shall be consistent with such regulation.

8 “ Code ” shall mean the U.S. Internal Revenue Code of 1986, as amended. Any reference to any section of the Code shall also be a reference to any successor provision and any Treasury Regulation promulgated thereunder.

9 “ Committee ” shall mean the compensation committee or other committee as may be appointed and maintained by the Board of Directors, in its discretion, to administer the Plan, to the extent permissible under applicable law, as amended from time to time.

10 “ Company ” shall mean Mellanox Technologies, Ltd., an Israeli company, and its successors and assigns.

11 “ Companies Law ” shall mean the Israeli Companies Law 5759-1999, as amended from time to time.

12 “ Consultant ” shall mean any individual who (either directly or through his or her employer) is an advisor or consultant to the Company or any affiliate thereof.

13 “ Corporate Charter ” shall mean the Articles of Association of the Company, and any subsequent amendments or replacements thereto.

14 “ Covered Employee ” means an employee, including an officer, of the Company or any subsidiary thereof who is, or could be, a “covered employee” within the meaning of Section 162(m) of the Code.

15 “ Disability ” shall have the meaning ascribed to such term or a similar term in the Participant’s employment agreement (where applicable), or in the absence of such a definition, the inability of the Participant, in the opinion of a qualified physician acceptable to the Company, to perform the major duties of the Participant’s position with the Company because of the sickness or injury of the Participant for a consecutive period of 180 days.

16 “ Effective Date ” shall have the meaning ascribed to it in Section 1.1 hereof.

17 “ Equity Restructuring ” shall mean a non-reciprocal transaction between the Company and its shareholders, such as a share dividend, share split, spin-off, rights offering or recapitalization through a large, nonrecurring cash dividend, that affects the Shares (or other securities of the Company) or the share price of Shares (or other securities) and causes a change in the per share value of the Shares underlying outstanding Awards.

18 “ Exchange Act ” shall mean the U.S. Securities Exchange Act of 1934, as amended. Any references to any section of the Exchange Act shall also be a reference to any successor provision.

19 “ Non-Employee Director ” shall mean a member of the Board of Directors who is not an employee of the Company or any of its affiliates.

20 “ Options ” shall mean options to purchase Shares awarded under the Plan.

21 “ Participant ” shall mean a recipient of an Award hereunder who executes an Award Agreement.

22 “ Performance-Based Award ” means an Award granted to selected Covered Employees pursuant to this Plan, including pursuant to the provisions of an Appendix, but which is subject to the terms and conditions set forth in Section 10 hereof.

23 “ Performance Criteria ” means the criteria that the Committee selects for purposes of establishing the Performance Goal or Performance Goals for a Participant for a Performance Period. The Performance Criteria that will be used to establish Performance Goals are limited to the following: net earnings (either before or after interest, taxes, depreciation and amortization), economic value-added, sales or revenue, net income (either before or after taxes), operating earnings, cash flow (including, but not limited to, operating cash flow and free cash flow), cash flow return on capital, return on net assets, return on shareholders’ equity, return on assets, return on capital, shareholder returns, return on sales, gross or net profit margin, productivity, expense, margins, operating efficiency, customer satisfaction, working capital, earnings per Share, price per Share, and market share, any of which may be measured either in absolute terms or as compared to any incremental increase or as compared to results of a peer group. The Committee shall define in an objective fashion the manner of calculating the Performance Criteria it selects to use for such Performance Period for such Participant.

24 “ Performance Goals ” means, for a Performance Period, the goals established in writing by the Committee for the Performance Period based upon the Performance Criteria. Depending on the Performance Criteria used to establish such Performance Goals, the Performance Goals may be expressed in terms of overall Company performance or the performance of

a division, business unit, or an individual. The Committee, in its sole discretion, may provide that one or more objectively determinable adjustments shall be made to one or more of the Performance Goals. Such adjustments may include, but are not limited to, one or more of the following: (i) items related to a change in applicable accounting standards; (ii) items relating to financing activities; (iii) expenses for restructuring or productivity initiatives; (iv) other non-operating items; (v) items related to acquisitions; (vi) items attributable to the business operations of any entity acquired by the Company during the Performance Period; (vii) items related to the sale or disposition of a business or segment of a business; (viii) items related to discontinued operations that do not qualify as a segment of a business under applicable accounting standards; (ix) items attributable to any share dividend, share split, combination or exchange of shares occurring during the Performance Period; (x) any other items of significant income or expense which are determined to be appropriate adjustments; (xi) items relating to unusual or extraordinary corporate transactions, events or developments, (xii) items related to amortization of acquired intangible assets; (xiii) items that are outside the scope of the Company’s core, on-going business activities; (xiv) items related to acquired in-process research and development; (xv) items relating to changes in tax laws; (xvi) items relating to major licensing or partnership arrangements; (xvii) items relating to asset impairment charges; (xviii) items relating to gains or losses for litigation, arbitration and contractual settlements; (xix) items attributable to expenses incurred in connection with a reduction in force or early retirement initiative; (xx) items relating to non-cash income or expense or (xxi) items relating to any other unusual or nonrecurring events or changes in applicable law, applicable accounting standards or business conditions. For all Awards intended to qualify as Performance-Based Compensation, such determinations shall be made within the time prescribed by, and otherwise in compliance with, Section 162(m) of the Code.

25 “ Performance Period ” means the one or more periods of time, which may be of varying and overlapping durations, 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-Based Award.

26 “ Prior Plans ” shall mean the Company 1999 United States Equity Incentive Plan, the Company 1999 Israeli Share Option Plan, the Company 2003 Israeli Share Option Plan, the Voltaire Ltd. 2007 Incentive Compensation Plan, the Voltaire Ltd. Section 102 Stock Option/Stock Purchase Plan, the Voltaire, Ltd. 2001 Section 102 Stock Option/Stock Purchase Plan, the Voltaire Ltd. 2001 Stock Option Plan, the Kotura, Inc. Second Amended and Restated 2003 Stock Plan, the IPtronics, Inc. 2013 Restricted Stock Unit Plan, the EZchip Semiconductor Ltd. 2003 Amended and Restated Equity Incentive Plan, the EZchip Semiconductor Ltd. 2007 U.S. Equity Incentive Plan and the Amended and Restated EZchip Semiconductor Ltd. 2009 Equity Incentive Plan, and the Company Global Share Incentive Assumption Plan (2010).

27 “ Qualified Performance-Based Compensation ” means any compensation that is intended to qualify as “qualified performance-based compensation” as described in Section 162(m)(4)(C) of the Code.

28 “ Service Provider ” shall mean an employee, member of the Board of Directors, office holder or Consultant of the Company or any affiliate thereof.

29 “ Shares ” shall mean Ordinary Shares, nominal value NIS 0.01 per share, of the Company.

3. Administration of the Plan .

3.1 The Plan shall be administered by the Administrator. If the Administrator is a Committee, such Committee shall consist of such number of members of the Board of Directors of the Company (not less than two in number), as may be determined from time to time by the Board of Directors. The Board of Directors shall appoint such 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.

3.2 In order to comply with the requirements of Section 162(m) of the Code, Rule 16b‑3 promulgated under the Exchange Act or to the extent required by any other applicable rule or regulation, the Plan shall be administered jointly by the Board of Directors and a Committee consisting solely of two or more members of the Board of Directors each of whom is an “outside director,” within the meaning of Section 162(m) of the Code, a member of the Board of Directors who qualifies as a “Non-Employee Director” as defined in Rule 16b-3(b)(3) under the Exchange Act or any successor rule and an “independent

director” under the NASDAQ rules (or other principal securities market on which Shares are traded). Without limiting the application of this Section 3.2, to the extent necessary to comply with the requirements of Section 162(m) of the Code and Rule 16b‑3 promulgated under the Exchange Act, Awards shall be granted by a Committee consisting of members who satisfy the requirements specified in the foregoing sentence and shall be ratified by the Board of Directors. Notwithstanding the foregoing, but subject to Section 4.1 hereof, the full Board of Directors, acting by a majority of its members in office, shall conduct the general administration of the Plan with respect to all Awards granted to a member of the Board of Directors who is not an employee of the Company or any affiliate thereof, and for purposes of such Awards the term “Committee” as used in this Plan shall be deemed to refer to the Board of Directors. In its sole discretion, the Board of Directors may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan except with respect to matters which under Rule 16b‑3 under the Exchange Act or Section 162(m) of the Code, or any regulations or rules issued thereunder, are required to be determined in the sole discretion of the Committee.

3.3 The Committee, if appointed, shall select one of its members as its Chairman and shall hold its meetings at such times and places as it shall determine. Actions at a meeting of the Committee at which a majority of its members are present or acts approved in writing by all members of the Committee, shall be the valid acts of the Committee. The Committee shall appoint a Secretary, who shall keep records of its meetings and shall make such rules and regulations for the conduct of its business and the implementation of the Plan, as it shall deem advisable, subject to the directives of the Board of Directors and in accordance with applicable law.

3.4 Subject to the general terms and conditions of the Plan, and in particular Section 3.5 below, the Administrator shall have full authority in its discretion, from time to time and at any time, to determine (i) eligible Participants, (ii) the number of Options or Shares to be covered by each Award, (iii) the time or times at which the Award shall be granted, (iv) the vesting schedule and other terms and conditions applying to Awards, including accelerations or waivers of restrictions, (v) the form(s) of Award Agreements, and (vi) any other matter which is necessary or desirable for, or incidental to, the administration of the Plan. The Board of Directors may, in its sole discretion, delegate some or all of the powers listed above to the Committee, to the extent permitted by the Companies Law, its Corporate Charter or other applicable law, rules or regulations to which the Company is subject.

3.5 In the event that the Administrator is a Committee, the Committee shall not be entitled to grant Options to the Participants (unless permitted to do so by the Companies Law). However, in the event that the Committee is authorized to do so by the Board of Directors, it may issue Shares underlying Options which have been granted by the Board of Directors and duly exercised pursuant to the provisions hereof, in accordance with Sections 112(a)(5) and 288 of the Companies Law.

3.6 No member of the Board of Directors or of the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any Award granted hereunder. Subject to the Company’s decision and to all approvals legally required, each member of the Board of Directors or the Committee shall be indemnified and held harmless by the Company against any cost or expense (including counsel fees) reasonably incurred by him, or any liability (including any sum paid in settlement of a claim with the approval of the Company) arising out of any act or omission to act in connection with the Plan unless arising out of such member’s own willful misconduct or bad faith, to the fullest extent permitted by applicable law. Such indemnification shall be in addition to any rights of indemnification the member may have as a director or otherwise under the Company’s Corporate Charter, any agreement, any vote of shareholders or disinterested directors, any insurance policy or otherwise.

3.7 The interpretation and construction by the Administrator of any provision of the Plan or of any Option hereunder shall be final and conclusive. In the event that the Board of Directors appoints a Committee, the interpretation and construction by the Committee of any provision of the Plan or of any Option hereunder shall upon ratification by the Board of Directors, be final and conclusive unless otherwise determined by the Board of Directors. To avoid doubt, subject to Section 3.2 hereof, the Board of Directors may at any time exercise any powers of the Administrator, notwithstanding the fact that a Committee has been appointed.

3.8 The Administrator shall have the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan and perform all acts, including the delegation of its responsibilities (to the extent permitted by applicable law and applicable stock exchange rules), as it shall, from time to time, deem advisable; to construe and interpret the

terms and provisions of the Plan and any Award issued under the Plan (and any agreements relating thereto); and to otherwise supervise the administration of the Plan. The Administrator may correct any defect, supply any omission or reconcile any inconsistency in the Plan or in any agreement relating thereto in the manner and to the extent it shall deem necessary to effectuate the purpose and intent of the Plan. Notwithstanding the foregoing, no action of the Administrator under this Section 3.8 shall reduce the rights of any Participant without the Participant’s consent.

3.9 Without limiting the generality of the foregoing, the Administrator may adopt special Appendices and/or guidelines and provisions for persons who are residing in or employed in, or subject to, the taxes of, any domestic or foreign jurisdictions, to comply with applicable laws, regulations, or accounting, listing or other rules with respect to such domestic or foreign jurisdictions.

4. Eligible Participants .

4.1 No Award may be granted pursuant to the Plan to any person serving as a member of the Committee or to any other member of the Board of Directors at the time of the grant, unless such grant is approved in the manner prescribed for the approval of compensation of directors under Section 273 of the Companies Law. To avoid doubt, such Awards require approval of the audit committee of the Board of Directors, the Board of Directors and the shareholders of the Company.

4.2 Subject to the limitation set forth in Section 4.1 above and any restriction imposed by applicable law, Awards may be granted to any Service Provider of the Company, whether or not the Service Provider is a member of the Board of Directors or a member of the board of directors of an affiliate of the Company. The grant of an Award to a Participant hereunder shall neither entitle such Participant to receive an additional Award or participate in other incentive plans of the Company, nor disqualify such Participant from receiving and additional Award or participating in other incentive plans of the Company.

5. Reserved Shares .

5.1 Subject to Section 12.1 hereof, as of the Effective Date, the aggregate number of Shares which may be issued or transferred pursuant to Awards under the Plan shall be the sum of (i) 750,000 Shares and (ii) any Shares which as of the Effective Date are subject to awards outstanding under the Prior Plans that expire, are cancelled or otherwise terminate unexercised, or Shares that otherwise would have reverted to the share reserve of the Prior Plans following the Effective Date. Anything to the contrary herein notwithstanding, the maximum aggregate number of Shares that may be issued or transferred pursuant to Awards under the Plan during the term of the Plan shall not exceed 6,800,000 Shares, subject to Section 12.1 hereof. Subject to Section 14.2 hereof, the Company shall determine the number of Shares reserved hereunder from time to time, and such number may be increased or decreased by the Company from time to time.

5.2 Any Shares subject to an Award that shall for any reason terminate, expire or otherwise lapse shall again be available for grant as Awards under the Plan. Additionally, any Shares tendered or withheld to satisfy the grant or exercise price or tax withholding obligation pursuant to any Award other than an Option shall again be available for the grant of an Award pursuant to the Plan. In addition, Shares purchased on the open market with cash proceeds from the exercise of Options shall not be available for the grant of an Award pursuant to the Plan. To the extent permitted by applicable law or any exchange rule, Shares issued in assumption of, or in substitution for, any outstanding awards of any entity acquired in any form of combination by the Company or any affiliate shall not be counted against Shares available for grant pursuant to this Plan. Any Shares that remain unissued and are not subject to Awards at the termination of the Plan shall cease to be reserved for purposes of the Plan. Until termination of the Plan the Company shall at all times reserve a sufficient number of Shares to meet the requirements of the Plan.

5.3 Notwithstanding any provision in the Plan to the contrary, and subject to Section 12.1 hereof, the maximum number of Shares with respect to one or more Awards that may be granted to any one Participant during any calendar year (measured from the date of any grant) shall be four million (4,000,000) Shares.

6. Award Agreement .

6.1 The Board of Directors, and to the extent contemplated under Section 3.2 hereof, a Committee and the Board of Directors, in their discretion may award to Participants Awards available under the Plan. The terms of the Award will be set forth in the Award Agreement. The date of grant of each Award shall be the date specified by the Board of Directors, and the Committee, as applicable, at the time such award is made, or in the absence of such specification, the date of approval of the award by the Board of Directors, and the Committee, as applicable.

6.2 The Award Agreement shall state, inter alia , the number of Options or Shares covered thereby, the type of Option or other Award, any special terms applying to such Award (if any), including the terms of any country-specific or other Appendix, as determined by the Board of Directors, and the Committee, as applicable.

7. Option Prices .

The exercise price for each Share to be issued upon exercise of an Option shall be such price as is determined by the Board of Directors in its discretion, provided that the price per Share is not less than Fair Market Value (as defined in the applicable Appendix), and subject to any further restrictions set forth in an applicable Appendix.

8. Exercise Of Option .

8.1 Options shall be exercisable pursuant to the terms under which they were awarded and subject to the terms and conditions of the Plan and any applicable Appendix, as specified in the Award Agreement.

8.2 An Option, or any part thereof, shall be exercisable by the Participant’s signing and returning to the Company at its principal office (and to the Trustee, where applicable), a “Notice of Exercise” in such form and substance as may be prescribed by the Administrator from time to time, together with full payment for the Shares underlying such Option.

8.3 Each payment for Shares under an Option shall be in respect of a whole number of Shares, shall be effected in (i) cash, (ii) by check payable to the order of the Company, (iii) Shares held for such period of time as may be required by the Administrator in order to avoid adverse accounting consequences and having a fair market value on the date of delivery equal to the aggregate exercise price of the Option or exercised portion thereof, or (iv) such other method of payment acceptable to the Company as determined by the Administrator, and shall be accompanied by a notice stating the number of Shares being paid for thereby.

8.4 Until the Shares are issued (as evidenced by the appropriate entry in the share register of the Company or of a duly authorized transfer agent of the Company) a Participant shall have no right to vote or right to receive dividends or any other rights as a shareholder shall exist with respect to such Shares, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment shall be made for a dividend or other right the record date for which is prior to the date the Shares are issued, except as provided in Section 12.1 of the Plan.

8.5 To the extent permitted by law, if the Shares are traded on a national securities exchange, NASDAQ or quoted on a national quotation system or otherwise publicly traded or quoted, payment for the Shares underlying an Option may be made all or in part by the delivery (on a form prescribed by the Company) of an irrevocable direction to a securities broker approved by the Company to sell Shares and to deliver all or part of the sales proceeds to the Company in payment of the exercise price (or the relevant portion thereof, as applicable) and any withholding taxes, or on such other terms and conditions as may be acceptable to the Administrator. No Shares shall be issued until payment therefor, as provided herein, has been made or provided for.

9. Prohibition on Repricing.

Subject to Section 12, the Administrator shall not, without the approval of the shareholders of the Company, (a) authorize the amendment of any outstanding Option to reduce its price per Share, or (b) cancel any Option in exchange for cash or another Award when the Option price per Share exceeds the fair market value of the underlying Shares. Furthermore, for purposes of this Section 9, except in connection with a corporate transaction involving the Company (including, without limitation, any share dividend, share split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination or exchange of shares), the terms of outstanding Options may not be amended to reduce the exercise price per Share or cancel outstanding Options in exchange for cash, other Awards or Options with an exercise price per Share that is less than the exercise price per Share of the original Options without the approval of the shareholders of the Company.

10. Performance Based Awards .

10.1 Purpose . The purpose of this Section 10 is to provide the Committee the ability to grant Awards that are intended to constitute Qualified Performance-Based Compensation. If the Committee, in its discretion, decides to grant a Performance-Based Award to a Covered Employee, the provisions of this Section 10 shall control over any contrary provision contained in this Plan or an Appendix; provided , however , that the Committee may in its discretion grant Awards to Covered Employees that are based on Performance Criteria or Performance Goals but that do not satisfy the requirements of this Section 10.

10.2 Applicability . This Section 10 shall apply only to those Covered Employees selected by the Committee to receive Performance-Based Awards. The designation of a Covered Employee as a Participant for a Performance Period shall not in any manner entitle the Participant to receive an Award for the period. Moreover, designation of a Covered Employee as a Participant for a particular Performance Period shall not require designation of such Covered Employee as a Participant in any subsequent Performance Period and designation of one Covered Employee as a Participant shall not require designation of any other Covered Employees as a Participant in such period or in any other period.

10.3 Procedures with Respect to Performance-Based Awards . To the extent necessary to comply with the Qualified Performance-Based Compensation requirements of Section 162(m)(4)(C) of the Code, with respect to any Award granted under this Plan, including under an Appendix, which may be granted to one or more Covered Employees, no later than ninety (90) days following the commencement of any fiscal year in question or any other designated fiscal period or period of service (or such other time as may be required or permitted by Section 162(m) of the Code), the Committee shall, in writing, (a) designate one or more Covered Employees, (b) select the Performance Criteria applicable to the Performance Period, (c) establish the Performance Goals, and amounts of such Awards, as applicable, which may be earned for such Performance Period, and (d) specify the relationship between Performance Criteria and the Performance Goals and the amounts of such Awards, as applicable, to be earned by each Covered Employee for such Performance Period. Following the completion of each Performance Period, the Committee shall certify in writing whether the applicable Performance Goals have been achieved for such Performance Period. In determining the amount earned by a Covered Employee, the Committee shall have the right to reduce or eliminate (but not to increase) the amount payable at a given level of performance to take into account additional factors that the Committee may deem relevant to the assessment of individual or corporate performance for the Performance Period.

10.4 Payment of Performance-Based Awards . Unless otherwise provided in the applicable Award Agreement, a Participant must be employed by the Company or a subsidiary of the Company on the day a Performance-Based Award for such Performance Period is paid to the Participant. Furthermore, a Participant shall be eligible to receive payment pursuant to a Performance-Based Award for a Performance Period only if the Performance Goals for such period are achieved. In determining the amount earned under a Performance-Based Award, the Committee may reduce or eliminate the amount of the Performance-Based Award earned for the Performance Period, if in its sole and absolute discretion, such reduction or elimination is appropriate.

10.5 Additional Limitations . Notwithstanding any other provision of the Plan, any Award which is granted to a Covered Employee and is intended to constitute Qualified Performance-Based Compensation shall be subject to any additional limitations set forth in Section 162(m) of the Code (including any amendment to Section 162(m) of the Code) or any regulations or rulings issued thereunder that are requirements for qualification as qualified performance-based compensation as described in Section 162(m)(4)(C) of the Code, and the Plan shall be deemed amended to the extent necessary to conform to such requirements.

11. Termination Of Relationship As Service Provider .

11.1 Effect of Termination; Exercise After Termination . Unless otherwise determined by the Administrator, if a Participant ceases to be a Service Provider, such Participant may exercise any outstanding Options within such period of time as is specified in the Award Agreement or the Plan to the extent that the Options are vested on the date of termination (but in no event later than the expiration of the term of the Option as set forth in the Award Agreement). If, on the date of termination, any Options or other Awards are unvested, the Shares covered by the unvested portion of the Option or other Award shall revert to the Plan. If, after termination, the Participant does not exercise the vested Options within the time specified in the Award Agreement or the Plan, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

In the absence of a provision specifying otherwise in the relevant Award Agreement, then:

(a) in the event that the Participant ceases to be a Service Provider for any reason other than termination for Cause as a result of the Participant’s death or Disability, the vested Options shall remain exercisable for a period of three (3) months from the effective date of termination of the Participant’s status as a Service Provider;

(b) in the event that the Participant ceases to be a Service Provider for Cause, any outstanding unexercised Option (whether vested or unvested) will immediately expire and terminate, and the Participant shall not have any rights in connection with such Options.

(c) in the event that the Participant ceases to be a Service Provider as a result of the Participant’s Disability, the Option shall remain exercisable for twelve (12) months following the Participant’s date of termination for Disability.

(d) in the event that the Participant dies while a Service Provider, the Option shall remain exercisable by the Participant’s estate or by a person who acquires the right to exercise the Option by bequest or inheritance for twelve (12) months following the Participant’s date of death.

11.2 Date of Termination . For purposes of the Plan and any Option or Option Agreement, the date of termination (whether for Cause or otherwise) shall be the effective date of termination of the Participant’s employment or engagement as a Service Provider.

11.3 Leave of Absence . Unless the Administrator provides otherwise, vesting of Options granted hereunder shall be suspended during any unpaid leave of absence. A Service Provider shall not cease to be considered as such in the case of any (a) leave of absence approved by the Company, or (b) transfers between locations of the Company or between the Company, and its parent, subsidiary, affiliate, or any successor thereof; or (c) changes in status (employee to member of the Board of Directors, employee to Consultant, etc.), provided that such change does not affect the specific terms applying to the Service Provider’s Award.

12. Change in Capital Structure .

Upon the occurrence of any of the following described events, a Participant’s rights to purchase Shares under the Plan shall be adjusted as hereinafter provided:

12.1 Adjustments .

(a) In the event of any dividend or other distribution, reorganization, merger, consolidation, combination, repurchase, or exchange of Shares or other securities of the Company, or other change in the corporate structure of the Company affecting the Shares (other than an Equity Restructuring) occurs such that an adjustment is determined by the Administrator (in its sole and absolute discretion) to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Administrator shall, in such manner as it may deem equitable, adjust: (a) the aggregate number and kind of shares that may be issued under the Plan (including, but not limited to, adjustments of the limitations in Section 5; (b) the terms and conditions of any outstanding Awards (including, without limitation, any applicable performance targets or criteria with respect thereto); and (c) the grant or exercise price per share for any outstanding Awards under the Plan.

(b) In the event of any transaction or event described in Section 12.1(a) hereof or any unusual or nonrecurring transactions or events affecting the Company, any affiliate of the Company, or the financial statements of the Company or any affiliate, or of changes in applicable laws, regulations or accounting principles, the Administrator, in its sole and absolute discretion, and on such terms and conditions as it deems appropriate, either by the terms of the Award or by action taken prior to the occurrence of such transaction or event and either automatically or upon the Participant’s request, is hereby authorized to take any one or more of the following actions whenever the Administrator determines that such action is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to any Award under the Plan, to facilitate such transactions or events or to give effect to such changes in laws, regulations or principles:

(i) To provide for either (A) termination of any such Award in exchange for an amount of cash, if any, equal to the amount that would have been attained upon the exercise of such Award or realization of the Participant’s rights (and, for the avoidance of doubt, if as of the date of the occurrence of the transaction or event described in this Section 12.1(b), the Administrator determines in good faith that no amount would have been attained upon the exercise of such Award or realization of the Participant’s rights, then such Award may be terminated by the Company without payment) or (B) the replacement of such Award with other rights or property selected by the Administrator in its sole discretion;

(ii) To provide that such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar options, rights or awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices;

(iii) To make adjustments in the number and type of Shares (or other securities or property) subject to outstanding Awards, and/or in the terms and conditions of (including the grant or exercise price), and the criteria included in, outstanding options, rights and awards and options, rights and awards which may be granted in the future;

(iv) To provide that such Award shall be exercisable or payable or fully vested with respect to all shares covered thereby, notwithstanding anything to the contrary in the Plan or the applicable Award Agreement; and

(v) To provide that the Award cannot vest, be exercised or become payable after such event.

(c) In connection with the occurrence of any Equity Restructuring, and notwithstanding anything to the contrary in Sections 12.1(a) or 12.1(b) hereof:

(i) The number and type of securities subject to each outstanding Award and the exercise price or grant price thereof, if applicable, will be proportionately adjusted. The adjustments provided under this Section 11.1(c) shall be nondiscretionary and shall be final and binding on the affected Participant and the Company.

(ii) The Administrator shall make such proportionate adjustment, if any, as the Administrator in its discretion may deem appropriate to reflect such Equity Restructuring with respect to the aggregate number and type of securities that may be issued under the Plan (including, but not limited to, adjustment of the limitations in Section 5).

12.2 Change in Control .

(a) Anything to the contrary in Section 12.1 hereof notwithstanding, in the event of a Change in Control, the unexercised or restricted portion of each outstanding Award shall be assumed or an equivalent Award or right substituted, by the successor corporation or an affiliate of the successor corporation, as shall be determined by such entity, subject to the terms hereof. In the event that the successor corporation or a parent or subsidiary of the successor corporation does not provide for such an assumption or substitution of Awards (in circumstances in which the Company is not the successor entity), all Awards shall become exercisable in full and all forfeiture restrictions on such Awards shall lapse, provided that unless otherwise determined by the Administrator, the exercise of all Options that otherwise would not have been exercisable and the lapsing of all forfeiture restrictions that would not have otherwise lapsed in the absence of a Change in Control, shall be contingent upon the actual consummation of the Change in Control. Upon, or in anticipation of, a Change in Control, the Administrator may cause any and all Awards outstanding hereunder to terminate at a specific time in the future, including but not limited to the date of such Change in Control, and shall give each Participant the right to exercise such Awards during a period of time as the Committee, in its sole and absolute discretion, shall determine.

(b) For the purposes of this Section 12.2, an Award shall be considered assumed if, following a Change in Control, the option confers the right to purchase or receive, for each Share subject to the Award immediately prior to the Change in Control, the consideration (whether shares, cash, or other securities or property) received in the merger or sale of assets by holders of Shares of the Company for each Share held on the effective date of the Change in Control (and if holders were offered a choice of consideration, the type of consideration determined by the Administrator, at its sole discretion); provided, however, that if the consideration received in the Change in Control is not solely ordinary shares (or the equivalent) of the successor corporation or its direct or indirect parent, the Administrator may, with the consent of the successor corporation, provide for the per share consideration to be received upon the exercise of the Option or upon the lapsing of the forfeiture restrictions to be solely ordinary shares (or the equivalent) of the successor corporation or its direct or indirect parent equal in fair market value to the per share consideration received by holders of Shares in the Change in Control, as determined by the Administrator.

(c) In the event that the Board of Directors determines in good faith that, in the context of a Change in Control, certain Options have no monetary value and thus do not entitle the holders of such Options to any consideration under the terms of the Change in Control, the Board of Directors may determine that such Options shall terminate effective as of the effective date of the Change in Control.

(d) It is the intention that the Administrator’s authority to make determinations, adjustments and clarifications in connection with the treatment of Awards shall be interpreted as widely as possible, to allow the Administrator maximal power and flexibility to interpret and implement the provisions of the Plan in the event of Change in Control.

13. Non-Transferability of Options, Other Awards and Shares .

13.1 Except as may be permitted under an applicable Appendix, no Option or other Award may be transferred other than by will or by the laws of descent and distribution, and during the Participant’s lifetime an Option may be exercised only by such Participant.

13.2 Except as may be permitted under an applicable Appendix, Shares for which full payment has not been made, may not be assigned, transferred, pledged or mortgaged, other than by will or laws of descent and distribution. For avoidance of doubt, the foregoing shall not be deemed to restrict the transfer of an Participant’s rights in respect of Options or Shares purchasable pursuant to the exercise thereof upon the death of such Participant to such Participant’s estate or other

successors by operation of law or will, whose rights therein shall be governed by Section 11.1(d) hereof, and as may otherwise be determined by the Administrator.

14. Term and Amendment of the Plan .

14.1 The Plan shall become effective as of the Effective Date. The Plan shall expire on the date which is ten (10) years from the date of its adoption by the Board of Directors (except as to Options or other Awards outstanding on that date).

14.2 Notwithstanding any other provision of the Plan, the Board of Directors (or a duly authorized Committee thereof) may at any time, and from time to time, amend, in whole or in part, any or all of the provisions of the Plan (including any amendment deemed necessary to ensure that the Company may comply with any regulatory requirement), or suspend or terminate it entirely, retroactively or otherwise; provided, however, that (a) to the extent necessary and desirable to comply with any applicable law, regulation, or stock exchange rule, or as contemplated in any Appendix, the Company shall obtain shareholder approval of any Plan amendment in such a manner and to such a degree as required, and (b) shareholder approval is required for any amendment to the Plan that (i) increases the number of Shares available under the Plan (other than any adjustment as provided by Section 12.1 hereof), (ii) constitutes a prohibited action under Section 9 or (iii) permits the Administrator to extend the exercise period for an Option beyond ten years from the date of grant; and provided further, however, that, except (x) to correct obvious drafting errors or as otherwise required by law or (y) as specifically provided herein, the rights of a Participant with respect to Awards granted prior to such amendment, suspension or termination, may not be reduced without the consent of such Participant. The Administrator may amend the terms of any Award theretofore granted, prospectively or retroactively, but except (x) to correct obvious drafting errors or as otherwise required by law or applicable accounting rules, or (y) as specifically provided herein, no such amendment or other action by the Administrator shall reduce the rights of any Participant without the Participant’s consent.

15. Term Of Option .

Anything herein to the contrary notwithstanding, but without derogating from the provisions of Section 11 hereof, if any Option, or any part thereof, has not been exercised and the Shares covered thereby not paid for within seven (7) years after the date on which the Option was granted, as set forth in the Award Agreement (or any other period set forth in the instrument granting such Option pursuant to Section 6 hereof), such Option, or such part thereof, and the right to acquire such Shares shall terminate, all interests and rights of the Participant in and to the same shall expire, and, in the event that in connection therewith any Shares are held in trust as aforesaid, such trust shall expire.

16. Continuance Of Engagement .

Neither the Plan nor any offer of Shares or Awards to a Participant shall impose any obligation on the Company or a related company thereof, to continue the employment or engagement of any Participant as a Service Provider, and nothing in the Plan or in any Award granted pursuant thereto shall confer upon any Participant any right to continue to serve as a Service Provider of the Company or a related company thereof or restrict the right of the Company or a related company thereof to terminate such employment or engagement at any time.

17. 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.

18. Application Of Funds .

The proceeds received by the Company from the sale of Shares pursuant to Options granted under the Plan will be used for general corporate purposes of the Company or any related company thereof.

19. Taxes .

19.1 Any tax consequences arising from the grant, vesting or exercise of any Award, from the payment for Shares covered thereby, or from any other event or act (of the Company, and/or its affiliates, or the Participant), hereunder shall be borne solely by the Participant. The Company and/or its affiliates shall withhold taxes according to the requirements under the applicable laws, rules, and regulations, including withholding taxes at source. Furthermore, the Participant shall agree to indemnify the Company and/or its affiliates and hold them harmless against and from any and all liability for any such tax or interest or penalty thereon, including without limitation, liabilities relating to the necessity to withhold, or to have withheld, any such tax from any payment made to the Participant. The Company or any of its affiliates may make such provisions and take such steps as it may deem necessary or appropriate for the withholding of all taxes required by law to be withheld with respect to Awards granted under the Plan and the exercise thereof, including, but not limited, to (i) deducting the amount so required to be withheld from any other amount (or Shares issuable) then or thereafter to be provided to the Participant, including by deducting any such amount from a Participant’s salary or other amounts payable to the Participant, to the maximum extent permitted under law and/or (ii) requiring the Participant to pay to the Company or any of its affiliates the amount so required to be withheld as a condition of the issuance, delivery, distribution or release of any Shares and/or (iii) by causing the exercise and sale of any Awards or Shares held by on behalf of the Participant to cover such liability, up to the amount required to satisfy minimum statutory withholding requirements. In addition, the Participant will be required to pay any amount due in excess of the tax withheld and transferred to the tax authorities, pursuant to applicable tax laws, regulations and rules.

19.2 The receipt of an Award and/or the acquisition of Shares issued upon the exercise of the Options may result in tax consequences. The description of tax consequences set forth in the Plan or any Appendix hereto does not purport to be complete, up to date or to take into account any special circumstances relating to a Participant.

19.3 THE PARTICIPANT IS ADVISED TO CONSULT WITH A TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES OF RECEIVING OR EXERCISING ANY AWARD IN LIGHT OF HIS OR HER PARTICULAR CIRCUMSTANCES.

20. Conditions Upon Issuance Of Shares .

Shares shall not be issued pursuant to an Award unless the issuance and delivery of such Shares shall comply with applicable laws and shall be further subject to the approval of counsel for the Company with respect to such compliance. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

21. Miscellaneous .

Whenever applicable in the Plan, the singular and the plural, and the masculine, feminine and neuter shall be freely interchangeable, as the context requires. The Section headings or titles shall not in any way control the construction of the language herein, such headings or titles having been inserted solely for the purpose of simplified reference. Words such as “herein”, “hereof”, “hereto”, “hereinafter”, “hereby”, and “hereinabove” when used in the Plan refer to the Plan as a whole, including any applicable Appendices, unless otherwise required by context.

* * *

APPENDIX – ISRAELI TAXPAYERS

MELLANOX TECHNOLOGIES, LTD.
AMENDED AND RESTATED GLOBAL SHARE INCENTIVE PLAN (2006)

1. Special Provisions for Israeli Tax Payers

1.4 This Appendix (the “ Appendi x”) to the Amended and Restated Mellanox Technologies, Ltd. Share Incentive Plan (2006) (the “ Plan ”) is effective as of the date the Plan, as amended and restated, becomes effective (the “ Effective Date ”).

1.5 The provisions specified hereunder apply only to persons who are deemed to be residents of the State of Israel for tax purposes, or are otherwise subject to taxation in Israel with respect to Awards.

1.6 This Appendix applies with respect to Awards granted under the Plan. The purpose of this Appendix is to establish certain rules and limitations applicable to Awards that may be granted or issued under the Plan from time to time, in compliance with the securities and other applicable laws currently in force in the State of Israel. Except as otherwise provided by this Appendix, all grants made pursuant to this Appendix shall be governed by the terms of the Plan. This Appendix is applicable only to grants made after the Effective Date. This Appendix complies with, and is subject to the ITO and Section 102.

1.7 The Plan and this Appendix shall be read together. In any case of contradiction, whether explicit or implied, between the provisions of this Appendix and the Plan, the provisions of this Appendix shall govern.

2. Definitions

Capitalized terms not otherwise defined herein shall have the meaning assigned to them in the Plan. The following additional definitions will apply to grants made pursuant to this Appendix:

“ 3(i) Option ” means an Option or Restricted Share Unit which is subject to taxation pursuant to Section 3(i) of the ITO which has been granted to any person who is not an Eligible 102 Participant.

“ 102 Capital Gains Track ” means the tax alternative set forth in Section 102(b)(2) of the ITO pursuant to which income resulting from the sale of Shares derived from Options or Restricted Share Units is taxed as a capital gain.

“ 102 Capital Gains Track Grant ” means a 102 Trustee Grant qualifying for the special tax treatment under the 102 Capital Gains Track.

“ 102 Ordinary Income Track ” means the tax alternative set forth in Section 102(b)(1) of the ITO pursuant to which income resulting from the sale of Shares derived from Options or Restricted Share Units is taxed as ordinary income.

“ 102 Ordinary Income Track Grant ” means a 102 Trustee Grant qualifying for the ordinary income tax treatment under the 102 Ordinary Income Track.

“ 102 Trustee Grant ” means an Award made pursuant to Section 102(b) of the ITO and held in trust by a Trustee for the benefit of the Participant, and includes both 102 Capital Gains Track Grants and 102 Ordinary Income Track Grants.

“ Award ” means an Option, a Restricted Share Unit award or other award or allotment of Shares under the Plan and this Appendix.

“ Affiliate ” means any “employing company” within the meaning of Section 102(a) of the ITO.

“ Controlling Shareholder ” as defined under Section 32(9) of the Ordinance, means an employee who prior to the grant or as a result of the exercise of any Option or grant or vesting of any Restricted Share Unit or Shares, holds or would hold, directly or indirectly, in his name or with a relative (as defined in the Ordinance) (i) 10% of the outstanding shares of the

Company, (ii) 10% of the voting power of the Company, (iii) the right to hold or purchase 10% of the outstanding equity or voting power, (iv) the right to obtain 10% of the “profit” of the Company (as defined in the Ordinance), or (v) the right to appoint a director of the Company.

“ Election ” means the Company's choice of the type (as between capital gains track or ordinary income track) of 102 Trustee Grants it will make under the Plan, as filed with the ITA.

“ Eligible 102 Participant ” means a person who is employed by the Company or its Affiliates, including an individual who is serving as a director or an office holder, who is not a Controlling Shareholder.

“ Fair Market Value ” shall mean with respect to 102 Capital Gains Track Grants only, for the sole purpose of determining tax liability pursuant to Section 102(b)(3) of the ITO, if at the date of grant the Company’s shares are listed on any established stock exchange or a national market system or if the Company’s shares will be registered for trading within ninety (90) days following the date of grant, the fair market value of the Shares at the date of grant shall be determined in accordance with the average value of the Company’s shares on the thirty (30) trading days preceding the date of grant or on the thirty (30) trading days following the date of registration for trading, as the case may be.

“ ITA ” means the Israeli Tax Authorities.

“ ITO ” means the Israeli Income Tax Ordinance (New Version) 1961 and the rules, regulations, orders or procedures promulgated thereunder and any amendments thereto, including specifically the Rules, all as may be amended from time to time.

“ Non-Trustee Grant ” means an Award granted to an Eligible 102 Participant pursuant to Section 102(c) of the ITO and not held in trust by a Trustee.

“ Required Holding Period ” means the requisite period prescribed by the ITO and the Rules, or such other period as may be required by the ITA, with respect to 102 Trustee Grants, during which Options, Restricted Share Units or Shares granted by the Company must be held by the Trustee for the benefit of the person to whom it was granted.

“ Restricted Share Unit ” means an Award granted pursuant to Section 3 hereof.

“ Rules ” means the Income Tax Rules (Tax benefits in Stock Issuance to Employees) 5763-2003.

“ Section 102 ” shall mean the provisions of Section 102 of the ITO, as amended from time to time, including by the Law Amending the Income Tax Ordinance (Number 132), 2002, effective as of January 1, 2003 and by the Law Amending the Income Tax Ordinance (Number 147), 2005.

“Shares” means Ordinary Shares, nominal value NIS 0.01 per share, of the Company, including restricted or unrestricted Shares issued upon exercise of Options or the vesting of Restricted Share Units granted pursuant to the Plan and this Appendix.

“ Trustee ” means a person or entity designated by the Board of Directors to serve as a trustee and approved by the ITA in accordance with the provisions of Section 102(a) of the ITO.

3. Special Terms for Restricted Share Units .

3.10 Grant of Restricted Share Units . The Administrator is authorized to make Awards of Restricted Share Units to any Participant selected by the Administrator in such amounts and subject to such terms and conditions as determined by the Administrator. At the time of grant, the Administrator shall specify the date or dates on which the Restricted Share Units shall become fully vested and nonforfeitable, and may specify such conditions to vesting as it deems appropriate. At the time of grant, the Administrator shall specify the maturity date applicable to each grant of Restricted Share Units which shall be no earlier than the vesting date or dates of the Award and may be determined at the election of the grantee. On the maturity date, the Company shall transfer to either: (a) in the case of an Award that is not a 102 Trustee Grant, the Participant of record as issued to the Participant in the books of the Company (or, if applicable, its transfer agent or stock plan administrator), or (b) in the case of a 102 Trustee Grant,

the Trustee (for the benefit of such Participant), pursuant to the provisions of Section 5 below, one unrestricted, fully transferable Share for each Restricted Share Unit scheduled to be paid out on such date and not previously forfeited.

3.11 Forfeiture . Except as otherwise determined by the Administrator at the time of the grant of the Award or thereafter, upon termination of employment or status of Service Provider, any Restricted Share Units that have not fully vested shall be forfeited; provided , however , that the Administrator may provide for the accelerated vesting of Restricted Share Units, in its sole discretion.

4. Types of Awards and Section 102 Election

4.3 Awards made pursuant to Section 102, whether as grants of Options or Restricted Share Units or as issuances of Shares under the Plan shall be made pursuant to either (a) Section 102(b)(2) of the ITO as 102 Capital Gains Track Grants or (b) Section 102(b)(1) of the ITO as 102 Ordinary Income Track Grants. The Company’s Election regarding the type of 102 Trustee Grant it chooses to make shall be filed with the ITA. Once the Company has filed such Election, it may change the type of 102 Trustee Grant that it chooses to make only after the passage of at least 12 months from the end of the calendar year in which the first grant was made in accordance with the previous Election, in accordance with Section 102. For the avoidance of doubt, such Election shall not prevent the Company from granting Non-Trustee Grants to Eligible 102 Participants at any time.

4.4 Eligible 102 Participants may receive only 102 Trustee Grants or Non-Trustee Grants under this Appendix. Participants who are not Eligible 102 Participants may be granted only 3(i) Options under this Appendix.

4.5 No 102 Trustee Grants may be made effective pursuant to this Appendix until 30 days after the requisite filings required by the ITO and the Rules have been made with the ITA.

4.6 The Award Agreement evidencing the Award made pursuant to the Plan and this Appendix shall indicate whether the Award is a 102 Trustee Grant, a Non-Trustee Grant or a 3(i) Grant; and, if the grant is a 102 Trustee Grant, whether it is a 102 Capital Gains Track Grant or a 102 Ordinary Income Track Grant.

5. Terms And Conditions Of 102 Trustee Options and Restricted Share Units

5.4 Each 102 Trustee Grant will be deemed granted on the date stated in a written notice by the Company, provided that on or before such date (i) the Company has provided such notice to the Trustee and (ii) the Participant has signed all documents required pursuant to this Section 5.

5.5 Each 102 Trustee Grant granted to an Eligible 102 Participant and each certificate for a Share acquired pursuant to the exercise of a Option, vesting of a Restricted Share Unit or issued directly as Share shall be issued to and registered in the name of a Trustee and shall be held in trust for the benefit of the Participant for the Required Holding Period. After termination of the Required Holding Period, the Trustee may release such Option, Restricted Share Unit and any such Shares, provided that (i) the Trustee has received an acknowledgment from the Israeli Income Tax Authority that the Eligible 102 Participant has paid any applicable tax due pursuant to the ITO or (ii) the Trustee and/or the Company or its Affiliate withholds any applicable tax due pursuant to the ITO. The Trustee shall not release any 102 Trustee Options, Restricted Share Units or shares issued upon exercise of such Option or vesting of such Restricted Share Unit prior to the full payment of the Eligible 102 Participant’s tax liabilities.

5.6 Each 102 Trustee Grant (whether a 102 Capital Gains Track Grant or a 102 Ordinary Income Track Grant, as applicable) shall be subject to the relevant terms of Section 102 and the ITO, which shall be deemed an integral part of the 102 Trustee Option and shall prevail over any term contained in the Plan, this Appendix or any agreement that is not consistent therewith. Any provision of the ITO and any approvals by the Income Tax Commissioner not expressly specified in this Plan, Appendix or Award Agreement which are necessary to receive or maintain any tax benefit pursuant to the Section 102 shall be binding on the Eligible 102 Participant. The Trustee and the Eligible 102 Participant granted a 102 Trustee Grant shall comply with the ITO, and the terms and conditions of the Trust Agreement entered into between the Company and the Trustee. For avoidance of doubt, it is reiterated that compliance with the ITO specifically includes compliance with the Rules. Further, the Eligible 102 Participant agrees

to execute any and all documents which the Company or the Trustee may reasonably determine to be necessary in order to comply with the provision of any applicable law, and, particularly, Section 102.

5.7 During the Required Holding Period, the Eligible 102 Participant shall not require the Trustee to release or sell the Options, Restricted Share Units or Shares and other shares received subsequently following any realization of rights derived from Shares, Options or Restricted Share Units (including share dividends) to the Eligible 102 Participant or to a third party, unless permitted to do so by applicable law. Notwithstanding the foregoing, the Trustee may, pursuant to a written request and subject to applicable law, release and transfer such Shares to a designated third party, provided that both of the following conditions have been fulfilled prior to such transfer: (i) all taxes required to be paid upon the release and transfer of the shares have been withheld for Transfer to the tax authorities and (ii) the Trustee has received written confirmation from the Company that all requirements for such release and transfer have been fulfilled according to the terms of the Company’s corporate documents, the Plan, any applicable agreement and any applicable law. To avoid doubt such sale or release during the Required Holding Period will result in different tax ramifications to the Eligible 102 Participant under Section 102 of the ITO and the Rules and/or any other regulations or orders or procedures promulgated thereunder, which shall apply to and shall be borne solely by such Eligible 102 Participant.

5.8 In the event a share dividend is declared on Shares which derive from Awards granted as 102 Trustee Grants, such dividend shall also be subject to the provisions of this Section 5 and the Required Holding Period for such dividend shares shall be measured from the commencement of the Required Holding Period for the Options, Restricted Share Units or Shares with respect to which the dividend was declared. In the event of a cash dividend on Shares, the Trustee shall transfer the dividend proceeds to the Eligible 102 Participant after deduction of taxes and mandatory payments in compliance with applicable withholding requirements.

5.9 If an Option or Restricted Share Unit granted as a 102 Trustee Grant is exercised or vests during the Required Holding Period, the Shares issued upon such exercise or vesting shall be issued in the name of the Trustee for the benefit of the Eligible 102 Participant. If such an Option or Restricted Share Unit is exercised or vests after the Required Holding Period ends, the Shares issued upon such exercise or vesting shall, at the election of the Eligible 102 Participant, either (i) be issued in the name of the Trustee, or (ii) be transferred to the Eligible 102 Participant directly, provided that the Participant first complies with all applicable provisions of the Plan.

5.10 For as long as Shares are registered in the name of the Trustee for the benefit of a Participant, the Trustee shall provide to the Participant prompt written notice of all shareholder meetings or other communications to shareholders of the Company received by the Trustee, and if so requested in writing by the Participant, the Trustee shall execute a proxy in a form acceptable to the Company to enable the Participant to vote such Shares.

6. Assignability

As long as Options, Restricted Share Units or Shares are held by the Trustee on behalf of the Eligible 102 Participant, all rights of the Eligible 102 Participant over the shares are personal, can not be transferred, assigned, pledged or mortgaged, other than by will or laws of descent and distribution.

7. Tax Consequences

7.1 Any tax consequences arising from the grant, sale, vesting or exercise of any Award, from the payment for Shares covered thereby, or from any other event or act (of the Company, and/or its affiliates and/or the Trustee or the Participant), hereunder shall be borne solely by the Participant. The Company and/or its affiliates and/or the Trustee shall withhold taxes according to the requirements under the applicable laws, rules, and regulations, including withholding taxes at source. Furthermore, the Participant shall agree to indemnify the Company and/or its affiliates and/or the Trustee and hold them harmless against and from any and all liability for any such tax or interest or penalty thereon, including without limitation, liabilities relating to the necessity to withhold, or to have withheld, any such tax from any payment made to the Participant. The Company an/or any of its affiliates and/or the Trustee may make such provisions and take such steps as it may deem necessary or appropriate for the withholding of all taxes required by law to be withheld with respect to Awards granted under the Plan and the exercise thereof, including, but not limited, to (i) deducting the amount so required to be withheld from any other amount (or Shares issuable) then or thereafter to be provided to the Participant, including by deducting any such amount from a Participant’s salary or other amounts payable to the

Participant, to the maximum extent permitted under law and/or (ii) requiring the Participant to pay to the Company or any of its affiliates the amount so required to be withheld as a condition of the issuance, delivery, distribution or release of any Shares and/or (iii) by causing the exercise and sale of any Options or Shares held by on behalf of the Participant to cover such liability, up to the amount required to satisfy minimum statutory withholding requirements. In addition, the Participant will be required to pay any amount due in excess of the tax withheld and transferred to the tax authorities, pursuant to applicable tax laws, regulations and rules.

7.2 With respect to Non-Trustee Grants, if the Participant ceases to be employed by the Company or any Affiliate, the Eligible 102 Participant shall extend to the Company and/or its Affiliate a security or guarantee for the payment of tax due at the time of sale of Shares to the satisfaction of the Company, all in accordance with the provisions of Section 102 of the ITO and the Rules.

8. Governing Law and Jurisdiction

Notwithstanding any other provision of the Plan, with respect to Participants subject to this Appendix, 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 applicable to contracts made and to be performed therein

* * *

APPENDIX – U.S. TAXPAYERS

MELLANOX TECHNOLOGIES, LTD.
AMENDED AND RESTATED GLOBAL SHARE INCENTIVE PLAN (2006)

1. Special Provisions for Persons who are U.S. Taxpayers .

1.1 This Appendix (the “ Appendix ”) to the Mellanox Technologies, Ltd. Amended and Restated Global Share Incentive Plan (2006) (the “ Plan ”) is effective as of the date that the Plan becomes effective (the “ Effective Date ”).

1.2 The provisions specified hereunder apply only to persons who are subject to U.S. federal income tax (any such person, a “ U.S. Taxpayer ”).

1.3 This Appendix applies with respect to Awards granted under the Plan. The purpose of this Appendix is to establish certain rules and limitations applicable to Awards that may be granted or issued under the Plan from time to time, in compliance with applicable tax, securities and other applicable laws currently in force. Except as otherwise provided by this Appendix, all grants made pursuant to this Appendix shall be governed by the terms of the Plan (including, without limitation, its provisions regarding adjustments). This Appendix is applicable only to grants made after the Effective Date.

1.4 The Plan and this Appendix shall be read together. In any case of an irreconcilable contradiction (as determined by the Administrator) between the provisions of this Appendix and the Plan, the provisions of the Plan shall govern unless expressly stated otherwise in this Appendix.

1.5 To the extent required by applicable law, the Plan and this Appendix shall be submitted to the Company’s shareholders for approval within twelve (12) months after the Effective Date.

2. Definitions .

Capitalized terms not otherwise defined herein shall have the meaning assigned to them in the Plan. The following additional definitions will apply to grants made pursuant to this Appendix:

30 “ Award ” means an Option, a Restricted Share award, a Restricted Share Unit award or other equity-based awards granted to a Participant pursuant to this Appendix and the Plan, or other allotment of Shares under the Plan and this Appendix.

31 “ Disability ” means, with respect to Incentive Stock Options, a “permanent and total disability” within the meaning of Section 22(e)(3) of the Code.

32 “ Fair Market Value ” means, for purposes of this Appendix, unless otherwise required by any applicable provision of the Code or any regulations issued thereunder, as of any date and except as provided below, (a) if the Shares are listed on any established stock exchange or a national market system, the closing sales price for such Shares (or the closing bid, if no sales were reported) as quoted on such exchange or system for such date, or if no bids or sales were reported for such date, then the closing sales price (or the closing bid, if no sales were reported) on the trading date immediately prior to such date during which a bid or sale occurred, in each case, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; (b) if the Shares are regularly quoted by a recognized securities dealer but selling prices are not reported, the mean of the closing bid and asked prices for the Shares on such date, or if no closing bid and asked prices were reported for such date, the date immediately prior to such date during which closing bid and asked prices were quoted for the Shares, in each case, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or (c) in the absence of an established market for the Shares, the Fair Market Value shall be determined in good faith by the

Administrator. Notwithstanding any provision herein to the contrary, with respect to Non-Qualified Stock Options, the “Fair Market Value” of the Shares shall be determined in a manner that satisfies the applicable requirements of Code Section 409A, and with respect to Incentive Stock Options, such Fair Market Value shall be determined in a manner that satisfies the applicable requirements of Code Section 422, and subject to Code Section 422(c)(7).

33 “ Family Member ” means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, any person sharing the employee’s household (other than a tenant or employee), a trust in which these persons have more than 50% of the beneficial interest, a foundation in which these persons (or the employee) control the management of assets, and any other entity in which these persons (or the employee) own more than 50% of the voting interests or in Section A(1)(a)(5) of the general instructions of Form S‑8, as applicable.

34 “ Incentive Stock Option ” means any Option awarded to an eligible Participant under the Plan and this Appendix intended to be and designated in the Award Agreement as an “incentive stock option” within the meaning of Section 422 of the Code.

35 “ Non-Qualified Stock Option ” means any Option awarded under this Plan that is not an Incentive Stock Option.

36 “ Parent ” means any parent corporation of the Company within the meaning of Section 424(e) of the Code.

37 “ Restricted Shares ” means Shares awarded to a Participant pursuant to Section 6 hereof that is subject to certain restrictions and may be subject to risk of forfeiture.

38 “ Restricted Share Unit ” means an Award granted pursuant to Section 7 hereof.

39 “ Securities Act ” means the U.S. Securities Act of 1933, as amended, and all rules and regulations promulgated thereunder. Any reference to any section of the Securities Act shall also be a reference to any successor provision.

40 “ Subsidiary ” means any subsidiary corporation of the Company within the meaning of Section 424(f) of the Code.

41 “ Ten Percent Shareholder ” means a person owning shares possessing more than 10% of the total combined voting power of all classes of shares of the Company, its Subsidiaries or its Parent.

3. Shares Reserved under Appendix for Incentive Stock Options .

The maximum aggregate number of Shares that may be issued pursuant to Incentive Stock Options is 6,800,000 Shares, and such reserve of Shares for grants of Incentive Stock Options shall not be increased without the approval of the shareholders of the Company as required pursuant to Section 421 et seq . of the Code. The number of Shares stated in this Section 3 shall be subject to adjustment as provided in Section 12.1 of the Plan. To the extent that an Incentive Stock Option terminates, expires, or lapses for any reason, any Shares subject to the Award shall again be available for the grant of an Incentive Stock Option pursuant to the Plan and this Appendix. Notwithstanding the foregoing, any Shares tendered or withheld to satisfy the grant or exercise price or tax withholding obligation pursuant to any Incentive Stock shall not again be available for the grant of an Incentive Stock Option pursuant to the Plan and this Appendix. In addition, Shares purchased on the open market with cash proceeds from the exercise of Incentive Stock Options shall not be available for the grant of an Incentive Stock Option pursuant to the Plan and this Appendix. To the extent permitted by applicable law or any exchange rule, Shares issued in assumption of, or in substitution for, any outstanding awards of any entity acquired in any form of

combination by the Company or any affiliate shall not be counted against Shares available for grant as Incentive Stock Options pursuant to the Plan and this Appendix. Notwithstanding the provisions of this Section 3 hereof, no Shares may again be optioned, granted or awarded if such action would cause an Incentive Stock Option to fail to qualify as an incentive stock option under Section 422 of the Code.

4. Grants of Options .

4.1 Generally . The Administrator shall have full authority to grant Options to Service Providers pursuant to the terms of this Appendix and the Plan. All Options shall be granted by, confirmed by, and subject to the terms of, an Award Agreement to be executed by the Company and the Participant. In particular, the Administrator shall have the authority to determine whether an Option is an Incentive Stock Option or a Non-Qualified Stock Option.

4.2 Eligibility . All Service Providers are eligible to be granted Non-Qualified Stock Options under this Appendix, and only employees of the Company, a Subsidiary or a Parent are eligible to be granted Incentive Stock Options under this Appendix, if so employed on the grant date of such Incentive Stock Option, although it is anticipated that grants hereunder will be granted solely or primarily to U.S. Taxpayers. Eligibility for the grant of an Option and actual participation in this Appendix and the Plan shall be determined by the Administrator in its sole discretion. Notwithstanding anything in this Section 4.2 to the contrary, Consultants who are not natural persons that provide bona fide services to the Company, a Subsidiary or a Parent, and Consultants who provide services in connection with the offer or sale of securities in a capital raising transaction shall not be eligible to be granted Options under this Appendix.

5. Special Terms for Incentive Stock Options .

5.1 Disqualification . To the extent that any Option does not qualify as an Incentive Stock Option (whether because of its provisions or the time or manner of its exercise or otherwise), such Option or the portion thereof that does not qualify shall constitute a separate Non-Qualified Stock Option.

5.2 Exercise Price . The exercise price per Share subject to an Incentive Stock Option shall be determined by the Administrator at the time of grant of such Incentive Stock Option; provided that the per share exercise price of an Option shall not be less than 100% of the Fair Market Value of the Share at the time of grant of such Incentive Stock Option; and provided, further, that if an Incentive Stock Option is granted to a Ten Percent Shareholder, the exercise price per Share shall be no less than 110% of the Fair Market Value of the Share at the time of the grant of such Incentive Stock Option.

5.3 Option Term . The term of each Incentive Stock Option shall be fixed by the Administrator; provided, however, that no Incentive Stock Option shall be exercisable more than seven (7) years after the date such Incentive Stock Option is granted; and further provided that the term of an Incentive Stock Option granted to a Ten Percent Shareholder shall not exceed five years.

5.4 Incentive Stock Option Limitations . To the extent that the aggregate Fair Market Value (determined as of the time of grant) of Shares with respect to which Incentive Stock Options are exercisable for the first time by an employee during any calendar year under this Plan and/or any other stock option plan of the Company, any Subsidiary or any Parent exceeds $100,000, such Incentive Stock Options shall be treated as Non-Qualified Stock Options. In addition, if an employee does not remain employed by the Company, any Subsidiary or any Parent at all times from the time an Incentive Stock Option is granted until three months prior to the date of exercise thereof (or such other period as required by Section 422 of the Code), such Incentive Stock Option shall be treated as a Non-Qualified Stock Option. Should any provision of this Appendix not be necessary in order for the Options to qualify as Incentive Stock Options, or should any additional provisions be required, the Administrator

may amend this Appendix accordingly, without the necessity of obtaining the approval of the shareholders of the Company, unless required by applicable law.

5.5 Effect of Termination . Notwithstanding anything to the contrary in the Plan or this Appendix, and in the absence of a provision specifying otherwise in the relevant Award Agreement, then with respect to Incentive Stock Options, the following provisions must be met on order for the Award to qualify as an Incentive Stock Option under the Code:

(a) in the event that the Participant ceases to be an employee of the Company or any Subsidiary or Parent for any reason other than the Participant’s death or Disability, the vested Options must be exercised within three (3) months from the effective date of termination of the Participant’s employment with the Company, any Subsidiary or Parent;

(b) in the event that the Participant’s employment with the Company, a Subsidiary or Parent terminates as a result of the Participant’s death or Disability, the Option must be exercised within twelve (12) months following the Participant’s date of termination for death or Disability.

To avoid doubt, the provisions of Section 11 of the Plan shall remain in full force and effect and apply to Awards granted as Incentive Stock Options. The restrictions set forth above represent special additional limitations that apply to qualify as Incentive Stock Options under the provisions of the Code. To avoid doubt, a Participant may choose to exercise Options in accordance with the terms of Section 11 of the Plan and the relevant Award Agreement, and not in compliance with the provisions of the Code relating to “incentive stock options”. In that case such Option will not qualify as an Incentive Stock Option and will be treated as a Non-Qualified Stock Option.

5.6 Notice of Disposition . The Participant shall give the Company prompt notice of any disposition of Shares acquired by exercise of an Incentive Stock Option within (i) two years from the date of grant of such Incentive Stock Option or (ii) one year after the transfer of such Shares to the Participant.

5.7 Right to Exercise . During a Participant’s lifetime, an Incentive Stock Option may be exercised only by the Participant.

6. Special Terms for Restricted Stock .

6.1 Grant of Restricted Stock . The Administrator is authorized to make Awards of Restricted Stock to any Participant selected by the Administrator in such amounts and subject to such terms and conditions as determined by the Administrator. All Awards of Restricted Stock shall be evidenced by an Award Agreement.

6.2 Issuance and Restrictions . Restricted Stock shall be subject to such restrictions on transferability and other restrictions as the Administrator may impose (including, without limitation, limitations on the right to vote Restricted Stock or the right to receive dividends on the Restricted Stock). These restrictions may lapse separately or in combination at such times, pursuant to such circumstances, in such installments, or otherwise, as the Administrator determines at the time of the grant of the Award or thereafter.

6.3 Forfeiture . Except as otherwise determined by the Administrator at the time of the grant of the Award or thereafter, upon termination of employment or status of Service Provider during the applicable restriction period, Restricted Stock that is at that time subject to restrictions shall be forfeited; provided , however , that the Administrator may (a) provide in any Restricted Stock Award Agreement that restrictions or forfeiture conditions relating to Restricted Stock will be waived in whole or in part in the event of terminations resulting from specified causes, and (b) in other cases waive in whole or in part restrictions or forfeiture conditions relating to Restricted Stock.

6.4 Certificates for Restricted Stock . Restricted Stock granted pursuant to the Plan may be evidenced in such manner as the Administrator shall determine. If certificates representing shares of Restricted Stock are registered in the name of the Participant, certificates must bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock, and the Company may, at its discretion, retain physical possession of the certificate until such time as all applicable restrictions lapse.

6.5 Taxes . In accordance with the terms of the Code, a Participant shall be responsible for payment of all taxes incurred in connection with the grant of Restricted Stock. Accordingly, upon the vesting of Restricted Stock, a Participant shall make provision for the payment of all required withholding to the Company in accordance with Section 19.1 of the Plan.

7. Restricted Share Units .

The Administrator is authorized to make Awards of Restricted Share Units to any Participant selected by the Administrator in such amounts and subject to such terms and conditions as determined by the Administrator. At the time of grant, the Administrator shall specify the date or dates on which the Restricted Share Units shall become fully vested and nonforfeitable, and may specify such conditions to vesting as it deems appropriate. At the time of grant, the Administrator shall specify the maturity date applicable to each grant of Restricted Share Units which shall be no earlier than the vesting date or dates of the Award and may be determined at the election of the grantee. On the maturity date, the Company shall transfer to the Participant or record as issued to the Participant in the books of the Company (or, if applicable, its transfer agent or stock plan administrator) one unrestricted, fully transferable Share for each Restricted Share Unit scheduled to be paid out on such date and not previously forfeited.

8. Amendment of Appendix and Individual Awards .

8.1 This Appendix may be amended or terminated in accordance with the terms governing the amendment or termination of the Plan; provided, however, that without the approval of the shareholders of the Company entitled to vote in accordance with applicable law, no amendment may be made that would: (i) increase the aggregate number of Shares that may be issued under this Appendix; (ii) change the classification of individuals eligible to receive Incentive Stock Options under this Appendix; (iii) decrease the minimum exercise price of any Option below the amounts specified herein; (iv) extend the term of the Plan under Section 14.1 of the Plan or the maximum Option period under Section 5.3 of this Appendix; or (v) require shareholder approval in order for the Appendix to continue to comply with Section 422 of the Code to the extent applicable to Incentive Stock Options or require shareholder approval to the extent necessary and desirable to comply with applicable law, regulations or under the rules of any exchange or system on which the Company’s securities are listed or traded at the request of the Company.

8.2 The Administrator may, to the extent permitted by the Plan and this Appendix, amend the terms of any Award theretofore granted, prospectively or retroactively, but, subject to the Plan or as otherwise specifically provided herein, no such amendment or other action by the Administrator shall materially impair the previously accrued rights of any holder of such Award without the holder’s consent.

8.3 Notwithstanding any other provisions of the Plan or this Appendix to the contrary, (a) the Administrator may amend the Plan, this Appendix or any Award without the consent of the holder thereof if the Administrator determines that such amendment is required or advisable for the Company, the Plan, this Appendix or any Award to satisfy, comply with or meet the requirements of any law, regulation, rule or accounting standard, and (b) neither the Company nor the Administrator shall take any action pursuant to Section 8 or Section 10 of this Appendix or Section 14.2 of the Plan, or otherwise, that would cause an Award that is otherwise exempt under Code Section 409A to become subject to Code Section 409A, or that would cause an Award that is subject to Code Section 409A to fail to satisfy the requirements of Code Section 409A.

9. Limits on Transfer .

No Award shall be assigned, transferred or otherwise disposed of by a Participant otherwise than by will or by the laws of descent and distribution, and all Awards shall be exercisable, during the Participant’s lifetime, only by the Participant. Notwithstanding the foregoing, the Administrator may determine, in its sole discretion, at the time of grant or thereafter that an Award (other than an Incentive Stock Option) granted under this Appendix that is otherwise not transferable pursuant to this Section 9 is transferable to a Family Member in whole or in part and in such circumstances, and under such conditions, as specified by the Administrator. An Award that is transferred to a Family Member pursuant to the preceding sentence (i) may not be subsequently transferred otherwise than by will or by the laws of descent and distribution and (ii) remains subject to the terms of the Plan, the Appendix and the applicable Award Agreement. Any Shares acquired upon the exercise of an Award by a permissible transferee of an Award or a permissible transferee pursuant to a transfer after the exercise of, or issuance of Shares under, an Award shall be subject to the terms of the Plan, the Appendix and the applicable Award Agreement.

10. Deferred Compensation .

To the extent that the Administrator determines that any Award granted under the Plan and this Appendix is subject to Section 409A of the Code, the Award Agreement evidencing such Award shall incorporate the terms and conditions required by Section 409A of the Code. To the extent applicable, the Plan, this Appendix and the 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 after the Effective Date. Notwithstanding any provision of the Plan or this Appendix to the contrary, in the event that following the Effective Date the Administrator determines that any 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 Administrator may adopt such amendments to the Plan or the Appendix and the applicable Award Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Administrator determines are necessary or appropriate to (a) exempt the Award from Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the Award, or (b) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance. The Administrator may permit deferrals of compensation pursuant to the terms of a Participant’s Award Agreement, a separate plan, or an Appendix that (in each case) meets the requirements of Code Section 409A.

* * *

Addendum to Unprotected Lease Agreement Dated

March 1, 2011

Made and executed in Yokneam, Israel on the 3 ^rd day of the month of May, 2016



Between:	Shaar Yokneam Limited Registered Partnership (Partnership No. 550014666) By its authorized signatories Messrs. Avi Levi (ID. No. 051974921) Daniel Lavon (ID. No. 31354724) Who are authorized to sign in the name of the Partnership and bind the Partnership with their signature Whose address for the purpose of this Addendum is C/O Melisron Ltd, 1 Abba Eban Ave., Herzliya (Hereinafter: " The Lessor ") The first party ;

And between:	Mellanox Technologies, Ltd. (Company No. 512763285) By its authorized signatory Mr. Eyal Waldman (ID. No. 56429095) Who is authorized to sign in the name of the Company and bind the Company with his signature Whose address for the purpose of this Addendum is: 26 HaKidma, Ofer Industrial Park, Yokneam 2069200 (Hereinafter : "The Lessee" ) The second party;



Whereas:	The Lessor is the owner or the registered lessee or entitled to be registered as owner or lessee as the case may be of a land in an area of approximately 62,000 sq.m. including the parcels known by numbers 33, 34, 36, 37, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, and 50 (in whole) and parts (areas) of the land parcels known by the numbers 21, 22, 23, 24, 30, 31, 32, 35, 38, 39, 79, 80 and 82 in block 11098 (hereinafter: " The “Land ");
And whereas:	The Lessor implemented and/or implements on the Land a project known by the name of "Ofer Shaar Yokneam" that includes, inter alia , different buildings, whether existing and whether built in the future, access routes, parking areas, public areas, roads, pavement areas, decorative areas and gardens (hereinafter: " Shaar Yokneam Park ");
And whereas:	On March 1, 2011 the Lessor and the Lessee signed a Lease Agreement including Appendices and attachments thereof (hereinafter: " Original Lease Agreement ") to lease a building known by the name of "Mellanox Building" located in Shaar Yokneam Park (hereinafter: " Existing Leased Premises "), as extended and/or amended from time to time (the Original Lease Agreement and addenda thereof, including this Addendum, including all Appendices and attachments thereof shall be referred collectively hereinafter: " The Lease Agreement );
And whereas:	Subject to the approval of the new Urban Building Plan (UBP), within its meaning below in accordance with the provisions set forth in this Addendum and subject to obtaining the construction permit, within its meaning below in accordance with the provisions set forth in this Addendum, the Lessor intends to implement on the Land the Additional Leased Premises, within their meaning below;
And whereas:	The Lessee desires to lease from the Lessor and the Lessor desires to lease to the Lessee the Additional Leased Premises within their meaning below;
And whereas:	The Lessee desires to lease from the Lessor and the Lessor desires to lease to the Lessee the Additional Leased Premises, to the extent built by the Lessor in accordance with the provisions set forth in this Addendum, in unprotected lease in accordance with the Tenant Protection Law [Consolidated Version] 5732-1972 (hereinafter: " Tenant Protection Law ") in addition to the Existing Leased Premises, within their meaning above, as specified below and in accordance with the provisions set forth in this Addendum;
And whereas:	The parties desire to amend provisions in the Lease Agreement pertaining also to the Existing Leased Premises;
And whereas:	As of the date of signing this Addendum the plant operated by the Lessee is an approved enterprise in accordance with the provisions set forth in the Encouragement of Capital Investments Law 5719-1959 - and this was taken into account in the decision of the Lessor to lease the Additional Leased Premises to the Lessee and in setting the rent and the terms of lease;

Therefore, it is Declared, Stipulated and Agreed between the Parties as Follows:

1. Preamble and appendices

1.1. The preamble to this Addendum and Appendices thereof constitute an integral part thereof and are binding as such terms.

1.2. The section headings will serve for the purpose of orientation and convenience only, and will not serve for the purpose of interpreting the Agreement.

1.3. All terms and expressions used in this Addendum shall have the meaning assigned to them in the Lease Agreement, unless otherwise stated expressly.

1.4. This Addendum constitutes an integral part of the Lease Agreement.

1.5. Previous versions of this Addendum shall be null and void in anything related to the interpretation of the Lease Agreement and/or this Addendum and/or any of their terms. Such drafts shall not be admissible in any judicial or quasi-judicial proceeding.

1.6.The other provisions set forth in the Original Lease Agreement, to the extent that they were not modified expressly in this Addendum, shall be in effect and shall bind the parties including, but without derogating from the generality of the aforesaid, in anything related to the Additional Leased Premises, as the case may be, mutatis mutandis , to the extent that there are any. It is clarified that the provisions set forth in the Lease Agreement in respect of which it is stated in this Agreement that they shall not apply with relation to the Additional Leased Premises shall continue to be in effect and shall bind the parties in anything related to the Existing Leased Premises.

1.7. The following Appendices specified below are enclosed with this Addendum as an integral part thereof and these Appendices shall be solely relevant upon the implementation of the Additional Leased Premises:



Appendix A	Conceptual architectural plan of the Additional Leased Premises;
Appendix A1	Updated version of the new Urban Building Plan Regulations;
Appendix A2	Blueprint of the design of the lobby;
Appendix A3	Table of areas;
Appendix B	Specification of the works of the Lessor (hereinafter: " Lessor's Works Specification ");
Appendix C	Photocopy of the confirmation issued to the Lessee in accordance with the Encouragement of Capital Investments Law;
Appendix D	Insurance Confirmation for the Lessee Works;
Appendix E	Lessee's Insurance Confirmation;
Appendix F	Hot work procedure;
Appendix G	Rules for the supply of electricity;
Appendix H	Undertaking by Lessee to manage the Additional Leased Premises and system (to be added);
Appendix I	Bank Guarantee.

2. Definitions

As used in this Agreement, the following terms shall have the respective meanings set forth beside them below unless any other definition is used expressly with respect to any term in the body of the Addendum in general or for a particular matter:



"The Additional Leased Premises "	A building that will be constructed on the Land, and that will include 9 floors above a double lobby floor, and a Service Building within its meaning below and 3 floors of parking lots that include, amongst other, approximately 250 parking spaces and the Storage Room, as defined below, and the public areas as defined below, and which will be in the size set forth in the area table attached hereto as Appendix A3 to this Addendum. A conceptual architectural plan of the Additional Leased Premises is hereby enclosed as part of Appendix A to this Addendum (herein above and hereinafter: " Conceptual Plan of the Additional Leased Premises ");
"Service Building"	A building that will be constructed on the Land and that will include 2 floors, including a kitchen, exercise room and an auditorium in the size set forth in the area table attached hereto as Appendix A3 to this Addendum ;
"The UBP"	Any Urban Building Plan that applies and/or that will apply to the Land including detailed plan no. C/12883, detailed plan no. C/BT/245 including the New UBP, to the extent approved.
"The New UBP"	Plan no. 222-0229583 under the jurisdiction of the Local Planning and Building Board and that was prepared following the initiative of the Lessor and whose object is, inter alia , to transfer areas to Lot 106 (as marked in the New UBP) for the purpose of implementing a new building and that was approved for submission on 15 November 2015. The New UBP Regulations and the decisions of the Local Planning and Building Board in connection therewith are hereby enclosed as part of Appendix A1 to this Addendum (hereinafter: " New UBP Regulations ");
"Area A"	Lobby floor (ground floor) and floors 1, 2, 3, 4, and 5 in total and 3 parking floors (including all parking spaces and Storage Room) the roof, in the size set forth in the area table attached hereto as Appendix A3 to this Addendum , as marked in the Conceptual Plan of the Additional Leased Premises and in accordance with the design blueprint of the lobby hereby enclosed as Appendix A2 to this Addendum, and as constructed in accordance with the UBP, the construction permit, within its meaning below, in accordance with the Additional Leased Premises Plans, within their meaning below, and as approved by the Local Planning and Building Board as specified in this Addendum;
"Area B"	Floors 6 and 7 in the Additional Leased Premises in the size set forth in the area table attached hereto as Appendix A3 to this Addendum as marked in the Conceptual Plan of the Additional Leased Premises and as constructed in accordance with the UBP, construction permit, in accordance with the Additional Leased Premises Plans, and as approved by the Local Planning and Building Board, and as specified in this Addendum;



"Area C"	Floors 8 and 9 in the Additional Leased Premises in the size set forth in the area table attached hereto as Appendix A3 to this Addendum as marked in the Conceptual Plan of the Additional Leased Premises and as constructed in accordance with the UBP, construction permit, in accordance with the Additional Leased Premises Plans, and as approved by the Local Planning and Building Board, and as specified in this Addendum and subject to the provisions of Section 3.3 below; The definition of Area A, Area B and Area C will be updated, as needed, in accordance with the calculation of the Additional Area, as specified in Section 4.2 below, for all intents and purposes including rent.
"The Storage Rooms"	All storage areas located in the parking floors in the Additional Leased Premises, as marked in the Conceptual Plan of the Additional Leased Premises and in accordance with and as constructed in accordance with the UBP, the construction permit, in accordance with the Additional Leased Premises Plans, and as approved by the Local Planning and Building Board, as specified in this Addendum;
"Additional Leased Premises"	As specified in the area table attached hereto as Appendix A3 to this Addendum;
"Approximate Area of Additional Leased Premises"	A total area of approximately 10,413sq.m. (i.e., floor contour + load addition).
"Lessor's Works"	All works that are implemented by the Lessor as specified in Appendix B;
"Lessee's Works" or "Adjustment Works"	All works that the Lessee requires for the purpose of completing construction of the Additional Leased Premises and for the purpose of making the Additional Leased Premises compatible with its requirements (except for the Lessor's Works within their meaning above) and all alterations or additions implemented by the Lessee in the area of the Additional Leased Premises (to the extent implemented), and that will be implemented by and at the expense of the Lessee in accordance with the provisions set forth in this Addendum;
"Additional Leased Premises Plans" or "The Plans"	The Conceptual Plan of the Additional Leased Premises, the plans of the application for construction permits in connection with the implementation of the Additional Leased Premises and the detailed plans, as prepared by the Lessor and/or anyone acting on its behalf, including any alteration implemented therein and as approved by the authorities;
"Construction Permit"	A construction permit and/or permits that are issued in connection with the implementation of the New Building and the Additional Leased Premises and that shall comply with the plans, subject to the modifications implemented in the said documents, including following the demands of the competent authorities and/or as part of the applications for the construction permits and/or as part of the detailed design in accordance with the provisions set forth in Section 3.5 below. It is clarified that as of the date of signing this Addendum the Lessor intends to submit an application for a construction permit that will include implementation of the three basement floors in the Additional Leased Premises and one floor in the Additional Leased Premises and afterwards, and upon approval of the New UBP, to submit an application for a construction permit that will include the remaining number of the floors in the Additional Leased Premises (subject to the terms of Section 3.3. below). Notwithstanding that which has been stated, it is clarified that the manner of issuing the Construction Permit/Permits in connection with the Additional Leased Premises, including splitting the permit into a number of construction permits, shall be made at the sole discretion of the Lessor. It is further clarified that anywhere in this Addendum in which the term "date of obtaining the Construction Permit" is specified, this shall mean the date in which the last construction permit after which the implementation of the Additional Leased Premises in full will be allowed (subject to the terms of Section 3.3 below) (hereinafter: " Last Construction Permit ").
"Adjudicator"	The Adjudicator shall be appointed upon consent of the parties and, in the absence of consent, in 30 days as of the date the appointment of an adjudicator was requested by any of the parties, and the Adjudicator shall be appointed by the chairman of the Association of Engineers in Israel. The powers of the Adjudicator shall be as set forth in Section 18 below.



"Force Majeure"	War, general military recruitment, earthquake, general strike in all the market and/or government offices and/or the office of the Local Planning and Building Board and/or the municipality and/or the entire construction sector and/or suspension of the works as a result of general governmental or municipal orders, discovering land pollution or another ecological nuisance that requires cleaning and/or cleansing, and provided that these do not derive from an act or omission of the Lessor and/or anyone acting on its behalf and/or the Lessee and/or anyone acting on its behalf, as the case may be, and that prevent or actually delay the implementation of Lessor's Works and/or the implementation of the Lessee's Works, as the case may be, and/or the approval of the New UBP and/or obtaining the Construction Permit and/or Form 4 (Certificate of Occupancy), as the case may be.
"Delivery Date of the Additional Leased Premises for the purpose of Performing the Works"	Within its meaning in Section 6.1 of this Addendum.
"Delivery Date"	Within its meaning in Section 5.4 of this Addendum.
"Public Areas"	All facilities and areas that are located in the Additional Leased Premises and that don’t comprise the main leased area in the Additional Leased Premises, including all additions and changes which will be added from time to time.

3. Declarations of the parties

It is agreed that in anything related to the declarations of the parties and with respect to Sections 4 and 5 of the Original Lease Agreement, the following provisions shall apply:

3.1. The Lessee confirms that it saw and inspected the Land, the Lessor's Works Specification, the Additional Leased Premises Plans, the instructions relating to the zoning classification of the Land and the uses of the UBP and/or the New UBP Regulations regarding the compliance of the Additional Leased Premises and the Purpose of Lease in accordance with the Lease Agreement and this Addendum with the UBP and the New UBP and the possibility to obtain the licenses it requires for the purpose of operating its business in the Leased Premises, and any detail pertaining to the design, engineering, finances, legal details and the like, and that it visited the Land and saw the area designated to serve as the area of the Additional Leased Premises and access routes thereto, and found all of the above compatible with its requirements and objects and the Purpose of Lease, and it hereby waives any allegation regarding lack of conformity and any other argument of choice with relation thereto.

3.2. The Lessee declares and confirms that it is aware that at present the Lessor takes different actions for the purpose of approving the New UBP as specified in the New UBP Regulations hereby enclosed as Appendix A1 to this Addendum. It is further clarified that the Lessor shall be entitled to add to and/or modify the New UBP at its sole discretion. The Lessee declares and confirms that it shall not object to that which has been stated and shall not take any action that will delay and/or hinder the approval of the New UBP and/or any modification thereof as aforesaid. The Lessee further declares and confirms that it shall raise no allegations and/or demands and/or claims towards the Lessor and/or anyone acting on its behalf in connection with that which is stated in this Section, including in anything related to the approval of the New UBP, the date of its approval or rejection thereof or with respect to the manner of its approval, to the extent that it is approved.

3.3. The Lessee hereby declares and confirms that it is aware that the construction areas which are included in the Additional Leased Premises in accordance with the Conceptual Plan of the Additional Leased Premises exceed by approximately 1,500 SQM from the construction rights available in accordance with the New UBP (hereinafter: “ The Additional Rights ”), and therefore, the construction of floor 9 of the Additional Leased Premises (hereinafter: “ Floor 9 ”) is subject to the completion of the formal procedures included in the receipt of the additional rights and permits required for the construction of Floor 9.

Accordingly, the Lessor shall act (in a way that does not harm the approval process of the New UBP), and its expense, to approve the Additional Rights. Furthermore, the Lessor shall update the Lessee, from time to time, in writing, as to the status of the approval of the Additional Rights.

Should it appear to the parties that it is not possible to construct Floor 9 in the dates specified in this Addendum, then the obligations of the Lessor under this Addendum shall not apply to Floor 9, and in such a situation the parties shall negotiate and reach understanding as to the time-line with respect to the construction of Floor 9 (including with respect to the grace period for Floor 9, which shall in any event, under such circumstances, end no later than one and a half years from the date of completion of construction of Floor 9 or at a date where the Lessee occupies or uses Floor 9 in any way, the earlier of the above mentioned times, and in accordance with the parties agreement). In

addition, it is hereby agreed that in the situation where it is not possible to construct Floor 9 in the dates specified in this Addendum, then until such time as Floor 9 is constructed as specified above and in accordance with any applicable law, Floor 8 shall be built at a double height in a way that the systems specified in Appendix B shall be placed on the roof of the double Floor 8.

3.4. The Lessee declares and confirms that it is aware that the New UBP has yet to be approved, and that a request for a Construction Permit has yet to be submitted, and in any event a Construction Permit has yet to be obtained and the construction work with respect to the Additional Leased Premises has yet to begin, , and that the development works of any kind in Shaar Yokneam Park and/or surroundings thereof and/or any other work in Shaar Yokneam Park may continue for a long time after commencement of the Term of Lease of the Additional Leased Premises, as defined below, and that it is possible that upon commencement of the Term of Lease all the services of the Additional Leased Premises and facilities thereof shall not be operational, and it is possible that temporary changes of access routes and/or parking lots will be required, and the Lessee agrees to said in advance, and undertakes not to object to the foregoing, and provided that on the lease commencement date the main systems (that is, water, electricity, air conditioning) shall operate in the Additional Leased Premises and that on this date two passenger elevators and a freight elevator and the public areas and the other public systems in the Additional Leased Premises will be completed within 3 months after commencement of the Term of Lease of the Additional Leased Premises, as defined below, and provided that in respect of all the foregoing the Lessor shall act reasonably and to the extent possible for the purpose of minimizing obstructions in the access routes to the Additional Leased Premises, and, if necessary, upon advance coordination with the Lessee the Lessor shall arrange alternative and reasonable access routes to the Additional Leased Premises.

3.5.The Lessee declares that it is aware that the plans will be modified from time to time at the request of the competent authorities and that there could be modifications in the New UBP Regulations hereby enclosed as Appendix A1 to this Addendum and/or in the conversion of the Conceptual Plan of the Additional Leased Premises into the application for a construction permit that will be submitted to the Local Planning and Building Board and/or as part of the preparation of the detailed design. The Lessee hereby waives any demand and/or claim in connection therewith and provided that this shall not materially alter the Additional Leased Premises as described in the Conceptual Plan of the Additional Leased Premises hereby enclosed with this Agreement.

It is agreed that changes that are implemented at the Lessor's initiative and that constitute a material change compared to the Conceptual Plan of the Additional Leased Premises shall be coordinated with the Lessee in advance and in writing. For the purpose of this Section, it is agreed that a "material change" shall mean a change at a rate of at least 5% above or under the area of the Proximate Area of the Additional Leased Premises in accordance with its definition above (or from the Approximate Area of Additional Leased Premises area after reduction of the Additional Rights so far as those aren’t approved in accordance with the terms of Section 3.3 above) and/or a change in plans. The Lessor shall be entitled to implement any change, including any change that is requested following the request made by the authorities, without obtaining the Lessee's approval.

3.6. The Lessee hereby undertakes to deliver to the Lessor data and/or documents and/or information and/or plans, to the extent that these are required for the purpose of preparing the plans and/or for the purpose of obtaining the Construction Permit and/or for the purpose of obtaining Form 4 (Certificate of Occupancy) for the Additional Leased Premises and/or for the purpose of obtaining a certificate of completion for the Additional Leased Premises, within a reasonable time after receiving the requests from the Lessor and/or anyone acting on their behalf, and if possible in such manner that will not delay submission of the plans and/or obtaining the Construction Permit and/or obtaining Form 4 for the Additional Leased Premises and/or obtaining the certificate of completion for the Additional Leased Premises.

3.7. Each of the parties hereby declares that there is no factual, statutory, contractual, economic and/or other preclusion preventing its engagement in this Agreement and, subject to the approval of the New UBP and obtaining a Construction Permit, there is no such preclusion as aforesaid preventing it from fulfilling fully and timely all its undertakings in accordance with this Agreement.

3.8. The parties declare that all decisions and approvals required by the competent organs for the purpose of entering into this Agreement were made.

3.9. The lease, the Lessee and the Additional Leased Premises are not protected in accordance with the Tenant Protection Law and/or any other law superseding the same, if any.

The Additional Leased Premises will be situated in a new building whose construction and occupation were completed after the Hebrew year 5771 (1971). The Leased Premises is a property in a new building, within its meaning in Section 14(a) of the Tenant Protection Law.

When vacating the Leased Premises the Lessee shall not be entitled to any payment from the Lessor and/or from a substitute lessee, not as key money and not as payment for any improvements or installations in the Leased Premises.

3.10. The Lessee declares that as of the date of signing this Addendum, the Lessee's business is an authorized enterprise in accordance with the provisions set forth in the Encouragement of Capital Investments Law 5719-1959. The letter of confirmation issued to the Lessee's enterprise by the Investments Center in accordance with the said law is hereby enclosed as Appendix C . Said confirmation is in effect and has not been revoked, and the Lessee continues to fulfill its terms and conditions.

3.11. The name of the Additional Leased Premises shall be "Mellanox Building 2" or any other name as requested by the Lessee. The parties shall act jointly in order update the name of the Additional Leased Premises in all required records, including with Yokneam Municipality, "Mavo Haamakim" Local Planning and Building Board, and any competent and additional entity and/or authority. However, the Lessor shall be entitled to indicate its name on the building and in connection therewith upon coordination with the Lessee.

3.12. The Lessee declares that it is aware that for the purpose of securing the return of loans and/or credit that was provided by Bank Leumi le-Israel Ltd. (hereinafter: " The Bank ") the Lessor assigned and charged to the Bank a first degree lien for all its rights in accordance with the Lease Agreement and this Addendum. Without derogating from the generality of the aforesaid, the Lessee undertakes to sign any agreement as instructed by the Lessor in connection therewith. By merely signing the Lease Agreement and this Addendum the Lessee grants its irrevocable approval to register and/or amend said lien in favor of the Bank and the Lessee shall not be entitled to object thereto. From time to time the Lessor shall be entitled to change the method of payment and/or the Lessor's bank account details in accordance with the written instructions delivered by the Bank. In addition, if so instructed by the Bank, payments will be transferred to another account of the Lessor and/or directly to the bank. In such circumstances the Lessor shall raise no allegations and/or demands from the Lessee in respect of following the Bank's instructions.

3.13.The Lessor hereby declares that it shall not grant any rights to cellular operators to install antennae in the Additional Leased Premises without obtaining the Lessee's prior and written approval.

3.14. It is agreed expressly that the provisions set forth in the Bailees Law 5727-1967 shall not apply to the Agreement and Appendices thereof, and under no circumstances the parties or anyone acting on their behalf shall be deemed as a paid bailee or a gratuitous bailee towards the other party.

3.15. Without derogating from the declarations of the parties specified in this Section 3 above and for the avoidance of doubt, it is hereby agreed that the Lessor's declarations specified in Sections 4.A, 4.B, 4.E, and 4.J of the Original Lease Agreement and the declarations of the Lessee in Sections 5.D, 5.E and 5.F of the Original Lease Agreement shall also apply in connection with the Additional Leased Premises, mutatis mutandis . It is clarified and agreed that the Lessor's declarations in Sections 4.C, 4.D, 4.F, 4.G, 4.H, and 4.I of the Original Lease Agreement and the Lessee's declarations in Sections 5.A and 5.C of the Original Lease Agreement shall not apply in anything related to the Additional Leased Premises.

4. The Additional Leased Premises

4.1. It is agreed that in anything related to the Additional Leased Premises, the provisions set forth in Section 7.A. of the Original Lease Agreement shall not apply, and the following shall apply in their place:

The area of the Additional Leased Premises shall comply with the definition of the term "Additional Leased Premises" as provided in Section 2 above.

The size of Area A, Area B and Area C shall be as set forth in the definition of the terms Area A, Area B and Area C in Section 2 above.

4.2. The following provisions shall apply regarding the said in Section 7.B of the Original Lease Agreement:

It is clarified that the area of the Additional Leased Premises (including, the number of parking spaces included in the Additional Leased Premises) as set forth in this Addendum above is an approximate estimate only, and the correct area of the Additional Leased Premises (and the exact number of parking spaces) shall be determined in a final and absolute manner according to a survey that will be performed shortly before completion of construction of the Additional Leased Premises, in accordance with the provisions set forth in Section 7.B of the Original Lease Agreement and in accordance with the provisions set forth below (hereinafter: " Actual Area of the Additional Leased Premises "). It is hereby clarified that, after the performance of the above mentioned measurement, the table of areas attached to this Addendum as Appendix A3 shall be updated accordingly.

It is further clarified that notwithstanding that which is stated in Section 7.B.1 of the Original Lease Agreement the

Lessee shall be entitled to object to the results of the measurements of the Additional Leased Premises that were performed by the Lessor within 30 days of the date the Lessor presented to the Lessee a calculation of the area of the Additional Leased Premises. In the event that the Lessee failed to notify the Lessor regarding its objection to the measurement of the area of the Additional Leased Premises during said period of time, the calculation that was provided by the Lessor to the Lessee shall be deemed as the area of the Additional Leased Premises for all intents and purposes. It is further agreed that the Lessee hereby waives any allegation and/or claim and/or demand towards the Lessor in the event that the Actual Area of the Additional Leased Premises is different than the one that was designed and specified in this Addendum, unless the difference is a material difference, within its meaning in Section 3.5 above.

It is hereby clarified and agreed that all of the payments with respect to the Additional Leased Premises shall be paid in accordance with the gross area as set forth in Appendix A3 attached to this Addendum, including any changes made to it as made in accordance with any measurement which shall be performed as specified above.

4.3. The following provisions shall take effect regarding the parking spaces in the Additional Leased Premises:

Subject to any preclusion or restriction as set forth by law, the Lessee shall be entitled to use the Parking Spaces that are included in the definition of the Additional Leased Premises as of the date in which the Lessor's works in the floors of the parking lots in the Additional Leased Premises are completed, even if on this date the other works of the Lessor within their meaning in this Addendum have not yet been completed (hereinafter: " Date of Earlier Use of the Parking Spaces "). The Lessor shall deliver notice to the Lessee regarding the Date of Earlier Use of the Parking Spaces as specified above, subject to any statutory preclusion or restriction. In the event that the Lessor delivered to the Lessee notice regarding the Date of Earlier Use of the Parking Spaces as specified above, the Lessee shall pay to the Lessor the parking fees according to the parking key as set forth in Section 8.1.3 below, and the other payments applicable to it in respect of all the parking spaces, as of the Date of Earlier Use of the Parking Spaces.

5. Construction of the Additional Leased Premises and delivery of possession in the Additional Leased Premises

5.1. The Lessee confirms that prior to signing this Agreement it received a copy of the Conceptual Plan of the Additional Leased Premises hereby enclosed as Appendix A to this Addendum and that and the Additional Leased Premises as described in said document and subject to the provisions set forth in Section 3.4 of this Addendum above comply with the Lessee and Purpose of Lease.

5.2. Suspending conditions

5.2.1 Notwithstanding any of the provisions set forth in this Addendum, it is hereby agreed that if until 18 months as of the date of signing this Addendum (hereinafter: " Date of the First Suspending Condition "( the New UBP was not approved, within the meaning of this term below, then each of the parties shall be entitled to deliver written notice to the other party regarding termination of this Addendum within 7 days as of the end of the 18 months' period as stated (hereinafter: " Date of Termination Notice "), and in such circumstances as said this Addendum shall be null and void within 4 months of the Date of the Termination Notice, and neither party shall raise any allegation and/or demand and/or claim in connection therewith, unless within the said 4 months as aforesaid the New UBP was approved, and then this Agreement shall be in effect (and subject to the provisions set forth in Section 5.2.2 below).

In the event that none of the parties delivered notice regarding termination of this Addendum as specified above, the Date of the First Suspending Condition shall be extended automatically by 12 additional months, after which if and to the extent that the New UBP is not approved, this Addendum shall be null and void unless otherwise stated in writing by the parties.

" Approval of the New UBP " for the purpose of this Section shall mean publication of the New UBP in Reshumot (State Gazette).

5.2.2. Subject to the approval of the New UBP, and without derogating from the undertakings of the Lessee as specified in Section 3.6 above, the Lessor shall take action for the purpose of submitting the application for the Last Construction Permit. Notwithstanding the provisions set forth in this Addendum, if until 9 months as of the date of approval of the New UBP (hereinafter: " Date of the Second Suspending Condition ") the Construction Permit is not obtained, then each of the parties shall be entitled to deliver written notice to the other party regarding termination of this Addendum by delivery of written notice to the other party within 7 days of the expiration of the said 9 months' period (hereinafter: " Date of Second Termination Notice "). In such circumstances this Addendum shall be null and void within 4 months of the date of delivery of the Second Termination Notice, and none of the parties shall raise any

allegation and/or demand and/or claim in connection thereto unless within said period of 4 months as specified above a Construction Permit was issued and then this Agreement shall be in effect.

In the event that none of the parties delivered notice regarding termination of this Addendum as specified above, the Date of the Second Suspending Condition shall be extended by 9 additional months after which if, and to the extent that no Construction Permit is issued, this Addendum shall be null and void unless otherwise agreed in writing by the parties.

For the avoidance of doubt it is clarified that in the event that this Addendum was terminated as specified in Section 5.2 above, the Original Lease Agreement shall continue to be in effect and intact.

It shall be further clarified that that which is stated in the Lease Agreement and/or in this Addendum in general and in this Section 5.2 in particular shall not impose any obligation and/or liability on the Lessor in connection with the approval of the New UBP and/or in connection with obtaining the Construction Permit and/or in connection with the date of their approval or receipt, as the case may be.

5.3. The Lessor shall perform the Lessor's Works by means of licensed contractors.

5.4. The Lessor hereby warrants that within 24 months , the Additional Leased Premises shall be in deliver of the date of obtaining the Last Construction Permit for the Additional Leased Permissible condition as defined below (herein above and below: " Delivery Date ").

5.5. It is clarified that subject to fulfilling all of the Lessee's undertakings in accordance with this Addendum and in accordance with the provisions set forth in Section 3.4 above, on the Delivery Date the Additional Leased Premises shall be in a condition in which the Lessor's works, in accordance with the Lessor's Works Specifications and in accordance with the plans, have been substantially completed and no material deficiencies and/or defects that would prevent reasonable use thereof were discovered therein, and part of the implementation of the works in the Public Areas at the entrance to the Additional Leased Premises is completed in a manner that will allow reasonable and safe passage to pedestrians from the street level and to the entrance to the Additional Leased Premises, and that there is a safe and reasonable passage to persons between the floors of the Additional Leased Premises including the parking lot floors (herein above and below: " Additional Leased Premises in Deliverable Condition ").

In addition, on the Delivery Date the Lessee shall be in possession of Form 4 (Certificate of Occupancy) for the Additional Leased Premises (hereinafter: " Issue Date of Form 4 ") subject to the full and timely fulfillment of all the following conditions cumulatively by the Lessee:

5.5.1. The Lessee shall complete the Lessee's Works on the completion date of the Lessee's Works, as those terms are defined below, and on condition that the completion date of the Lessee's Works was not delayed for reasons that are contingent upon the Lessor.

5.5.2. The Lessee shall furnish to the Lessor any confirmation and/or permit and/or any other demand that is required in accordance with the law and/or made by any competent authority in connection with the Lessee's Works and/or in connection with the activity of the Lessee in the Leased Premises, to the extent that these are required for the purpose of obtaining Form 4 for the Additional Leased Premises, and no later than one month prior to the date of obtaining Form 4 as defined above.

5.5.3. The Lessee undertakes to cooperate with the Lessor for the purpose of obtaining Form 4 for the Additional Leased Premises, and in this regard the Lessee undertakes to furnish data and/or documents and/or information and/or plans, to the extent that these are required for the purpose of obtaining Form 4 for the Additional Leased Premises.

5.5.4. The Lessee's Works shall not impede in any manner the issuing of Form 4 for the Additional Leased Premises and/or shall not delay the issuing of Form 4 for the Additional Leased Premises.

For the avoidance of doubt it is clarified that to the extent that the conditions set forth in Sections 5.5.1-5.5.4 above or any thereof are not fulfilled, the Delivery Date shall be deemed as the date in which the Additional Leased Premises are suitable for delivery, within the meaning of this term above.

Each of the parties shall incur its costs and/or any costs associated with performance of that which is stated in this Section 5.5.

5.6. A delay of the Delivery Date (as defined in Section 5.4) that does not exceed 3 months, for any reason, and/or a delay in the Date of Delivering the Additional Leased Premises for the purpose of Performing the Works (as stated in Section 6.1 below) that does not exceed two months, for any reason, and/or a delay of the Delivery Date as aforesaid or on the day of delivering the Additional Leased Premises for the purpose of the works as aforesaid that does not exceed 5 months in anything related to the Service Building, for any reason, or a delay of the Delivery Date as

aforesaid or on the date of delivering the Additional Leased Premises for the purpose of performing works as aforesaid for a longer period due to the occurrence of a Force Manure event as defined in this Addendum, and/or due to orders issued by competent authorities (unless issued in respect of an act and/or omission of the Lessor), and/or a lag and/or delay as aforesaid due to an act or omission of the Lessee and/or due to the works of the Lessee and/or due to circumstances that are related to the Lessee and/or due to breach of the Lessee of its undertakings as specified in Section 5.5 above (hereinafter jointly: " Delays other than Breach ") shall not constitute breach of the Lessor's undertakings and shall not entitle the Lessee to any relief and/or compensation of any kind.

In the matter of delays regarding the delivery of the Additional Leased Premises for the purpose of works (as defined in Section 6.1 below) and/or on the Delivery Date (as defined in Section 5.4 above, and subject to fulfillment of the conditions set forth in Sections 5.5.1-5.5.4 above) beyond the dates specified above and that derive solely from reasons that are contingent on the Lessor, it is agreed as follows:

5.6.1. In the event of a delay that exceeds 3 months as aforesaid, (or that exceeds two months in circumstances of a delay on the Date of Delivering the Additional Leased Premises for the purpose of Performing the Works), and/or a delay of more than 5 months in anything related to the Service Building, except for Delays other than a Breach as defined above, the Lessor shall pay to the Lessee in respect of each month of delay (or any part thereof) after expiration of the three months' period (or two months, in circumstances of a delay of the Date of Delivering the Additional Leased Premises for the purpose of Performing the Works) and/or 5 months in the Service Building (as the case may be) and until commencement of the period specified in Section 5.6.2 below, compensation at a rate of 1/2 of the Rent in respect of Area A as specified in Section 8.1.1 below in respect of said period, and the Lessee shall not be entitled to any additional relief for any delay as aforesaid, and it hereby waives any allegations and/or demands and/or claims and/or any other right in connection therewith. The parties declare that this amount was determined and set by them as pre-estimated liquidated damages that were estimated reasonably in advance by the parties as the reasonable amount of the damage caused to the Lessee due to said delay, and that this will be the sole relief to which the Lessee shall be entitled in such circumstances.

5.6.2. In the event of a delay that exceeds 5 months as aforesaid, or a delay of more than 7 months in anything related to the Service Building, except for Delays other than Breach as defined above, the Lessor shall pay to the Lessee in respect of each month of delay (or any part thereof) after expiration of the 5 months' period and/or 7 months' period in the Service Building (as the case may be) and until 12 months as specified in Section 5.6.3 below, compensation in an amount equal to the Rent in respect of Area A, as set forth in Section 8.1.1 below for said period, and the Lessee shall not be entitled to any additional relief in respect of such a delay as aforesaid and it hereby waives in advance any allegation and/or demand and/or claim and/or any other right in connection therewith. The parties declare that this amount was determined and agreed between the parties as pre-estimated liquidated damages that were estimated reasonably and in advance by the parties as the reasonable amount of the damage caused to the Lessee as a result of said delay, and that this shall be the sole relief the Lessee may seek in such circumstances.

5.6.3. In the event of a delay for a period exceeding 12 months as aforesaid, except for Delays other than a Breach as defined above, the Lessee shall be entitled to terminate this Addendum by delivery of a written notice that shall be delivered to the Lessor within 7 days as of the expiration date of said 12 months' period, and in such circumstances as aforesaid this Addendum shall be null and void on that date, and the Lessee shall raise no allegations and/or demands and/or claims in connection thereof. It is clarified that the Lessee shall not be entitled to any additional relief in respect of such a delay as aforesaid and/or in respect of termination of this Addendum as aforesaid, except for the compensation paid to it until the termination date of this Addendum in accordance with the provisions set forth in Sections 5.6.1 - 5.6.2 above, and it hereby waives any allegation and/or demand and/or claim and/or any other right in connection therewith.

In the event of a delay on the Delivery Date the Delivery Date shall be referred to as "Deferred Delivery Date."

Without derogating from the foregoing, a delay of the Date of Delivering the Additional Leased Premises for the purpose of Performing the Works (beyond the two months' period as specified in this Section 5.6 above) and/or a delay on the Delivery Date (beyond the date specified in Section 5.4 above) that derive solely for reasons that are contingent on the Lessor, unless the delays were caused due to Force Majeure and/or due to orders issued by competent authorities (unless issued in respect of an act and/or omission of the Lessor) and/or due to an act or omission of the Lessee and/or due to the Lessee's Works and/or due to circumstances related to the Lessee, shall entitle the Lessee to delay of all the payment dates in accordance with this Addendum, including Rent, and the like (except for parking fees that shall be paid as of the date of early use of the parking spaces as specified in Section 4.3 above, and except for payments for electricity and water consumption paid as of the Date of Delivering the Additional Leased Premises for the purpose of Performing the Works as specified in Section 14.1 below), and until the Deferred Delivery Date

(including issuing of Form 4, unless the delay derived from reasons that are contingent on the Lessee).

For the avoidance of doubt, for the purpose of the provisions set forth above, it is hereby clarified that a delay of the Delivery Date as aforesaid due to Delays other than a Breach as specified in this Section 5.6 above, shall not be deemed as a delay or deferral that entitle the Lessee with any remedy and shall not be deemed as breach of this Agreement. It is clarified that all the periods specified above shall not be counted in the count of the periods of delay for all intents and purposes.

In addition, it is agreed that the compensation and delay of payment dates as specified in this Section 5.6 above that are set due to a delay of the Date of Delivering the Additional Leased Premises for the purpose of Performing the Works shall be in effect on condition that said deferral caused a delay on the Delivery Date.

For the avoidance of doubt it is clarified that in circumstances of a delay both of the date of delivering the Additional Leased Premises for the purpose of the works and of the Delivery Date, the Lessee shall not be entitled to receive double compensation and/or double delay of the payment dates in accordance with the provisions set forth in this Section 5.6 above, and in such circumstances as aforesaid the compensation and delay in payment dates as specified in this Section 5.6 above shall be calculated in accordance with the delay period that is greater than the two.

5.7. It is agreed that in anything related to the delivery of possession of the Additional Leased Premises, that which is stated in Sections 5.4 - 5.6 above shall supersede the provisions set forth in Sections 8.A., 8.B., 8.E, and the first paragraph of Section 8.F of the Original Lease Agreement. For the avoidance of doubt, the provisions set forth in Sections 8.D., the second and third paragraph of Section 8.F, 8.G - 8.J of the Original Lease Agreement shall also apply to the delivery of possession in the Additional Leased Premises, mutatis mutandis .

6. Works of the Lessee in the Additional Leased Premises and adjustment of the Additional Leased Premises for the requirements of the Lessee

It is agreed that in anything related to Section 9 of the Original Lease Agreement and with respect to the Lessee's works in the Additional Leased Premises and the adjustment of the Additional Leased Premises for the Lessee's requirements, the following provisions shall apply:

6.1. The Lessor warrants that no later than 16 months as of the date of obtaining the Last Construction Permit the Lessee shall be permitted to stay in the Additional Leased Premises for the purpose of Performing the Lessee's Works (hereinafter: " Date of Delivering the Additional Leased Premises for the purpose of Performing the Works "). The Lessor shall notify the Lessee regarding the aforesaid date, upon delivery of a written notice at least 30 days in advance.

It is agreed that on the Date of Delivering the Additional Leased Premises for the purpose of Performing the Works, the Additional Leased Premises shall be in the following condition: construction of frame and walls of the outer frame of the Additional Leased Premises in "almost complete" condition (hereinafter: " Condition of the Leased Premises on the Date of Delivering the Additional Leased Premises to the Lessee ").

During a period of 20 business days prior to the Date of Delivering the Additional Leased Premises to the Lessee, a preliminary protocol recording the condition of the Leased Premises shall be prepared (hereinafter: " Preliminary Protocol "). The provisions set forth in Section 8.H. of the Original Lease Agreement shall apply with respect to the Preliminary Protocol, mutatis mutandis .

Without derogating from the foregoing, on the Date of Delivering the Additional Leased Premises for the purpose of Performing the Works, the Lessee shall approve in writing receipt of the Additional Leased Premises for the purpose of performing the Lessee's Works in accordance with the provisions set forth in the Lease Agreement and this Addendum, and provided that the Additional Leased Premises comply with the Condition of the Leased Premises on the Date of Delivering the Additional Leased Premises to the Lessee as defined above.

It is agreed that the status of the Lessee in the Additional Leased Premises as of the Date of Delivering the Additional Leased Premises for the purpose of Performing the Works and until the Delivery Date shall be the status of an "authorized entity" only, and the Lessee shall be entitled to enter the Additional Leased Premises during this period solely for the purpose of performing the Lessee's Works in accordance with the provisions set forth in this Addendum. Granting such permission as aforesaid shall not be deemed as delivery of possession of the Additional Leased Premises, and the Lessor shall retain possession in the Additional Leased Premises during said period and until the Delivery Date.

6.2. As of the Date of Delivering the Additional Leased Premises for the purpose of Performing the Works, the Lessee undertakes to implement in the Additional Leased Premises, at its expense, the Lessee's Works in accordance

with the provisions set forth in Section 9 of the Original Lease Agreement (save as provided in Section 6.13 below) mutatis mutandis , and complete the Lessee's Works in a manner that the Additional Leased Premises are ready for use in accordance with the Purpose of Lease within its meaning in the Original Lease Agreement until and no later than 8 months as of the Date of Delivering the Additional Leased Premises for the purpose of Performing the Works (hereinafter: " Completion Date of the Lessee's Works "), subject to the provisions set forth in Section 5.5.2 above.

The construction plans, technical specifications and bills of quantities according to which the Lessee's Works shall be implemented (hereinafter jointly: " Lessee's Plans ") shall be prepared by the Lessee by licensed professionals on its behalf, at its expense and under its sole responsibility, and shall be in a standard that shall not fall below the standard of plans of the Lessee in the existing Leased Premises, and provided that that it shall not fall below the standard of the plans that were approved for the Existing Leased Premises.

The Lessee's Plans shall be sent for the Lessor's prior approval as specified in Sections 9.D., 9.E.1. and 31.C. of the Original Lease Agreement.

It is clarified that for the purpose of Sections 9.D., 9.E.1. and 31.C. of the Original Lease Agreement, "reasonable reasons" for the Lessor to avoid issuing confirmation of the Lessee's Plans shall be solely reasons that are related to the impact of the works on the systems and utilities of the Additional Leased Premises, including connections thereto and/to Shaar Yokneam Park and/or anything related to construction of the Additional Leased Premises and/or the provisions set forth in any law and/or the conditions set forth in the construction permit and/or the requirements set forth by the authorities and/or the demands made by suppliers and/or service providers in the Additional Leased Premises.

After obtaining the Lessor's approval regarding the Lessee's Plans as aforesaid, the Lessee shall deliver to the Lessor the final Lessee's Plans (hereinafter: " Final Lessee's Plans ").

It is agreed that modifications in the Final Lessee's Plans that do not have any impact on the systems and utilities of the Additional Leased Premises including connections thereto and/or that do not have any impact on Shaar Yokneam Park and/or the construction of the Additional Leased Premises and/or that do not constitute breach of the provisions set forth in any law and/or construction permit and/or the New UBP and/or the requirements set forth by the authorities and/or the requirements set forth by suppliers and/or service providers to the Additional Leased Premises (hereinafter: " Permitted Modifications ") shall not oblige the Lessee to obtain the Lessor's additional prior and written approval, but the Lessee shall deliver written notice to the Lessor regarding any modification and/or deviation with relation to the details specified in the Final Lessee's Plans and in any event prior to performing the modification and/or the deviation.

Implementation of modifications that do not constitute Permitted Modifications shall require the Lessor's prior and written approval. The Lessor shall deliver its response to the request made by the Lessee as aforesaid no later than 10 days after receiving the request for approval as aforesaid.

6.3. The Lessee shall incur all costs in connection with implementation of the Lessee's Works and, without derogating from the generality of the aforesaid, shall incur the costs of service sites that will be used by the Lessee. The Lessee shall reach an arrangement regarding this issue directly with a contractor who will construct the frame of the Additional Leased Premises, and the Lessor shall not be held liable in connection with such an arrangement as aforesaid. It is clarified that the Lessee shall not be entitled to enter into an agreement with an outside entity for the purpose of providing the site services as aforesaid, except for an agreement regarding waste disposal.

6.4. The Lessee undertakes to appoint a safety supervisor on its behalf for the purpose of supervising the safety of the works, in accordance with the instructions set forth by the Ministry of Industry, Trade and Labor and in accordance with the safety instructions set forth in accordance with the provisions of any law.

6.5. The Lessee shall be entitled to store and place materials and equipment solely in areas designated by the Lessor for that purpose. The Lessee shall incur any damage caused to the Additional Leased Premises or surroundings thereof due to the storage of materials and the equipment as aforesaid. In the course of Performing the Works and following their completion the Lessee shall vacate by itself and at its expense any waste of any kind, including construction waste, auxiliary materials, residues, remains, packages, etc. that it and/or anyone acting on its behalf used, to a licensed waste disposal site and in accordance with the provisions set forth in any law. The Lessee warrants that the implementation of the Lessee's Works on its behalf and/or by anyone acting on its behalf shall not impair and/or disrupt works and/or construction processes that are implemented by the Lessor and/or anyone acting on its behalf and/or the use of leased premises of other lessees in the Additional Leased Premises in Shaar Yokneam Park.

6.6. The Lessee undertakes that in any event delivering the Additional Leased Premises for the purpose of performing the Lessee's Works shall not hinder and/or prevent and/or delay the completion of the Lessor's Works as

specified in this Addendum. Without derogating from the foregoing, in the event that delays are caused during completion of the Lessor's Works deriving from the Lessee and/or from the Lessee's Works, including due to the need to obtain confirmations and/or documents in connection therewith, this shall not constitute breach of the Lease Agreement and this Addendum on behalf of the Lessor. For the purpose of commencing the Term of Lease, the date in which the Lessor could have delivered the Additional Leased Premises, including the Lessor's Works if it had not been for said delay, shall be deemed as the Delivery Date, and the Lessee hereby waives any allegation and/or demand and/or claim and/or any other right in connection therewith.

6.7. Non-applicability of employer-employee relationship. All employees and/or workers employed by the Lessee and/or anyone acting on its behalf in connection with implementation of the Lessee's Works shall be deemed solely as the Lessee's employees and/or contractors for all intents and purposes, and the Lessor shall not be held liable in any manner in connection therewith. It is further agreed that craftsmen, suppliers of materials, services, equipment and facilities and different service providers in connection with the Lessee's Works shall act solely and in the name of the Lessee, and that the Lessor shall not be deemed, whether directly or indirectly, as their employer and/or their principal and/or as a party to their contract, and that no liability and/or obligation and/or responsibility of any kind shall be imposed on the Lessor with relation to them and/or towards them and/or with relation to their acts and/or omissions.

In the event that the Lessor is compelled to incur any payment in accordance with the provisions set forth in any law by any competent authority or instance in accordance with a judgment whose execution was not stayed vis-à-vis a claim and/or demand with relation to and/or in connection with the Lessee's employees, contractors, subcontractors, craftsmen, suppliers of services and materials, and any other equipment and/or workers and/or employees in the implementation of the Lessee's Works and/or with relation to their acts and/or omissions of any of them and/or towards them, the Lessee shall indemnify and compensate the Lessor fully for any payment of any kind imposed on the Lessor as specified above. The Lessor shall notify the Lessee regarding any claim and/or demand and/or allegation directed against it shortly after its receipt, and shall afford the Lessee to conduct the defense in its name against said claim and/or allegation, to the extent that this is contingent thereon, on the condition that the proceedings shall be handled in collaboration with the Lessor and/or representatives thereof.

6.8. As of the Date of Delivering the Additional Leased Premises to the Lessee, the Lessee shall be held solely liable by law towards the Lessor and towards any third party, in respect of any damage caused to the Additional Leased Premises, the Additional Leased Premises, other leased premises in the complex, the Lessor and/or to any third party in connection with the Lessee's Works, provided that this is not an act and/or omission of the Lessor and/or anyone acting on its behalf. Without derogating from the Lessee's undertaking as specified above, the Lessee shall arrange insurance for its liability as specified in the insurance appendices (Appendices D and E). Without derogating from the foregoing and from that which is stated in any law, the Lessee undertakes that the works in the Additional Leased Premises shall be implemented, inter alia , in compliance with the Hot Works Procedure as specified in Appendix F hereby enclosed with this Agreement.

6.9. The Lessee shall be responsible for any breach and/or violation of the laws related to the Lessee's Works that are implemented by the Lessee and/or anyone acting on its behalf, to the extent implemented by the Lessee and/or anyone acting on its behalf in violation of the provisions set forth in any law, and the Lessee further declares and undertakes that it shall incur at its expense and exclusively any fine or penalty imposed in respect of the Lessee's Works implemented by the Lessee and/or by anyone acting on its behalf, to the extent that such works are implemented by the Lessee and/or anyone acting on its behalf contrary to the provisions of the law.

6.10. That which is stated in Sections 6.7, 6.8 and 6.9 above shall apply respectively to the Lessor's Works in such manner that the Lessor shall be held under identical liabilities towards the Lessee in anything related to implementation of the Lessor's Works and the works of its employees and anyone employed on its behalf.

6.11. Each of the parties shall be responsible for anything related to the works that said party implemented in accordance with the provisions set forth in this Addendum, including for presentation of any document or making any repair and/or lack of conformity that are related to its works as aforesaid.

6.12. Without derogating from the generality of that which is stated in Section 9.I of the Original Lease Agreement, it is agreed that upon completion of the Lessee's Works, and as a condition for start of the activities of the Lessee in the Additional Leased Premises, the Lessee shall furnish to the Lessor all of the following documents and authorizations:

6.12.1. Business license for the entire Additional Leased Premises, to the extent required in accordance with the provisions set forth in any law or the demands made by any authority.

6.12.2. As Made plans of the finishing works in the Additional Leased Premises including architectural plans, air conditioning, electricity and plumbing.

6.12.3. Contact list for all contractors and suppliers.

6.12.4. Operating instructions for the different systems that were installed in the Additional Leased Premises as part of the Lessee's Works.

6.12.5. Certificate of warranty of air conditioning systems, fire detection systems and emergency PA.

6.12.6. Authorization issued by plumbing, electricity and air conditioning consultants, constituting a designer's confirmation regarding receipt of the facility in accordance with the Lessee's Plans that were approved by the Lessor.

6.12.7. Authorization issued by the Standards Institution of Israel for the sprinkler system, fire detection system and gas fire extinguishing system.

6.12.8. Authorization issued by a certified electrical inspector for the electricity systems in the Leased Premises and for the UPS systems.

6.12.9. Authorization issued by a safety consultant that will also include reference to the finishing materials.

6.12.10. Authorization issued by the fire department, to the extent that the local council conducted an inspection.

For the avoidance of doubt it is clarified that failure to present such authorizations or any thereof as aforesaid shall not give rise to grounds to delay commencement of the Term of Lease of the Additional Leased Premises and/or a delay in any of the payments and/or the liabilities imposed on the Lessee in accordance with the Lease Agreement and this Addendum, unless said delay and/or deferral derived solely for reasons contingent on the Lessor, as specified in Section 5.6 above.

6.13. It is agreed that in anything related to the Additional Leased Premises the provisions set forth in Sections 9.A., 9.B. (except for the first paragraph of Section 9.B. that shall also apply with respect to the Additional Leased Premises), 9.C. and 9.H. shall not apply, and that which is stated in this Section 6 above shall apply in their place. For the avoidance of doubt the provisions set forth in Sections 9.D., 9.E. 9.F. (subject to the terms of Section 12 of this Addendum), 9.G., and 9.J. shall apply to the Lessee's Works in the Additional Leased Premises, mutatis mutandis .

7. Term of Agreement

It is agreed that in anything related to Section 11 of the Original Lease Agreement and with respect to the Term of Lease of the Additional Leased Premises the following provisions shall apply:

7.1. It is hereby agreed between the parties that the Term of Lease of the Lessee in the Additional Leased Premises is for a total period of time of 10 years, which will be counted as of the Delivery Date or the Deferred Delivery Date (hereinafter: " Term of Lease of the Additional Leased Premises ").

7.2. The provisions set forth in Sections 11.A. and 11.B. of the Original Lease Agreement shall not apply with respect to the Term of Lease of the Additional Leased Premises. For the avoidance of doubt it is clarified that the Lessee shall not be entitled to shorten the Term of Lease of the Additional Leased Premises. For the avoidance of doubt it is clarified that the provisions set forth in Sections 11.C. and 11.D. of the Original Lease Agreement shall apply to the Term of Lease of the Additional Leased Premises mutatis mutandis , and will supersede any reference made to shortening the Term of Lease.

8. Rent and Parking Fees - Amount, terms of payment and dates of payment

It is agreed that in anything related to Section 12 of the Original Lease Agreement and with respect to the Rent and the Parking Fees of the Additional Leased Premises, the following provisions shall apply:

8.1. As of the Delivery Date or the Deferred Delivery Date (or on any earlier date for the purpose of Parking Fees as specified in Section 4.3 above) and during the entire Term of Lease of the Additional Leased Premises, the Lessee undertakes to pay to the Lessor Rent and Parking Fees in respect of the Additional Leased Premises in accordance with the following provisions:

8.1.1 Rent for floor areas - monthly Rent for each month of the Term of Lease of the Additional Leased Premises that the Lessee hereby undertakes to pay to the Lessor during the entire Term of Lease of the

Additional Leased Premises shall total a monthly amount of NIS 51.5 (principal) for each 1 sq.m. (gross) of the Additional Leased Premises (including the Service Building), in addition to linkage differentials as specified below and in addition to statutory VAT (hereinafter: " Rent for Floor Areas ").

8.1.2. Rent for the Storage Rooms (in the parking floors) - monthly Rent for the Storage Rooms (in the parking floors) for each month of the Term of Lease of the Additional Leased Premises that the Lessee hereby undertakes to pay to the Lessor during the entire Term of Lease of the Additional Leased Premises shall total a monthly amount of NIS 42 (principal) for 1 sq.m. (gross) of Storage Room areas, in addition to linkage differentials as specified below and in addition to statutory VAT (hereinafter: " Rent for the Storage Rooms ").

8.1.3. Parking Fees -monthly parking fees for each month of the Term of Lease of the Additional Leased Premises that the Lessee hereby undertakes to pay to the Lessor during the entire Term of Lease of the Additional Leased Premises shall be in a monthly amount of NIS 350 (principal) for each parking space, in addition to linkage differentials as specified below and in addition to statutory VAT. It is clarified that said amount shall not include payment of municipal taxes and/or payment of other taxes in respect of the parking spaces that shall be solely incurred by the Lessee (to the extent applicable).

Rent for floor areas, the Storage Rooms and Parking Fees shall be referred hereinafter collectively: " Rent for the Additional Leased Premises ."

8.2. Notwithstanding that which is stated in Section 8.1 above, it is hereby agreed that in respect of the period taking effect on the Delivery Date and that expires within two months of the Delivery Date or the Deferred Delivery Date, or that expires on the date in which the Lessee occupies or makes any use of the Additional Leased Premises, in whole or in part, whatever is earlier (hereinafter: " Grace Period "), the Lessee shall be exempt from payment of the Rent for Floor Areas (and solely with respect to these areas) during said period of time.

It is clarified that during the Grace Period the Lessee shall be obligated to make any other payment applicable to the Leased Premises in respect of the Additional Leased Premises in accordance with the terms set forth of the Lease Agreement and this Addendum (including the Rent in respect of the Storage Rooms, Parking Fees and municipal taxes) (hereinafter: " Grace ").

8.3. Notwithstanding that which is stated in Sections 8.1 and 8.2 above, it is hereby agreed between the parties that in anything related to the Rent in respect of Area B within its meaning above, the Grace Period shall be the period taking effect on the Delivery Date or on the Deferred Delivery Date and that will expire one year as of the Delivery Date or the Deferred Delivery Date or on the date in which the Lessee occupies or makes any use of Area B in whole or in part, whichever is earlier (hereinafter: " Grace Period Area B " and " Grace Area B " as the case may be).

Notwithstanding that which is stated in Sections 8.1 and 8.2 above, it is hereby agreed between the parties that in anything related to the Rent in respect of Area C within its meaning above, the Grace Period shall be the period taking effect on the Delivery Date or on the Deferred Delivery Date and that will expire two years as of the Delivery Date or the Deferred Delivery Date or on the date in which the Lessee occupies or makes any use of Area B in whole or in part, whichever is earlier (hereinafter: " Grace Period Area C " and " Grace Area C " as the case may be).

It is further clarified that even if at the end of one year of the Delivery Date the Lessee does not occupy Area B or at the end of two years of the Delivery Date the Lessee does not occupy Area C (subject to the provisions in Section 3.3 related to Floor 9), in whole or in part (respectively), then in any event as of one year from the Delivery Date or the Deferred Delivery Date (with respect to Area B) and as of two years from the Delivery Date or the Deferred Delivery Date (with respect to Area C) and until expiration of the Term of Lease of the Additional Leased Premises in accordance with the provisions set forth in the Lease Agreement and this Addendum, the Lessee shall pay the Rent for the entire Area B and Area C (respectively) without derogating from the Lessee's undertakings in respect of Area A.

8.4. It is hereby agreed and clarified that the Lessee shall pay the Lessor full Rent for the Additional Leased Premises in addition to linkage differentials and in addition to statutory VAT in accordance with the provisions set forth in Section 13 of the Original Lease Agreement and subject to its amendments as specified in Section 9 below.

8.5. It is agreed that Rent for the Additional Leased Premises shall be added to the Rent in respect of the Existing Leased Premises and shall be paid on the same date and in the same manner as paid in accordance with the provisions set forth in Sections 12(A)(3) - 12(A)(4) of the Original Lease Agreement, subject to the following modifications:

The following paragraph shall come in lieu of the second paragraph of Section 12.A.3 of the Original Lease Agreement: "Upon expiration of the Grace Period, within its meaning below, the Lessee shall pay to the Lessor the

Rent for the Additional Leased Premises for a Term of Lease taking effect upon expiration of the Grace Period and expiring at the end of the calendar quarter subsequent to the quarter in which the Grace Period expired (hereinafter: " First Payment "). It is agreed that if the Lessee occupies or makes any use of the Additional Leased Premises, in whole or in part, prior to expiration of the Grace Period (herein above and hereinafter: " Early Use of the Leased Premises "), then the First Payment shall be paid on the date of early start of use of the Leased Premises, and the other provisions set forth in the Section shall apply accordingly, mutatis mutandis . The payment date of all the other remaining quarterly payments that the Lessee is obligated to pay to the Lessor in accordance with the provisions set forth in this Addendum shall be on the first day (1 ^st ) of the calendar months January, April, July and October that shall take effect as of the end of the quarter subsequent to the quarter in which the Grace Period expired until expiration of the Term of Lease subject of this Agreement, in accordance with all the other terms and provisions set forth in the Lease Agreement and this Addendum.

The following paragraph shall be added to the final part: "The Lessee shall be granted exclusive right to notify the Lessor that it wishes to pay the Rent for the Additional Leased Premises in consecutive annual installments each time for the purpose of the advance payment of the Rent for the Additional Leased Premises for 12 additional months in advance. In such circumstances the First Payment shall be paid on the date specified in the second paragraph of this Section above, mutatis mutandis , and the other outstanding annual payments that the Lessee is obligated to pay in accordance with the provisions set forth in this Addendum shall be on the 1 ^st (first) of January of each year of lease until expiration of the lease contemplated in this Addendum in accordance with all the other terms and provisions set forth in the Lease Agreement and this Addendum."

It is clarified that the Lessor shall deliver a tax invoice to the Lessee no later than ten days prior to the payment date stipulated in this Addendum, and not before publication of the index to which said payment is linked in accordance with the provisions set forth in the Agreement and this Addendum.

8.6. It is agreed that breach of the undertaking to pay the Rent for the Additional Leased Premises shall not be deemed as breach of the undertaking to pay the Rent with respect to the Existing Leased Premises for all intents and purposes.

8.7. The Lessor hereby instructs the Lessee to pay the Rent due from the Lessee to the Lessor by way of wire transfer directly to the Lessor's Account: account no. 61823/25 in Bank Leumi le-Israel Ltd, Tel Aviv main branch (branch no. 800) (herein above and hereinafter: " Lessor's Account "), unless the Lessor notifies the Lessee regarding another bank account.

For the avoidance of doubt it is emphasized that only full and timely payment of the Rent for the Additional Leased Premises and other payments applicable to the Lessee in accordance with the provisions set forth in the Lease Agreement and this Addendum, shall be deemed as fulfillment of the Lessee's undertakings for the purpose of said payments.

From time to time the Lessor shall be entitled to change the payment method and/or details of the Lessor's Account according to its requirements. It is emphasized that any payment in connection with this Agreement, including the Appendices thereof, shall not be made in cash.

8.8. It is agreed that in anything related to the Additional Leased Premises the provisions set forth in Sections 12.A.1 and 12.A.2 of the Original Lease Agreement shall not apply, and that which is stated in this Section 8 shall come in their place. For the avoidance of doubt the provisions set forth in Section 12.A.3 (subject to the changes specified in Section 8.5 above), 12.A.4, 12.B- 12.E shall apply to the Additional Leased Premises, mutatis mutandis and subject to the provisions set forth below.

Notwithstanding that which is stated in the Original Lease Agreement, it is clarified that the said in Sections 12.C and 12.D of the Original Lease Agreement shall apply to all payments imposed on the Lessee in accordance with the Original Lease Agreement and this Addendum.

9. Linkage of payments to the Consumer Price Index and payment of VAT

It is agreed that the following provisions shall apply in anything related to Section 13 of the Original Lease Agreement, and with respect solely to the Additional Leased Premises:

Notwithstanding that which is stated in Section 13.A. of the Original Lease Agreement, the "base index" shall be the index published on August 15, 2015 in respect of July 2015 (_____ points according to a basis of _____) (hereinafter: " Base Index ").

10. Insurance

It is agreed that the following provisions shall apply in anything related to Section 16 of the Original Lease Agreement and with relation to the Additional Leased Premises (and all subject to the terms of Section 10.18 below):

10.1. Without derogating from the liability of the Lessee in accordance with the Original Lease Agreement and/or this Addendum and/or by law, the Lessee undertakes to arrange and maintain the following insurance with a legally licensed and reputable insurance company.

It is agreed that to the extent that the Lessee is required to perform works to protect the Additional Leased Premises, protect against burglary and/or install security systems, an alarm, detection systems, fire and smoke detection systems and the like (hereinafter: " Protection Works ") for the purpose of complying with the terms set forth in the insurance policies of any of the insurance coverage specified in the Lessee's Insurance Confirmation enclosed as Appendix D, the Lessee shall solely incur all costs of the Protection Works and shall raise no allegations towards the Lessor in connection therewith.

10.2 Subject to the provisions set forth in this Addendum in anything related to obtaining authorization to perform works in the Additional Leased Premises, if any works are performed in the Additional Leased Premises by the Lessee and/or anyone acting on its behalf prior to the Lessee first occupying the Leased Premises and/or on any other date during the Term of Lease, the Lessee undertakes to present to the Lessor and the Lessee's Insurance Confirmation as made either between the Lessee and a contractor on its behalf, hereby enclosed with this Addendum constituting an integral part thereof and marked as Appendix D (hereinafter respectively: " Insurance Confirmation for the Lessee's Works" and "Lessee's Insurance Confirmation ") signed by its insurer. The Lessee declares that it is aware that presenting the Insurance Confirmation for the Lessee's Works is a suspending condition and condition precedent for the performance of any works in the Additional Leased Premises, and the Lessor and/or the Management Company shall be entitled, however not obligated, to prevent from the Lessee from performing works in the Additional Leased Premises if said confirmation was not presented to them prior to the start of the works as aforesaid.

10.3. During the entire Term of Lease the Lessee undertakes to arrange and maintain the insurance coverage specified in the Insurance Confirmation enclosed with this Addendum constituting an integral part thereof and marked as Appendix E (hereinafter respectively: " Lessee's Permanent Insurance Confirmation" and "Lessee's Permanent Insurance ").

10.4. The Lessee undertakes, without receiving any demand by the Lessor, to present to the Lessor, no later than the date of receiving possession of the Leased Premises or prior to the date of bringing any assets to the Additional Leased Premises (except for assets that are listed in the works that are insured under Section 10.2 above) - whichever is earlier - the Lessee's Permanent Insurance Confirmation signed by its insurer. The Lessee declares that it is aware that presenting the Lessee's Permanent Insurance Confirmation is a suspending condition and a condition precedent prior to receiving possession in the Additional Leased Premises and/or bringing any assets to the Additional Leased Premises (except for assets that are included in the works that are insured under Section 10.2 above), and the Lessor shall be entitled, but not obligated, to prevent the Lessee from receiving possession of the Additional Leased Premises and/or bringing such assets as aforesaid if the confirmation was not presented before the date specified above.

10.5. It is agreed that the Lessee may not arrange consequential loss insurance (in whole or in part) as specified in Section (2) of the Lessee's Permanent Insurance Confirmation, but the exemption specified in Section 10.8 below shall apply as if the insurance was fully arranged. In addition, the Lessee shall be entitled not to arrange a glass breakage insurance for the Leased Premises as specified in Section (1) of the Lessee's Permanent Insurance Confirmation, but in such circumstances as aforesaid the Lessee shall incur the costs of replacing the glass in the Additional Leased Premises as aforesaid and the exemption specified in Section 10.8 below shall apply.

10.6. If the Lessee is of the opinion that it is required to arrange additional insurance and/or supplemental insurance to that of the Lessee's Works and/or the Lessee's Permanent Works, the Lessee shall be entitled to arrange and maintain the additional and/or supplemental insurance as aforesaid. A section regarding waiver of the right of subrogation towards the Lessor, and anyone acting on its behalf. The waiver shall not apply in favor of a person who caused willful damage.

10.7. The Lessee undertakes to update from time to time (and each insurance period as a minimum) the sums insured in respect of the insurance that has been arranged under Sections (1) and (2) of the Lessee's Permanent Insurance Confirmation, so that they always reflect the full value of the subject matter of their insurance.

10.8. The Lessee exempts the Lessor and anyone acting on their behalf towards the Lessee in respect of damage for which the Lessee is entitled to indemnification in accordance with the insurance that is arranged under Section (1) of

the Insurance Confirmation for the Lessee's Works, Sections (1) and (2) of the Lessee's Permanent Insurance Confirmation and additional property insurances that the Lessee arranges in accordance with the provisions set forth in Section 10.6 above (or for which it was entitled to indemnification if it had not been for the deductible amounts specified in the said insurances); however, said exemption from liability shall not apply in favor of a person who caused willful damage.

10.9. Upon expiration of the term specified in the Lessee's Permanent Insurance Confirmation the Lessee undertakes to deposit with the Lessor the Lessee's Permanent Insurance Confirmation an extension of its validity for an additional insurance period. As long as said period is in effect, the Lessee undertakes to repeat and deposit the Lessee's Permanent Insurance Confirmation on said dates, each insurance period.

10.10. Whenever the Lessee's insurer notifies the Lessor that any of the Lessee's Permanent Insurance is about to be terminated and/or that its conditions are about to undergo adverse change as specified in the final parts of Appendix E as aforesaid, the Lessee undertakes to rearrange said insurance and to present a new insurance confirmation on the date of termination or the date of the adverse change of said insurance.

10.11. For the avoidance of doubt it is clarified that failure to present the insurance confirmation on time as specified in Sections 10.4, 10.9 and 10.10 above shall not derogate from the Lessee's undertakings in accordance with the Original Lease Agreement and/or this Addendum including, and without derogating from the generality of the aforesaid, any obligation of payment applicable to the Lessee, and the Lessee undertakes to uphold all its undertakings in accordance with the Agreement even if it is prevented from performing works and/or receiving possession in the Leased Premises and/or bringing assets to the Leased Premises and/or operating its business in the Leased Premises due to failure to present the confirmations on time.

10.12. The Lessor shall be entitled to inspect the insurance confirmations presented by the Lessee in accordance with the provisions set forth in Sections 10.4, 10.9, 10.10 above, and the Lessee undertakes to perform any revision or amendment that is required so that said insurance confirmations comply with the undertakings of the Lessee as specified in this Section 10. The Lessee declares that the right of inspection granted to the Lessor with relation to the insurance confirmations and their right to instruct their revision and amendment as specified above shall not impose on the Lessor and/or anyone acting on its behalf any obligation and/or liability in anything related to the insurance confirmations including the standard, scope and validity of the insurance that is arranged accordingly or the absence thereof, and the right of inspection shall not derogate from any liability imposed on the Lessee in accordance with the Original Lease Agreement and/or this Addendum and/or in accordance with the provisions set forth in any law.

10.13. The Lessee undertakes to uphold the terms set forth in the insurance policies it arranges, and make full and timely payment of the insurance premiums and assure that the Lessee's Permanent Insurances are extended from time to time as required and shall be in effect during the entire Term of Lease.

10.14. For the avoidance of doubt it is clarified that the liability limits that are required in accordance with the provisions set forth in Appendices D and E are a minimal requirement imposed on the Lessee. The Lessee declares and confirms that it shall be precluded from raising any allegation and/or demand towards the Lessor and/or towards anyone acting on its behalf in anything related to the liability limits as aforesaid.

10.15. (A) The Lessor represents that the construction work of the Additional Leased Premises shall be insured with construction insurance as customary whereby the chapter relating to loss or damage to the work shall include a section regarding waiver of the right of subrogation towards the Lessee and anyone acting on its behalf, however the above subrogation shall not apply to any person who willfully caused harm. (B) The Lessor undertakes, during the Term of Lease, to arrange with a legally licensed and reputable insurance company and maintain the insurance specified further below in this Section:

10.15.1 An insurance policy providing insurance coverage to the Additional Leased Premises, including the investments which shall be performed as part of the Lessor’s construction work against loss or damage following the risks insured in extended fire insurance, including fire, smoke, lighting, explosion, earthquakes, storms, floods, damage from liquids and burst pipes, damage from a vehicle, damage from an aircraft, riots, strikes, willful damage and damage by burglary on the basis of first damage. Said insurance shall include a section regarding waiver of the right of subrogation towards the Lessee and anyone acting on its behalf and the management company acting on behalf of the Lessee, , but said waiver shall not apply in favor of a person who caused willful damage. For the avoidance of doubt, it is agreed expressly that said insurance shall not include any contents investments in the Additional Leased Premises which were not performed by the Lessor, and shall not include insurance coverage for windowpanes, windows, glass partitions and doors that do not constitute part of the exterior structure of the Additional Leased Premises.

10.15.2 Consequential loss insurance providing insurance coverage for loss of Rent due to damage caused

the Additional Leased Premises , due to the risks specified in Section 10.15.1 above (except for break-in damages), for the period during which use of the Additional Leased Premises is prevented as a result of the above mentioned damage the “ indemnification Period ”) of at least 12 (twelve) months. Said insurance shall include a section regarding waiver of the right of subrogation in favor of the Lessee and anyone acting on its behalf and the management company acting on behalf of the Lessee , but said waiver shall not apply in favor of a person who caused willful damage.

10.16. It is agreed that the Lessor shall be entitled not to arrange (in whole or in part) consequential loss insurance for loss of Rent as specified in this Section 10.15.2 above,; however, the exemption specified in Section 10.17 below shall apply as if the insurance was fully arranged.

It is agreed expressly that arrangement of the insurance specified in Section 10.15 above shall not add to the liability of the Lessor in addition to that which is stated in this Addendum and/or derogate from the Lessee's liability in accordance with the provisions set forth in this Addendum and/or in accordance with the provisions set forth in any law (except for that which is stated expressly in the final part of Section 10.17 below).

10.17. The Lessor exempts the Lessee and anyone acting on its behalf from liability for damage for which the Lessor is entitled to indemnification in accordance with the insurance that is arranged in accordance with Sections 10.15.1 and 10.15.2 above, (or for which it was entitled to indemnification if it had not been for the deductible amounts applicable to the policies); however, said exemption from liability shall not apply in favor of a person who caused willful damage. Said exemption shall also apply with respect to breakage of windowpanes and windows that constitute an integral part of the exterior part of the Additional Leased Premises; however, said exemption shall not apply to glass breakage caused due to a negligent or willful act by the Lessee and/or anyone acting on its behalf.

10.18. Notwithstanding the generality of the above, the parties hereby agree, that the parties shall conduct a negotiation regarding the insurance which shall apply to the Existing Leased Premises and the Additional Leased Premises, who shall issue them, how the premium shall be divided up between the parties and which insurance coverages shall apply to them, and that for the purpose that the liability for issuing and maintaining the Lessor’s insurance as specified in Section 10.15.1 above (the insurance of the Additional Leased Premises) shall be transferred to the Lessee. As far as the parties reach such an agreement as specified above, they shall sign within 60 days of the execution of this Addendum, an amendment to this Addendum through which the relevant sections will be updated. Should the parties not reach an agreement within 60 days as specified above, the terms of Section 16 of the Original Lease Agreement and Section 10 of this Addendum shall apply.

Breach of any of the undertakings of the Lessee as specified in Section 10 above and/or breach of any subsection thereof shall be deemed a fundamental breach of this Addendum.

11. Liability for damages and indemnification

11.1.The Lessor and anyone acting on their behalf shall not be held liable, in any manner, for any damage and/or loss caused to the Lessee and/or its business and/or its property and/or anyone acting on its behalf and/or to any other person staying in the Additional Leased Premises including, and without derogating from the generality of the aforesaid, damage or failure caused following the entrance of the and/or the Management Company and/or anyone acting on its behalf to the Additional Leased Premises unless said damage and/or failure as aforesaid were caused as a result of an act or omission of the Lessor and/or anyone acting on its behalf and for which they are held liable by law, and the Lessee hereby waives any claim, allegation and demand as aforesaid towards the Lessor and/or anyone acting on its behalf that is in excess of their liability as specified above.

11.2. The Lessee shall be held liable by law towards the Lessor for any loss and/or damage caused to the Additional Leased Premises and/or the New Building and/or contents thereof and/or to any person and/or corporation including its employees and/or to the Lessor and/or anyone acting on its behalf and/or customers and/or visitors in the New Building (unless he said damage and/or loss and/or failure as aforesaid were caused as a result of an act or omission of the Lessor and/or their visitors and/or anyone acting on its behalf and for which the Lessor are liable by law), and that are caused by Lessee and/or anyone acting on its behalf (including by its employees and/or its customers and/or visitors and/or contractors and/or consultants on its behalf), and/or under its liability by virtue of the provisions set forth in this Addendum and all in connection with the Additional Leased Premises, management of its business in the Additional Leased Premises and/or possession and/or use thereof (including due to breach or partial fulfillment of the provisions set forth in any law and/or license and/or permit in connection with the use of the Leased Premises), and/or any other act of the Lessee and/or its employees and/or visitors and/or suppliers and/or anyone acting on its behalf and/or its customers. That which is stated in this Section shall not derogate from the undertakings of the Lessee towards third parties in accordance with the provisions set forth in any law.

11.3. Each of the parties undertakes to compensate and/or indemnify the other party and/or anyone acting on its behalf for any damage and/or expense and/or charge imposed on them or that they are compelled to pay or pay, including as part of a civil or criminal suit brought against them, in respect of any damage that is under the liability of that party in accordance with the Lease Agreement and/or this Addendum and/or in accordance with the provisions set forth in any law pursuant to a judgment whose execution was not stayed, and in respect of all reasonable expenses that the other party and/or anyone acting on its behalf incurred for the purpose of defending against a demand and/or a claim in connection therewith, including attorney fees, and all within 30 days as of the date of receiving the judgment whose execution was not stayed, and on the condition that the other party notifies said party regarding the receipt of any claim and/or demand in respect thereof shortly after its receipt, and affords said party a reasonable opportunity to defend to the extent that this is contingent on that party.

11.4. It is clarified that the provisions set forth in this Section 11 above refer solely to the Additional Leased Premises and anything associated therewith.

12. Modifications in the Leased Premises

It is agreed that the following provisions shall apply in anything related to Section 19 of the Original Lease Agreement:

12.1 The fifth and sixth paragraphs of Section 19.A. of the Original Lease Agreement shall be deleted and the following shall come in their place:

"Without derogating and/or without prejudice to the foregoing, if and when the Lessee performs any modifications, improvements and additions in the Leased Premises, including the works of the Lessee in the Leased Premises and/or systems thereof, at the time of returning possession in the Leased Premises to the Lessor for any reason, the Lessee shall remove at its expense the modifications, improvements and additions unless the Lessor delivers written notice and demands to leave the modifications, improvements and additions as aforesaid and/or any part thereof, and in such circumstances as aforesaid these shall become the property of the Lessor and the Lessee shall have no claim and/or demand against the Lessor in respect of the modifications, improvements and additions and/or in respect of its investments therein.

Notwithstanding the aforesaid, it is clarified that the Lessee shall not be required to remove construction works that were implemented by the Lessee in the Leased Premises and that are permanently attached to the Leased Premises, including to their floor, ceiling or walls and/or whose dismantling and/or removal from the Leased Premises might cause any damage to the Leased Premises. Upon expiration of the lease subject of this Agreement all construction works specified above (except for modular equipment, office cabinets, laboratory equipment, communication rooms, floating floors and designated air conditioning units) - shall be deemed as the property of the Lessor and the Lessee shall have no claim and/or demand against the Lessor in respect of the modifications, improvements and additions and/or in respect of its investments therein. For the avoidance of doubt it is clarified that the amendment of Section 19.A. as specified in this Section 12.1 above shall apply both with relation to the Existing Leased Premises and with relation to the Additional Leased Premises.

12.2. It is clarified that the first part of the fourth paragraph of Section 19.A of the Original Lease Agreement shall not apply with relation to performance of the Lessee's works in the Additional Leased Premises, and the provisions set forth in Section 6 of this Addendum above shall apply for the purpose of this matter.

13. Vacating the Leased Premises

It is agreed that in anything related to Section 20 of the Original Lease Agreement the following provisions shall apply:

13.1. That which is stated said in Section 20.A. of the Original Lease Agreement shall be deleted and the following shall come in its place:

"The Lessee undertakes to vacate the Leased Premises upon expiration of the Term of Lease or shortening thereof due to the termination or expiration of the Lease Agreement for any reason, upon the earlier and as the case may be, and return the Leased Premises to the sole possession of the Lessor when the Leased Premises are in the same condition they were on the Delivery Date, and the Lessee shall further remove any article and/or addition and/or fixture that was installed by the Lessee (unless the Lessor demanded that they be left in the Leased Premises) and in such manner that their removal shall not damage the Leased Premises and its exterior and interior appearance and all subject to reasonable wear however in any event - when the Leased Premises are in good condition, working order

and whitewashed.

The Lessee shall return the Leased Premises when the Leased Premises are free from any article and person and in accordance with the provisions set forth in Section 19 of the Lease Agreement (subject to the repairs as specified in Section 12.1 of this Addendum above), and all at the expense and under the responsibility of the Lessee.

The dismantling of fixtures and/or systems in the Leased Premises owned by the Lessee (unless the Lessor demanded that they be left in the Leased Premises) shall be made in accordance with the instructions of the engineer and contractors approved for that purpose solely by the Lessor, and in any event without causing any damage to the building and/or the Leased Premises and/or systems installed therein and serving the Leased Premises and/or other lessees in the building and/or the routine operation of the building and/or other lessees therein."

14. Payment of taxes and expenses

It is agreed that in anything related to Section 22 of the Original Lease Agreement and with relation to the Additional Leased Premises the following provisions shall apply:

14.1 All taxes, expenses and all other payments applicable to the Lessee in accordance with the Original Lease Agreement and this Addendum including, but not limited to, payment of municipal taxes, electricity and water consumption, the Lessee’s relative cost for the ongoing maintenance of the public areas included in Shaar Yokneam Park and any payment made to any third party as specified in Section 22 of the Original Lease Agreement shall also apply to the Additional Leased Premises (for the avoidance of doubt, both with relation to Area A, Area B and Area C) as of the Delivery Date or the Deferred Delivery Date, except for payments for electricity and water consumption that shall apply as of the Date of Delivering the Additional Leased Premises for the purpose of Performing the Works.

For the avoidance of doubt it is clarified that the Lessee shall not be held liable for payment of municipal taxes in respect of the Additional Leased Premises applicable as of the Date of Delivering the Additional Leased Premises for the purpose of Performing the Works and until the Delivery Date.

14.2. The Lessee shall be entitled, under its responsibility and at its expense, to apply to the local council to receive exemption from municipal taxes by virtue of Section 330 of the Municipalities Ordinance (Uninhabitable Property) to the extent that it is entitled to such an exemption as aforesaid, and the Lessor shall not be held liable and/or obligated in connection therewith. For the avoidance of doubt it is clarified that in the event that the Lessee does not obtain said exemption for any reason, this shall not derogate from the Lessee's undertakings to pay the full municipal taxes in respect of the Additional Leased Premises applicable as of the Delivery Date. In addition, the Lessee undertakes not to apply to the local council to receive a discount in payment of municipal taxes applicable to the Additional Leased Premises in respect of the Term of Lease of the Additional Leased Premises by virtue of Regulation 13 (Discount for municipal taxes in respect of a vacant property) of the State Economy Arrangements Regulations (Reduction in Municipal Property Tax), 5753-1993 (or any other law or regulation promulgated below). In any event in which the Lessee applies to the local council to receive a discount in payments of municipal taxes as aforesaid contrary to that which is stated above, and such a discount is granted to the Lessee as aforesaid, the Lessor shall be entitled, without prejudice to any other relief it may seek in accordance with the provisions set forth in this Agreement and/or in accordance with the provisions set forth in any law, to receive from the Lessee at its first demand and even after expiration of the Term of Lease the discount amount in addition to linkage differentials and arrears interest.

14.3. It is agreed that the second paragraph in Section 22.A.2 of the Original Lease Agreement and Section 22.A.E shall not apply with respect to the Additional Leased Premises.

15. Electricity supply

It is agreed that notwithstanding the provisions of Section 22.A.a. of the Original Lease Agreement, and with respect to the electricity supply to the Additional Leased Premises and maintenance of electrical systems in the Additional Leased Premises:

15.1 It is hereby agreed that if the “Electricity Company” agree to it, the payment related to the electricity consumption shall be made directly by Lessee to the “Electricity Company”, and a separate electricity counter shall be installed in the Additional Leased Premises in the name of the Lessee .

15.2. Without derogating from the foregoing, it is agreed that if the Israel Electric Corporation disagrees with any of the provisions set forth in Section 15.1 above or in circumstances in which the Lessee leases less than 60% of the total areas designated for lease in the Existing Leased Premises and/or in the Additional Leased Premises (each

separately), electricity to the Existing Leased Premises and/or the Additional Leased Premises (as the case may be) shall be supplied in accordance with the method determined by the Lessor from time to time, and might be supplied by way of "bulk supply " by and/or via the Lessor and/or the Management Company of Shaar Yokneam Park. To the extent that the Lessor states that the electricity supply is made in bulk the provisions set forth in Appendix G to this Addendum shall apply, and the Lessee undertakes to act in accordance with the provisions set forth in Appendix G , in any event in which the Lessor notifies that electricity supply is made in bulk.

For the avoidance of doubt it is clarified that the contents of this Section 15.2 shall not grant the Lessee any right to terminate the Term of Lease of the Existing Leased Premises and/or the Additional Leased Premises prior to expiration of the Term of Lease set forth in the Original Lease Agreement (with relation to the Existing Leased Premises) and/or in this Addendum (with relation to the Additional Leased Premises).

15.3. It is agreed that the Lessor shall be entitled to determine that electricity shall be provided by another supplier instead of the Israel Electric Corporation, provided that the substitute entity shall hold a valid license by law to supply electricity and in such circumstances the provisions set forth in the Lease Agreement and this Addendum regarding the Israel Electric Corporation shall apply to said substitute entity.

15.4. The Lessee confirms that it is aware that the electricity meters are placed by the Lessor together and/or in close proximity at the discretion of the Lessor, and the Lessee agrees to the location of the meter as aforesaid and its billing by the reading of that meter without any objection or appeal, including any change in location at the discretion of the Lessor.

15.5 For the avoidance of doubt, the terms of Section 22A.c of the Original Lease Agreement shall also apply to the Additional Leased Premises.

16. Management of the Building and inspection of the Leased Premises

It is agreed that notwithstanding the provisions of Section 23 of the Original Lease Agreement and with relation to the Additional Leased Premises within 90 days of the execution of this Addendum the Lessee shall sign a letter of undertaking relating to the management of the Additional Leased Premises and its systems which shall be attached as Appendix H to this Addendum and based upon the principles set forth in the Lessee's letter of undertaking that was enclosed as Appendix I to the Original Lease Agreement:

17. Bank guarantee

It is agreed that in anything related to Section 27 of the Original Lease Agreement and with relation to the Additional Leased Premises the following provisions shall apply:

17.1 In order to assure performance of the Lessee's undertakings and obligations in accordance with the Lease Agreement and this Addendum, the Lessee shall furnish to the Lessor, within 30 days of the date of approving the New UBP or from the date an operating contractor is selected by the Lessor, whichever is later, an autonomous and unconditional bank guarantee of a lawfully licensed and recognized bank operating in Israel, in addition to the bank guarantee that was presented by the Lessee in accordance with the Original Lease Agreement and in the form hereby enclosed as Appendix I to this Addendum. This guarantee shall be non-negotiable and nontransferable and shall be made solely to the order of the Lessor.

Said bank guarantee shall be made in the amount of NIS 6,111,593 (principal) (equal to the amount of the Rent for Area A (including parking fees) for 8 months of lease of Area A in addition to statutory VAT), and said amount shall be linked to increases in the Consumer Price Index in accordance with the rate in which the Consumer Price Index known at the time of its actual application compared to the rate of the Base Index within its meaning above (hereinafter: " Additional Bank Guarantee ").

Notwithstanding the aforesaid, as of the date of occupancy of Area A the Additional Bank Guarantee shall be replaced by another bank guarantee (hereinafter: " Other Bank Guarantee ") or its amount will be amended, subject to and in accordance with the following conditions:

17.1.1. To the extent that the value of the Lessee's company in NASDAQ is two billion dollars or higher in the year that preceded the occupancy date of Area A, the Lessee shall be entitled to replace the Additional Bank Guarantee with the Other Bank Guarantee in the amount of NIS 4,386,228 (principal) (equal to the amount of the Rent (including parking fees) for 4 months of lease of the Additional Leased Premises in addition to statutory VAT), and said amount shall be linked to increases in the Consumer Price Index in accordance with the rate in which the Consumer Price Index known at the time of its actual application compared to the rate of the Base Index within its meaning above. All other provisions set forth in the

Original Lease Agreement and this Section 17.1 regarding the bank guarantee shall also apply to this guarantee.

17.1.2. To the extent that the value of the Lessee's company in NASDAQ falls below two billion dollars but is greater than one and a half billion dollars on average in the year that preceded the date of occupancy of Area A, the Additional Bank Guarantee shall be replaced by the Other Bank Guarantee in the amount of NIS 5,482,785 (principal) (equal to the Rent of the Additional Leased Premises (including parking fees) for 5 months of lease of the Additional Leased Premises in addition to statutory VAT), and said amount shall be linked to increases in the Consumer Price Index in accordance with the rate in which the Consumer Price Index known at the time of its actual application compared to the rate of the Base Index within its meaning above. All other provisions set forth in the Original Lease Agreement and this Section 17.1 regarding the bank guarantee shall also apply to this guarantee.

17.1.3. To the extent that value of the Lessee's company in NASDAQ in the year that preceded the date of occupancy of Area A falls below one and a half billion dollars but is greater than one billion dollars on average, the Additional Bank Guarantee shall be replaced by the Other Bank Guarantee in the amount of NIS 6,579,342 (principal) (equal to the amount of the Rent of the Additional Leased Premises (including parking fees) for 6 months of lease of the Additional Leased Premises in addition to statutory VAT), and said amount shall be linked to increases in the Consumer Price Index in accordance with the rate in which the Consumer Price Index known at the time of its actual application compared to the rate of the Base Index within its meaning above. All other provisions set forth in the Original Lease Agreement and this Section 17.1 regarding the bank guarantee shall also apply to this guarantee.

17.1.4. In any event in which the value of the Lessee's company in NASDAQ falls below one billion dollars on average in the year that preceded the date of occupancy of Area A, the Lessee shall replace the Additional Bank Guarantee with the Other Bank Guarantee in the amount of NIS 8,772,454 (principal) (equal to the Rent of the Additional Leased Premises (including parking fees) for 8 months of lease of the Additional Leased Premises in addition to statutory VAT), and said amount shall be linked to increases in the Consumer Price Index in accordance with the rate in which the Consumer Price Index known at the time of its actual application compared to the rate of the Base Index within its meaning above. All other provisions set forth in the Original Lease Agreement and this Section 17.1 regarding the bank guarantee shall also apply to this guarantee.

After providing the Other Bank Guarantee and after every six calendar months during the Term of Lease, the parties shall examine the average value of the Lessee's company in NASDAQ during the relevant six calendar months, and said bank guarantee shall be replaced or its amount shall be updated in accordance with the criteria set forth in Section 17.1.1-17.1.4 above.

It is further clarified that the provisions set forth in this Section 17.1 shall apply as of the date of approving the New UBP or as of the date the Lessor has appointed the contractor (whichever is later) and during the entire Term of Lease of the Additional Leased Premises.

17.2. It is agreed that to the extent that the Lessor demands from the Lessee to transfer or assign the Additional Bank Guarantee or the Other Bank Guarantee to one of the five largest banks in Israel or to recognized financial institutions in Israel (including insurance companies), the Lessee shall furnish to the Lessor a new bank guarantee in accordance with the demand made by the Lessor in lieu of the existing bank guarantee. The Lessee undertakes to cooperate fully in anything related to the provisions set forth in this Section 17.2.

17.3. It is agreed that the first, second and eighth paragraph of Section 27 of the Original Lease Agreement shall not apply in anything related to the Additional Leased Premises.

17.4. It is further agreed that all securities that were deposited and/or that will be deposited with the Lessor in accordance with the provisions set forth in the Lease Agreement and this Addendum shall be used by the Lessor for the purpose of securing the full and accurate performance of all obligations and undertakings of the Lessee in accordance with the Lease Agreement and in accordance with this Addendum, both with respect to the Existing Leased Premises and with respect to the Additional Leased Premises.

17.5. In addition, the parties agree that upon signing this Addendum the bank guarantees that were provided to the Lessor with respect to the Existing Additional Leased Premises and with respect to all the additional areas that are leased to the Lessee in Shaar Yokneam Park (such as Hermon Building) shall be replaced permanently with an amount equal to the amount of the Rent (including parking fees) and Management Fees (principal) (as applicable to those areas) for 5 months of lease of the Existing Leased Premises and the additional areas (such as Hermon Building) as the case may be and for which the bank guarantees were provided to the Lessor, in addition to statutory

VAT, or whose amount shall be updated in accordance with the provisions set forth in this Section 17.5 above.

After providing the amended bank guarantees as specified in this Section 17.5 above, and upon expiration of a period of six calendar months during the relevant Term of Lease, the parties shall examine the average value of the Lessee's company in NASDAQ during the relevant six calendar months, and the bank guarantees as specified in this Section 17.5 shall be replaced or their amount shall be amended in accordance with the criteria set forth in Sections 17.1.1-17.1.3 above, mutatis mutandis . It is clarified that for the purpose of the bank guarantees specified in this Section 17.5 above, the provisions set forth in Section 17.1.3 shall apply if and to the extent that the average value of the Lessee's company in NASDAQ during the six calendar months as specified above falls below one and a half billion dollars.

For the avoidance of doubt it is clarified that until the date of presenting the updated bank guarantees as specified above, the Lessor shall continue to use all the previous bank guarantees that were presented by the Lessee to the Lessor, and the Lessor shall be entitled to use said guarantees.

18. The Adjudicator

18.1. In any event of dispute between the Lessor and the Lessee (and/or anyone acting on their behalf) regarding matters pertaining to the design, construction and delivery of the Additional Leased Premises, the dispute shall be referred to the decision of the Adjudicator within 7 days of the date of receiving a request from any of the parties. It is clarified that matters brought for the Adjudicator's decision shall relate solely to technical and/or engineering and/or operational matters.

18.2. The Adjudicator shall not be subject to the law of evidence or to court procedures, but shall be obligated to give reasons for his decisions.

18.3. Referral of disputes and differences of opinion to the Adjudicator as aforesaid shall not constitute justification of a delay in performing this Agreement by the parties, and in any event the Lessor and/or the Lessee shall be obligated to continue and uphold all their obligations in accordance with this Agreement. The Adjudicator shall be entitled to issue urgent interim instructions if necessary.

18.4. The Adjudicator shall be required to give his decision within 14 (fourteen) days of the date of receiving a query from any of the parties for the purpose of receiving his position regarding a dispute between the parties, and after the Adjudicator afforded each of the parties an opportunity to present its position to him. The parties undertake to cooperate with the Adjudicator to the extent required so that the Adjudicator will be able to meet the schedule required for the purpose of giving his decisions.

18.5. The Adjudicator's decision shall be final and shall bind the parties.

18.6. The parties shall incur the fees paid to the Adjudicator in equal parts, unless instructed otherwise by the Adjudicator.

19. General

19.1. Without derogating from that which is stated in this Addendum above, it is agreed that the provisions set forth in the last paragraph in Section 29.B and Sections 30.D and 30.E of the Original Lease Agreement shall not apply in anything related to the Additional Leased Premises.

19.2. It is clarified that anywhere in the Original Lease Agreement that includes a reference to the "Leased Premises" and/or to "Shlomo Building," and/or the “Structure” and/or the “Building” shall also mean the Additional Leased Premises, except for matters in which there is another express arrangement specified in this Addendum.

19.3. For the avoidance of doubt it is clarified that the Lessee may not offset any of the Lessee's payments in accordance with the Lease Agreement and/or this Addendum including, but not limited to, the Rent, different financial obligations that the Lessor owes to the Lessee by virtue of the Lease Agreement, and/or this Addendum, if any.

19.4. It is clarified and agreed between the parties that nothing stated in this Addendum shall constitute a waiver and/or remission on behalf of the Lessor of any argument and/or claim and/or demand of any thereof towards the Lessee, including in accordance with the Lease Agreement and/or in accordance with the provisions set forth in any law.

19.5. By signing this Addendum the Lessee grants its approval that its details, including the details of the Lease Agreement and this Addendum, shall be included in the lessees database managed by the Lessor and/or Melisron Ltd.

and/or any subsidiary thereof, in accordance with the provisions set forth in the Protection of Privacy Law 5741-1981 for the uses and the requirements of the Melisron Group, including direct mailing of information and content to the Lessee, and delivery of information to the suppliers and/or third parties that require the data for the purpose of working in Shaar Yokneam Park, managing the center, and so forth at the discretion of the database manager.

19.6. This Addendum shall take effect solely after the parties affix their signature thereto.

In Witness Whereof the Parties Have Signed in the Place and on the Date Stipulated in the Heading of this Addendum Hereinabove:




The Lessor		The Lessee

EXHIBIT 31.1

Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Eyal Waldman, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Mellanox Technologies, Ltd.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 29, 2016



By:	/s/ EYAL WALDMAN
	Name:	Eyal Waldman
	Title:	President and Chief Executive Officer

EXHIBIT 31.2

Certification of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Jacob Shulman, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Mellanox Technologies, Ltd.;

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 29, 2016



By:	/s/ JACOB SHULMAN
	Name:	Jacob Shulman
	Title:	Chief Financial Officer

EXHIBIT 32.1

Certification of Chief Executive Officer

Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

I, Eyal Waldman, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(i) the Quarterly Report of Mellanox Technologies, Ltd. on Form 10-Q for the quarter ended June 30, 2016 , fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii) the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods covered by the Quarterly Report.

In Witness Whereof, the undersigned has set his hand hereto as July 29, 2016 .




By:		/s/ EYAL WALDMAN
	Name:	Eyal Waldman
	Title:	President and Chief Executive Officer

Dated: July 29, 2016

This certification accompanies the Form 10-Q to which it relates to, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by references into any filings of Mellanox Technologies, Ltd. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.

EXHIBIT 32.2

Certification of Chief Financial Officer

Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

I, Jacob Shulman, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

In Witness Whereof, the undersigned has set his hand hereto as July 29, 2016 .




By:		/s/ JACOB SHULMAN
	Name:	Jacob Shulman
	Title:	Chief Financial Officer

Dated: July 29, 2016