S-1

As filed with the Securities and Exchange Commission on September 28, 2006

Registration No. 333-      

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

MELLANOX TECHNOLOGIES, LTD.

(Exact name of registrant as specified in its charter)

Israel	3674	98-0233400
(State or other jurisdiction of	(Primary Standard Industrial	(I.R.S. Employer
incorporation or organization)	Classification Code Number)	Identification Number)

Mellanox Technologies, Ltd.

Hermon Building, Yokneam, Israel 20692

+972-4-909-7200

(Address, including zip code, and telephone number,

including area code, of registrant’s principal executive offices)

Michael Gray

Chief Financial Officer

Mellanox Technologies, Inc.

2900 Stender Way

Santa Clara, California 95054

(408) 970-3400

(Name, address, including zip code, and telephone number,

including area code, of agent for service)

Copies To:

Alan C. Mendelson, Esq.
Mark V. Roeder, Esq.
Latham & Watkins LLP
140 Scott Drive
Menlo Park, California 94025
(650) 328-4600 Barry P. Levenfeld, Adv.
Yigal Arnon & Co.
22 Rivlin Street
Jerusalem, Israel 94240
+972-2-623-9220 Bruce A. Mann, Esq.
William W. Yeung, Esq.
Andrew D. Thorpe, Esq.
Theresa Ng, Esq.
Morrison & Foerster LLP
425 Market Street
San Francisco, California 94105
(415) 268-7000 David S. Glatt, Adv.
Michael J. Rimon, Adv.
Meitar Liquornik Geva &
Leshem Brandwein
16 Abba Hillel Rd.
Ramat Gan, Israel 52506
+972-3-610-3100

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

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  o

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

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

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

CALCULATION OF REGISTRATION FEE

		Proposed Maximum		Amount of
Title of Each Class of Securities	Amount to be	Offering		Registration
to be Registered	Registered	Price per Unit	Proposed Maximum Aggregate Offering Price(1)	Fee
Ordinary shares, nominal value NIS 0.01 per share			$86,250,000	$9,229

⁽¹⁾ Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.

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

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

SUBJECT TO COMPLETION, DATED SEPTEMBER 28, 2006

PRELIMINARY PROSPECTUS

           Shares

Ordinary Shares

This is the initial public offering of our ordinary shares. We are selling all of the ordinary shares being sold in this offering. Prior to this offering, there has been no public market for our ordinary shares. The initial public offering price of our ordinary shares is expected to be between $      and $      per share. We will apply to have our ordinary shares approved for quotation on The Nasdaq Global Market under the symbol “MLNX.”

We have granted the underwriters an option to purchase up to           additional ordinary shares from us to cover the over-allotment of shares.

Investing in our ordinary shares involves a high degree of risk. See “Risk Factors” on page 6 of this prospectus.

		Underwriting	Proceeds, Before
	Price to	Discounts and	Expenses, to
	Public	Commissions	Mellanox
Per Share	$	$	$
Total	$	$	$

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

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

Credit Suisse JPMorgan

Thomas Weisel Partners LLC Jefferies & Company, Inc.

The date of this prospectus is          , 2006.

Mellanox Technologies is a fabless semiconductor company. We are a leading supplier of semiconductor-based interconnect products that facilitate high-performance data transmission. Our customers include leading server, storage, communications infrastructure equipment, and embedded systems vendors. InfiniBand Adapters InfiniBand Switches Blade COMMUNICATIONS Rack Optimized Servers INFRASTRUCTURE EMBEDDED SERVERS STORAGE EQUIPMENT SYSTEMS

You should rely only on the information contained in this prospectus. Neither we, nor the underwriters, have authorized anyone to provide you with additional information or information different from that contained in this prospectus. We are offering to sell, and seeking offers to buy, our ordinary shares only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our ordinary shares.

TABLE OF CONTENTS

	Page
PROSPECTUS SUMMARY		1
RISK FACTORS		6
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS		22
USE OF PROCEEDS		23
DIVIDEND POLICY		23
CAPITALIZATION		24
DILUTION		25
CONVERSION OF SERIES D PREFERRED SHARES		26
SELECTED CONSOLIDATED FINANCIAL DATA		27
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		29
BUSINESS		41
MANAGEMENT		57
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS		73
PRINCIPAL SHAREHOLDERS		76
DESCRIPTION OF AUTHORIZED SHARE CAPITAL		79
ISRAELI TAX CONSIDERATIONS AND GOVERNMENT PROGRAMS		84
U.S. FEDERAL INCOME TAXATION CONSIDERATIONS		89
SHARES ELIGIBLE FOR FUTURE SALE		93
UNDERWRITING		95
NOTICE TO CANADIAN RESIDENTS		98
LEGAL MATTERS		99
EXPERTS		99
ENFORCEABILITY OF CIVIL LIABILITIES		99
WHERE YOU CAN FIND MORE INFORMATION		100
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS		F-1
EXHIBIT 3.1
EXHIBIT 4.4
EXHIBIT 10.1
EXHIBIT 10.2
EXHIBIT 10.3
EXHIBIT 10.4
EXHIBIT 10.5
EXHIBIT 10.6
EXHIBIT 10.7
EXHIBIT 10.8
EXHIBIT 21.1
EXHIBIT 23.3
EXHIBIT 23.4

Unless the context requires otherwise, the words “Mellanox,” “we,” “company,” “us” and “our” refer to Mellanox Technologies, Ltd., and our wholly-owned subsidiary, Mellanox Technologies, Inc. For purposes of this prospectus, the term “shareholders” shall refer to the holders of our ordinary shares.

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PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our ordinary shares, you should carefully read this entire prospectus, including our financial statements and the related notes included in this prospectus and the information set forth under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

MELLANOX TECHNOLOGIES, LTD.

We are a leading supplier of semiconductor-based, high-performance interconnect products that facilitate data transmission between servers and storage systems through communications infrastructure equipment. Our products are an integral part of a total solution focused on computing, storage and communication applications used in enterprise data centers, high-performance computing and embedded systems. We are one of the pioneers of InfiniBand, an industry standard architecture that provides specifications for high-performance interconnects. We are the leading merchant supplier of field-proven InfiniBand semiconductor products that deliver industry-leading performance and capabilities.

We are a fabless semiconductor company that provides high-performance interconnect solutions. We design, develop and market InfiniBand adapter and switch integrated circuits, or ICs, as well as adapter cards incorporating our ICs. These ICs are added to servers, storage, communications infrastructure equipment and embedded systems by either integrating them directly on circuit boards or inserting adapter cards into slots on the circuit board. We have established significant expertise with high-performance interconnect solutions from successfully developing and implementing multiple generations of our products. Our expertise enables us to develop and deliver products that serve as building blocks for creating reliable and scalable interconnect solutions with leading performance at significantly lower cost than products based on alternative interconnect technologies.

Our products are incorporated into servers produced by the five largest server vendors: IBM, Hewlett-Packard, Dell, Sun Microsystems and Fujitsu. These server vendors collectively shipped the majority of servers in 2005, according to the industry research firm IDC. We also supply leading storage and communications infrastructure equipment vendors such as Cisco Systems, LSI Logic, Network Appliance, SilverStorm Technologies and Voltaire. Additionally, our products are used by GE Fanuc, Mercury Computers, SeaChange International and other vendors of embedded systems. Since we introduced our first product in 2001, we have shipped products containing more than 1.4 million InfiniBand ports, which we believe demonstrates an established customer and end-user base for our products.

The increasing reliance of enterprises on information technology, or IT, for their everyday operations is fueling the demand for computing, storage and communications infrastructure systems that can process, store and transmit large volumes of data. High-performance interconnect solutions play a key role in enabling high-speed transmission of data and sharing of resources among systems. There are several trends and technological advances driving demand for high-performance interconnect solutions, including:

•  Transition to clustered computing and storage using connections among multiple standard components;

•  Transition to multiple and multi-core processors in servers;

•  Enterprise data center infrastructure consolidation; and

•  Increasing deployments of mission critical, latency (response time) sensitive applications.

As a result of these trends and advances in computing, storage and communications infrastructure technology, the requirements on high-performance interconnect solutions have become more demanding. High-performance interconnect solutions are challenged to provide high bandwidth, low latency, reduced complexity, increased interconnect efficiency, reliability, stability and improved price/performance economics.

InfiniBand was developed to address these challenges. We believe that InfiniBand has significant advantages compared to alternative interconnect technologies and that products based on the InfiniBand standard are well positioned to become the leading high-performance interconnect solution. The InfiniBand standard was developed

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under the auspices of the InfiniBand Trade Association, or IBTA, which was founded in 1999 and is composed of leading IT vendors and hardware and software solution providers including Mellanox, Brocade, Cisco Systems, Fujitsu, Hewlett-Packard, Hitachi, IBM, Intel, LSI Logic, NEC, Network Appliance, QLogic Corporation, SilverStorm Technologies, Sun Microsystems and Voltaire. InfiniBand products have achieved increasing market adoption, particularly in high-performance computing applications, and are expanding into mainstream financial, retail and other commercial enterprise data centers.

We apply our strengths to enhance our position as a leading supplier of semiconductor-based, high-performance interconnect products. We consider our key strengths to include the following:

•  We have expertise in developing high-performance interconnect solutions;

•  We are the leading merchant supplier of InfiniBand ICs with a multi-year competitive advantage;

•  We have a comprehensive set of technical capabilities to deliver innovative and reliable products; and

•  We have extensive relationships with our key OEM customers and many end users.

Our goal is to be the leading supplier of semiconductor-based, high-performance interconnect products for computing, storage and communications applications. To accomplish this goal, we intend to:

•  Continue to develop leading, high-performance interconnect solutions;

•  Facilitate and increase the continued adoption of InfiniBand;

•  Expand our presence with existing server OEM customers;

•  Broaden our customer base with storage, communications infrastructure and embedded systems OEMs; and

•  Leverage our fabless business model to deliver strong financial performance.

We also face several risks as we grow our business, including the need to generate and sustain higher revenues while maintaining reasonable cost and expense levels, the rate and extent of InfiniBand adoption, our reliance on a small number of customers for a significant portion of our sales and the cyclicality of the semiconductor industry in general. Our success in growing our business also depends on our ability to effectively compete, develop new products, enhance our existing products and protect our intellectual property. We also face risks associated with the outsourcing of our manufacturing and with our Israeli operations. If we are unable to adequately address these risks, our ability to grow our business will be negatively impacted.

As of June 30, 2006, we had 148 full-time employees and 24 part-time employees located in the United States and Israel, including 94 in research and development, 25 in sales and marketing, 15 in general and administrative, 6 in operations and 8 in other administrative functions.

We were incorporated under the laws of Israel in March 1999. Our principal executive offices in the United States are located at 2900 Stender Way, Santa Clara, California 95054, and our principal executive offices in Israel are located at Hermon Building, Yokneam, Israel 20692. Our telephone number in Santa Clara, California is (408) 970-3400, and our telephone number in Yokneam, Israel is +972-4-909-7200. Our website address is www.mellanox.com. Information contained on our website is not a part of this prospectus and the inclusion of our website address in this prospectus is an inactive textual reference only.

Mellanox^®, InfiniBridge^®, InfiniHost^®, InfiniPCI^®, InfiniRISC^® and InfiniScale^® are our registered trademarks. Trade names, trademarks and service marks of other companies appearing in this prospectus are the property of the respective holders.

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THE OFFERING

Ordinary shares offered by us	shares.
Over-allotment option	shares.
Ordinary shares outstanding after this offering	shares.
Use of proceeds	We intend to use the net proceeds of this offering to fund development of our products and for general corporate purposes, including working capital, sales and marketing activities, general and administrative matters and capital expenditures. We may also use a portion of the net proceeds to acquire or invest in complementary technologies, products or businesses or to obtain rights to such complementary technologies, products or businesses. There are no such transactions under consideration at this time.
Proposed Nasdaq Global Market symbol	MLNX.
Risk factors	See “Risk Factors,” beginning on page 6 and the other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in our ordinary shares.

The number of our ordinary shares outstanding after this offering is based on 33,828,652 shares outstanding as of June 30, 2006 and excludes:

•  an aggregate of 7,516,630 ordinary shares issuable upon the exercise of outstanding options to purchase our ordinary shares granted pursuant to our 1999 United States Equity Incentive Plan, 1999 Israeli Share Option Plan and 2003 Israeli Share Option Plan as of June 30, 2006, at a weighted average exercise price of $1.74 per share;

•  an aggregate of 1,024,763 additional ordinary shares reserved for future issuance under our 1999 United States Equity Incentive Plan and our 2003 Israeli Share Option Plan;

•            additional ordinary shares to be reserved for issuance under our 2006 Global Share Incentive Plan, which we plan to adopt in connection with the completion of this offering;

•  an aggregate of 102,000 ordinary shares issuable upon the exercise of outstanding options granted outside of our equity incentive plans as of June 30, 2006, at a weighted average exercise price of $0.69 per share; and

•  1,268,574 ordinary shares issuable upon the exercise of warrants outstanding as of June 30, 2006, with an exercise price of $6.61 per share.

Except as otherwise indicated, information in this prospectus reflects or assumes the following:

•  that our amended and restated articles of association, which we will file in connection with the completion of this offering, are in effect;

•  the conversion of all of our outstanding convertible preferred shares into an aggregate of           ordinary shares upon completion of this offering, based on an assumed initial public offering price of $      per share; and

•  no exercise of the underwriters’ over-allotment option to purchase up to           additional shares of our ordinary shares.

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Summary Consolidated Financial Data

The summary consolidated statements of operations data for each of the three years in the period ended December 31, 2005 have been derived from our audited consolidated financial statements that are included elsewhere in this prospectus. The summary consolidated balance sheet data as of June 30, 2005 and the summary consolidated statements of operations data for each of the six months ended June 30, 2005 and 2006 have been derived from our unaudited consolidated financial statements that are included elsewhere in this prospectus. The following tables provide summary consolidated financial data which you should read together with our financial statements and related notes and the sections of this prospectus entitled “Selected Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Our historical results are not necessarily indicative of the results to be expected in any future period.

	Year Ended December 31,									Six Months Ended June 30,
	2003			2004			2005			2005			2006
	(in thousands of dollars, except share and per share data)
										(unaudited)
Consolidated Statement of Operations Data:
Total revenues	$	10,151		$	20,254		$	42,068		$	17,722		$	19,319
Cost of revenues		(4,535	)		(8,736	)		(15,203	)		(7,192	)		(5,950	)
Gross profit		5,616			11,518			26,865			10,530			13,369
Operating expenses:
Research and development		14,457			12,864			13,081			6,100			7,243
Sales and marketing		5,298			5,640			7,395			3,340			3,958
General and administrative		1,720			1,719			3,094			1,325			1,618
Total operating expenses		21,475			20,223			23,570			10,765			12,819
Income (loss) from operations		(15,859	)		(8,705	)		3,295			(235	)		550
Other income, net		308			123			326			218			131
Income (loss) before taxes on income		(15,551	)		(8,582	)		3,621			(17	)		681
Provision for taxes on income		(12	)		(306	)		(462	)		(240	)		(123	)
Net income (loss)	$	(15,563	)	$	(8,888	)	$	3,159		$	(257	)	$	558
Accretion of Series D mandatorily redeemable convertible preferred shares		(144	)		(155	)		(166	)		(83	)		(88	)
Income allocable to preferred shareholders		—			—			(2,993	)		—			(470	)
Net income (loss) attributable to ordinary shareholders		(15,707	)		(9,043	)		0			(340	)		0
Net income (loss) per share attributable to ordinary shareholders — basic and diluted	$	(1.33	)	$	(0.73	)	$	0.00		$	(0.03	)	$	0.00
Shares used in computing net income (loss) per share attributable to ordinary shareholders:
Basic		11,839			12,438			13,161			13,156			13,429
Diluted		11,839			12,438			15,913			13,156			16,727
Pro forma net income (loss) per share — basic and diluted (unaudited)
Pro forma weighted average ordinary shares outstanding (unaudited)

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							Six Months Ended
	Year Ended December 31,						June 30,
	2003		2004		2005		2005		2006
	(in thousands of dollars)
							(unaudited)
Share-based Compensation Expense:
Research and development	$	0	$	329	$	0	$	0	$	12
Sales and marketing		512		504		16		5		88
General and administrative		33		191		15		1		10
Total share-based compensation expense	$	545	$	1,024	$	31	$	6	$	110

	Six Months Ended
	June 30, 2006
				Pro Forma
	Actual			as Adjusted
	(in thousands of dollars)
	(unaudited)
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	12,963
Working capital		17,088
Total assets		31,413
Convertible preferred shares		92,009
Total shareholders’ deficit	$	(73,294	)

The preceding table presents a summary of our consolidated balance sheet data as of June 30, 2006:

•  on an actual basis; and

•  on a pro forma as adjusted basis to give effect to the conversion of all of our outstanding convertible preferred shares into           shares of ordinary shares immediately prior to the completion of this offering, and to give effect to the sale by us of           shares of ordinary shares in this offering at an initial public offering price of $      per share, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

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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 other information set forth in this prospectus, 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 have a history of losses, have only recently become profitable and may not sustain or increase profitability in the future.

We first recorded a profit in the year ended December 31, 2005. We incurred net losses prior to the quarter ended June 30, 2005 and incurred a net loss during the quarter ended March 31, 2006. As of June 30, 2006, we had an accumulated deficit of approximately $76.0 million. In addition, we recorded net losses of $15.6 million and $8.9 million for the years ended December 31, 2003 and 2004, respectively. We may not be able to sustain or increase profitability on a quarterly or an annual basis. This may, in turn, cause the price of our ordinary shares to decline. To sustain or increase our profitability, we will need to generate and sustain substantially higher revenues while maintaining reasonable cost and expense levels. We expect to increase expense levels in each of the next several quarters to support increased research and development and sales and marketing efforts. These expenditures may not result in increased revenues or customer growth, and we may not remain profitable.

We do not expect to sustain our recent revenue growth rate, which may reduce our share price.

Our revenues have grown rapidly over the last three years, approximately doubling in size from year to year. Our revenues increased from $10.2 million to $20.3 million to $42.1 million for the years ended December 31, 2003, 2004 and 2005, respectively. We do not expect to sustain our recent growth rate in future periods. You should not rely on the revenue growth of any prior quarterly or annual periods as an indication of our future performance. If we are unable to maintain adequate revenue growth, we may not have adequate resources to execute our business objectives and our share price may decline.

InfiniBand may not be adopted at the rate or extent that we anticipate, and adoption of InfiniBand is largely dependent on third-party vendors and end users.

While the usage of InfiniBand has increased since its first specifications were completed in October 2000, continued adoption of InfiniBand is dependent on continued collaboration and cooperation among IT vendors. In addition, the end users that purchase IT products and services from vendors must find InfiniBand to be a compelling solution to their IT system requirements. We cannot control third-party participation in the development of InfiniBand as an industry standard technology. We rely on server, storage, communications infrastructure equipment and embedded systems vendors to incorporate and deploy InfiniBand ICs in their systems. InfiniBand may fail to effectively compete with other technologies, which may be adopted by vendors and their customers in place of InfiniBand. The adoption of InfiniBand is also impacted by the general replacement cycle of IT equipment by end users, which is dependent on factors unrelated to InfiniBand. These factors may reduce the rate at which InfiniBand is incorporated by our current server vendor customers and impede its adoption in the storage, communications infrastructure and embedded systems markets, which in turn would harm our ability to sell our InfiniBand products.

We have limited visibility into end-user demand for our products, which introduces uncertainty into our production forecasts and business planning and could negatively impact our financial results.

Our sales are made on the basis of purchase orders rather than long-term purchase commitments. In addition, our customers may defer purchase orders. We place orders with the manufacturers of our products according to our estimates of customer demand. This process requires us to make multiple demand forecast assumptions with respect to both our customers’ and end users’ demands. It is more difficult for us to accurately forecast end-user demand because we do not sell our products directly to end users. In addition, the majority of our adapter card business is conducted on a short order fulfillment basis, introducing more uncertainty into our forecasts. Because of the lead

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time associated with fabrication of our semiconductors, forecasts of demand for our products must be made in advance of customer orders. In addition, we base business decisions regarding our growth on our forecasts for customer demands. As we grow, anticipating customer demand may become increasingly difficult. If we overestimate customer demand, we may purchase products from our manufacturers that we may not be able to sell and may over-budget company operations. Conversely, if we underestimate customer demand or if sufficient manufacturing capacity were unavailable, we would forego revenue opportunities and could lose market share or damage our customer relationships.

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

A small number of customers accounts for a significant portion of our revenues. In the year ended December 31, 2005, sales to Cisco Systems and Topspin Communications (which was acquired by Cisco Systems in May 2005) accounted for 44% of our total revenues, and sales to our four largest customers accounted for an aggregate of 72% of our total revenues. In 2004, sales to our four largest customers accounted for an aggregate of 62% of our total revenues. Because the majority of servers, storage, communications infrastructure equipment and embedded systems is 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. For example, one of our largest customers has ordered fewer products from us in 2006 to date as compared to its 2005 order history. In addition, our sales are dependent on our customers’ sales, and the loss of end-user customers by any of our OEM customers could have an adverse effect on our revenues and results of operations.

We face intense competition and may not be able to compete effectively, which could reduce our market share, net revenues and profit margin.

The markets in which we operate are extremely competitive and are characterized by rapid technological change, continuously evolving customer requirements and declining average selling prices. We may not be able to compete successfully against current or potential competitors. With respect to InfiniBand products, we compete with QLogic Corporation. We also compete with providers of alternative technologies, including Ethernet, Fibre Channel and proprietary interconnects. The companies that provide IC products for these alternative technologies include Marvell Technology Group, Broadcom Corporation, Emulex Corporation, QLogic Corporation and Myricom. Many of our current and potential competitors have longer operating histories, significantly greater resources, greater economies of scale, stronger name recognition and larger customer bases than we have. This may allow them to respond more quickly than we are able to respond to new or emerging technologies or changes in customer requirements. In addition, these competitors may have greater credibility with our existing and potential customers. If we do not compete successfully, our market share, revenues and profit margin may decline, and, as a result, our business may be adversely affected.

If we fail to develop new products or enhance our existing products to react to rapid technological change and market demands in a timely and cost-effective manner, our business will suffer.

We must develop new products or enhance our existing products with improved technologies to meet rapidly evolving customer requirements. We are currently engaged in the development process for next generation products, and we need to successfully design our next generation and other products successfully for customers who continually require higher performance and functionality at lower costs. The development process for these advancements is lengthy and will require us to anticipate accurately technological innovations and market trends. Developing and enhancing these products can be time-consuming, costly and complex. Our ability to fund product development and enhancements partially depends on our ability to generate revenues from our existing products.

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There is a risk that these developments or enhancements will be late, fail to meet customer or market specifications and will not be competitive with other products using alternative technologies that offer comparable performance and functionality. We may be unable to successfully develop our next generation products, new products or product enhancements. Any new products or product enhancements may not be accepted in new or existing markets. Our business will suffer if we fail to develop and introduce new products or product enhancements in a timely manner or on a cost-effective basis.

We rely on a limited number of subcontractors to manufacture, assemble, package and production test our products, and the failure of any of these third-party subcontractors to deliver products or otherwise perform as requested could damage our relationships with our customers, decrease our sales and limit our growth.

While we design and market our products and conduct test development in-house, we do not manufacture, assemble, package and production test our products, and we must rely on third-party subcontractors to perform these services. We currently rely on Taiwan Semiconductor Manufacturing Company, or TSMC, to produce our silicon wafers, and Flextronics International Ltd. to manufacture and production test our adapter cards. We also rely on Advanced Semiconductor Engineering, or ASE, to assemble, package and production test our ICs. We are currently arranging an additional manufacturing line with one of our subcontractors, but we may not be able to finalize this arrangement. If these subcontractors do not provide us with high-quality products, services and production and production test capacity in a timely manner, or if one or more of these subcontractors terminates its relationship with us, we may be unable to obtain satisfactory replacements to fulfill customer orders on a timely basis, our relationships with our customers could suffer, our sales could decrease and our growth could be limited. In particular, there are significant challenges associated with moving our IC production from our existing manufacturer to another manufacturer with whom we do not have a pre-existing relationship.

We currently do not have long-term supply contracts with any of our third-party subcontractors. Therefore, they are not obligated to perform services or supply products to us for any specific period, in any specific quantities or at any specific price, except as may be provided in a particular purchase order. None of our third-party subcontractors has provided contractual assurances to us that adequate capacity will be available to us to meet future demand for our products. Our subcontractors may allocate capacity to the production of other companies’ products while reducing deliveries to us on short notice. Other customers that are larger and better financed than we are or that have long-term agreements with these subcontractors may cause these subcontractors to reallocate capacity to those customers, decreasing the capacity available to us.

Other significant risks associated with relying on these third-party subcontractors include:

•  reduced control over product cost, delivery schedules and product quality;

•  potential price increases;

•  inability to achieve sufficient production, increase production or test capacity and achieve acceptable yields on a timely basis;

•  increased exposure to potential misappropriation of our intellectual property;

•  shortages of materials used to manufacture products;

•  capacity shortages;

•  labor shortages or labor strikes;

•  political instability in the regions where these subcontractors are located; and

•  natural disasters impacting these subcontractors.

Our sales cycle can be lengthy, which could result in uncertainty and delays in generating revenues.

We have occasionally experienced a lengthy sales cycle for some of our products, due in part to the constantly evolving nature of the technologies on which our products are based. Some of our products must be custom

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designed to operate in our customers’ products, resulting in a lengthy process between the initial design stage and the ultimate sale. We also compete for design wins prior to selling products, which may increase the length of the sales process. We may experience a delay between the time we increase expenditures for research and development, sales and marketing efforts and inventory and the time we generate revenues, if any, from these expenditures. In addition, because we do not have long-term supply contracts with our customers and the majority of our sales are on a purchase order basis, we must repeat our sales process on a continual basis, including sales of new products to existing customers. As a result, our business could be harmed if a customer reduces or delays its orders.

The average selling prices of our products have decreased in the past and may do so in the future, which could harm our financial results.

The products we develop and sell are subject to declines in average selling prices. We have had to reduce our prices in the past to meet market demand, and we may be required to reduce prices in the future. Reductions in our average selling prices to one customer could impact our average selling prices to other customers. This would cause our gross margin to decline. Our financial results will suffer if we are unable to offset any reductions in our average selling prices by increasing our sales volumes, reducing our costs or developing new or enhanced products with higher selling prices or gross margin.

Fluctuations in our revenues and operating results on a quarterly and annual basis could cause the market price of our ordinary shares to decline.

Our quarterly and annual revenues and operating results are difficult to predict and have fluctuated in the past, and may fluctuate in the future, from quarter to quarter and year to year. It is possible that our operating results in some quarters and years will be below market expectations. This would likely cause the market price of our ordinary shares to decline. Our quarterly and annual operating results are affected by a number of factors, many of which are outside of our control, including:

•  unpredictable volume and timing of customer orders, which are not fixed by contract but vary on a purchase order basis;

•  the loss of one or more of our customers, or a significant reduction or postponement of orders from our customers;

•  our customers’ sales outlooks, purchasing patterns and inventory levels based on end-user demands and general economic conditions;

•  seasonal buying trends;

•  the timing of new product announcements or introductions by us or by our competitors;

•  our ability to successfully develop, introduce and sell new or enhanced products in a timely manner;

•  product obsolescence and our ability to manage product transitions;

•  changes in the relative sales mix of our products;

•  decreases in the overall average selling prices of our products;

•  changes in our cost of finished goods; and

•  the availability, pricing and timeliness of delivery of other components used in our customers’ products.

We base our planned operating expenses in part on our expectations of future revenues, and a significant portion of our expenses is relatively fixed in the short-term. We have limited visibility into customer demand from which to predict future sales of our products. As a result, it is difficult for us to forecast our future revenues and budget our operating expenses accordingly. Our operating results would be adversely affected to the extent customer orders are cancelled or rescheduled. If revenues for a particular quarter are lower than we expect, we likely would not proportionately reduce our operating expenses.

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We rely primarily upon copyright, patent and trade secret laws and contractual restrictions to protect our proprietary rights, and, if these rights are not sufficiently protected, our ability to compete and generate revenues could suffer.

We seek to protect our proprietary manufacturing specifications, documentation and other written materials primarily under trade secret, patent and copyright laws. We also typically require employees and consultants with access to our proprietary information to execute confidentiality agreements. The steps taken by us to protect our proprietary information may not be adequate to prevent misappropriation of our technology. In addition, our proprietary rights may not be adequately protected because:

•  people may not be deterred from misappropriating our technologies despite the existence of laws or contracts prohibiting it;

•  policing unauthorized use of our intellectual property may be difficult, expensive and time-consuming, and we may be unable to determine the extent of any unauthorized use; and

•  the laws of other countries in which we market our products, such as some countries in the Asia/Pacific region, may offer little or no protection for our proprietary technologies.

Reverse engineering, unauthorized copying or other misappropriation of our proprietary technologies could enable third parties to benefit from our technologies without paying us for doing so. Any inability to adequately protect our proprietary rights could harm our ability to compete, generate revenues and grow our business.

We may not obtain sufficient patent protection on the technology embodied our products, which could harm our competitive position and increase our expenses.

Our success and ability to compete in the future may depend to a significant degree upon obtaining sufficient patent protection for our proprietary technology. As of July 31, 2006, we had 10 issued patents and 27 patent applications pending in the United States, 5 issued patents in Taiwan and 6 applications pending in Israel, each of which covers aspects of the technology in our products. Patents that we currently own do not cover all of the products that we presently sell. Our patent applications may not result in issued patents, and even if they result in issued patents, the patents may not have claims of the scope we seek. Even in the event that these patents are not issued, the applications may become publicly available and proprietary information disclosed in the applications will become available to others. In addition, any issued patents may be challenged, invalidated or declared unenforceable. The term of any issued patent in the United States would be 20 years from its filing date, and if our applications are pending for a long time period, we may have a correspondingly shorter term for any patent that may issue. Our present and future patents may provide only limited protection for our technology and may not be sufficient to provide competitive advantages to us. For example, competitors could be successful in challenging any issued patents or, alternatively, could develop similar or more advantageous technologies on their own or design around our patents. Also, patent protection in certain foreign countries may not be available or may be limited in scope and any patents obtained may not be as readily enforceable as in the United States and Israel, making it difficult for us to effectively protect our intellectual property from misuse or infringement by other companies in these countries. Our inability to obtain and enforce our intellectual property rights in some countries may harm our business. In addition, given the costs of obtaining patent protection, we may choose not to protect certain innovations that later turn out to be important.

Intellectual property litigation, which is common in our industry, could be costly, harm our reputation, limit our ability to sell our products and divert the attention of management and technical personnel.

The semiconductor industry is characterized by frequent litigation regarding patent and other intellectual property rights. We have indemnification obligations to most of our customers with respect to infringement of third-party patents and intellectual property rights by our products. If litigation were to be filed against these customers in connection with our technology, we may be required to defend and indemnify such customers.

Questions of infringement in the markets we serve involve highly technical and subjective analyses. Although we have not been involved in intellectual property litigation to date, litigation may be necessary in the future to enforce any patents we may receive and other intellectual property rights, to protect our trade secrets, to determine

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the validity and scope of the proprietary rights of others or to defend against claims of infringement or invalidity, and we may not prevail in any such future litigation. Litigation, whether or not determined in our favor or settled, could be costly, could harm our reputation and could divert the efforts and attention of our management and technical personnel from normal business operations. In addition, adverse determinations in litigation could result in the loss of our proprietary rights, subject us to significant liabilities, require us to seek licenses from third parties or prevent us from licensing our technology or selling our products, any of which could seriously harm our business.

We depend on key and highly skilled personnel to operate our business, and if we are unable to retain our current personnel and hire additional personnel, our ability to develop and successfully market our products could be harmed.

Our business is particularly dependent on the interdisciplinary expertise of our personnel, and we believe our future success will depend in large part upon our ability to attract and retain highly skilled managerial, engineering, finance and sales and marketing personnel. The loss of any key employees or the inability to attract or retain qualified personnel could delay the development and introduction of, and harm our ability to sell, our products and harm the market’s perception of us. Competition for qualified engineers in the markets in which we operate, primarily in Israel where our engineering operations are based, is intense and, accordingly, we may not be able to retain or hire all of the engineers to meet our ongoing and future business needs. If we are unable to attract and retain the highly skilled professionals we need, we may have to forego projects for lack of resources or be unable to staff projects optimally. We believe that our future success is highly dependent on the contributions of Eyal Waldman, our president and chief executive officer. We do not have long-term employment contracts with Mr. Waldman or any other key personnel, and their knowledge of our business and industry would be extremely difficult to replace.

We may not be able to manage our future growth effectively, and we may need to incur significant expenditures to address the additional operational and control requirements of our growth.

We are experiencing a period of growth and expansion. This expansion has placed, and any future expansion will continue to place, a significant strain on our management, personnel, systems and financial resources. We plan to hire additional employees to support an increase in research and development as well as increases in our sales and marketing and general and administrative efforts. To successfully manage our growth and handle the responsibilities of being a public company, we believe we must effectively:

•  continue to enhance our customer relationship and supply chain management and supporting systems;

•  implement additional and improve existing administrative, financial and operations systems, procedures and controls;

•  expand and upgrade our technological capabilities;

•  manage multiple relationships with our customers, distributors, suppliers, end users and other third parties;

•  manage the mix of our U.S., Israeli and other foreign operations; and

•  hire, train, integrate and manage additional qualified engineers for research and development activities, sales and marketing personnel and financial and IT personnel.

Our efforts may require substantial managerial and financial resources and may increase our operating costs even though these efforts may not be successful. If we are unable to manage our growth effectively, we may not be able to take advantage of market opportunities, develop new products, satisfy customer requirements, execute our business plan or respond to competitive pressures.

We may experience defects in our products, unforeseen delays, higher than expected expenses or lower than expected manufacturing yields of our products, which could result in increased customer warranty claims, delay our product shipments and prevent us from recognizing the benefits of new technologies we develop.

Although we test our products, they are complex and may contain defects and errors. In the past we have encountered defects and errors in our products. Delivery of products with defects or reliability, quality or

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compatibility problems may damage our reputation and our ability to retain existing customers and attract new customers. In addition, product defects and errors could result in additional development costs, diversion of technical resources, delayed product shipments, increased product returns, warranty expenses and product liability claims against us which may not be fully covered by insurance. Any of these could harm our business.

In addition, our production of existing and development of new products can involve multiple iterations and unforeseen manufacturing difficulties, resulting in reduced manufacturing yields, delays and increased expenses. The evolving nature of our products requires us to modify our manufacturing specifications, which may result in delays in manufacturing output and product deliveries. We rely on third parties to manufacture our products and currently rely on one manufacturer for our ICs and one manufacturer for our cards. Our ability to offer new products depends on our manufacturers’ ability to implement our revised product specifications, which is costly, time-consuming and complex.

If we fail to maintain an effective system of internal controls, we may not be able to report accurately our financial results or prevent fraud. As a result, current and potential shareholders could lose confidence in our financial reporting, which could harm our business and the trading price of our ordinary shares.

Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We have in the past discovered, and may in the future discover, areas of our internal controls that need improvement. In addition, Section 404 of the Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley, requires us to evaluate and report on our internal control over financial reporting and have our independent registered public accounting firm annually attest to our evaluation, as well as issue its own opinion on our internal control over financial reporting. The Section 404 internal control reporting requirements will be implemented according to the regulatory phase-in schedule of the Securities and Exchange Commission. The SEC recently proposed to delay the implementation of Section 404 compliance for new public companies. If the SEC’s proposal is adopted, we will be required to provide a management report on internal control over financial reporting for the first time in connection with our Annual Report on Form 10-K for the year ending December 31, 2007. We will be required to provide both a management report and an independent registered public accounting firm attestation report on internal controls in connection with our Annual Report on Form 10-K for the year ending December 31, 2008. We are preparing for compliance with Section 404 by strengthening, assessing and testing our system of internal controls to provide the basis for our report. However, the continuous process of strengthening our internal controls and complying with Section 404 is expensive and time-consuming and requires significant management attention. We cannot be certain that these measures will ensure that we will maintain adequate control over our financial processes and reporting. Furthermore, as we grow our business, our internal controls will become more complex and will require significantly more resources to ensure our internal controls remain effective overall. Failure to implement new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations. If we or our independent registered public accounting firm discover a material weakness, the disclosure of that fact, even if quickly remedied, could reduce the market’s confidence in our financial statements and harm our share price. In addition, future non-compliance with Section 404 could subject us to a variety of administrative sanctions, including the suspension or delisting of our ordinary shares from The Nasdaq Global Market, which could reduce our share price.

We may pursue acquisitions or investments in complementary products, technologies and businesses, which could harm our operating results and may disrupt our business.

In the future, we may pursue acquisitions of, or investments in, complementary products, technologies and businesses. Acquisitions present a number of potential risks and challenges that could, if not met, disrupt our business operations, increase our operating costs and reduce the value to us of the acquisition. For example, if we identify an acquisition candidate, we may not be able to successfully negotiate or finance the acquisition on favorable terms. Even if we are successful, we may not be able to integrate the acquired businesses, products or technologies into our existing business and products. Furthermore, potential acquisitions and investments, whether or not consummated, may divert our management’s attention and require considerable cash outlays at the expense of our existing operations. In addition, to complete future acquisitions, we may issue equity securities, incur debt,

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assume contingent liabilities or have amortization expenses and write-downs of acquired assets, which could adversely affect our profitability.

Changes to financial accounting standards may affect our results of operations and cause us to change our business practices.

We prepare our financial statements to conform with generally accepted accounting principles, or GAAP, in the United States. These accounting principles are subject to interpretation by the Financial Accounting Standards Board, or FASB, the SEC and various bodies formed to interpret and create appropriate accounting policies. A change in those policies can have a significant effect on our reported results and may affect our reporting of transactions completed before a change is announced. Changes to those rules or the questioning of current practices may adversely affect our reported financial results or the way we conduct our business. For example, accounting policies affecting many aspects of our business, including rules relating to employee share option grants, have recently been revised. The FASB and other agencies have made changes to GAAP that required us, as of our first quarter of 2006, to record a charge to earnings for the estimated fair value of employee share option grants and other equity incentives, whereas under previous accounting rules charges were required only for the intrinsic value, if any, of such awards to employees. We may have significant and ongoing accounting charges under the new rules resulting from option grants and other equity incentive expensing that could reduce our net income. In addition, since historically we have used equity-related compensation as a component of our total employee compensation program, the accounting change could make the use of equity-related compensation less attractive to us and therefore make it more difficult for us to attract and retain employees.

Our business is subject to the risks of earthquakes, fires, floods and other natural catastrophic events, and to interruption by manmade problems such as computer viruses or terrorism.

Our U.S. corporate offices are located in the San Francisco Bay Area, a region known for seismic activity. A significant natural disaster, such as an earthquake, fire or flood, could have a material adverse impact on our business, operating results and financial condition. In addition, our servers are vulnerable to computer viruses, break-ins and similar disruptions from unauthorized tampering with our computer systems. In addition, acts of terrorism could cause disruptions in our or our customers’ businesses or the economy as a whole. To the extent that such disruptions result in delays or cancellations of customer orders, or the deployment of our products, our business, operating results and financial condition would be adversely affected.

Risks Related to Our Industry

Due to the cyclical nature of the semiconductor industry, our operating results may fluctuate significantly, which could adversely affect the market price of our ordinary shares.

The semiconductor industry is highly cyclical and subject to rapid change and evolving industry standards and, from time to time, has experienced significant downturns. These downturns are characterized by decreases in product demand, excess customer inventories and accelerated erosion of prices. These factors could cause substantial fluctuations in our net revenues and in our operating results. Any downturns in the semiconductor industry may be severe and prolonged, and any failure of this industry to fully recover from downturns could harm our business. The semiconductor industry also periodically experiences increased demand and production capacity constraints, which may affect our ability to ship products. Accordingly, our operating results may vary significantly as a result of the general conditions in the industry, which could cause our share price to decline.

The demand for semiconductors is affected by general economic conditions, which could impact our business.

The semiconductor industry is affected by general economic conditions, and a downturn may result in decreased demand for our products and adversely affect our operating results. Our business has been adversely affected by previous economic downturns. For example, during the global economic downturn in 2002 to 2003, demand for many computer and consumer electronics products suffered as consumers delayed purchasing decisions or changed or reduced their discretionary spending. As a result, demand for our products suffered and we had to

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implement restructuring initiatives to align our corporate spending with a slower than anticipated revenue growth during that timeframe.

The semiconductor industry is highly competitive, and we cannot assure you that we will be able to compete successfully against our competitors.

The semiconductor industry is highly competitive. Increased competition may result in price pressure, reduced profitability and loss of market share, any of which could seriously harm our revenues and results of operations. Competition principally occurs at the design stage, where a customer evaluates alternative design solutions. We continually face intense competition from semiconductor interconnect solutions companies. Some of our competitors have greater financial and other resources than we have with which to pursue engineering, manufacturing, marketing and distribution of their products. As a result, they may be able to respond more quickly to changing customer demands or devote greater resources to the development, promotion and sales of their products than we can. We cannot assure you that we will be able to increase or maintain our revenues and market share, or compete successfully against our current or future competitors in the semiconductor industry.

Risks Related to Operations in Israel and Other Foreign Countries

Regional instability in Israel may adversely affect business conditions and may disrupt our operations and negatively affect our revenues and profitability.

We have engineering facilities and corporate and sales support operations and, as of June 30, 2006, 118 full-time and 23 part-time employees located in Israel. Accordingly, political, economic and military conditions in Israel may directly affect our business. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its Arab neighbors, as well as incidents of civil unrest. Israel was recently engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia group and political party. In addition, Israel and companies doing business with Israel have, in the past, been the subject of an economic boycott. Although Israel has entered into various agreements with Egypt, Jordan and the Palestinian Authority, Israel has been and is subject to civil unrest and terrorist activity, with varying levels of severity, since September 2000. The recent election of representatives of the Hamas movement to a majority of seats in the Palestinian Legislative Council may create additional unrest and uncertainty. In addition, the recent armed conflict with Hezbollah negatively affected business conditions in Israel and any future armed conflicts or political instability in the region may negatively affect business conditions and adversely affect our results of operations. Parties with whom we do business have sometimes declined to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary. In addition, the political and security situation in Israel may result in parties with whom we have agreements involving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions in the agreements.

We can give no assurance that security and political conditions will have no impact on our business in the future. Hostilities involving Israel or the interruption or curtailment of trade between Israel and its present trading partners could adversely affect our operations and could make it more difficult for us to raise capital. Recently, there had been a sharp increase in hostilities along Israel’s northern border between Israel and Hezbollah armed forces based in Lebanon and to a lesser extent between Israel and the Hamas militia in the Gaza Strip. Recently, the hostilities between Israel and Hezbollah involving missile strikes against civilian targets in northern Israel have resulted in economic losses. While we did not sustain damage, our Israeli operations, which are located in northern Israel, are within range of Hezbollah missiles and we or our immediate surroundings may sustain damages in a missile attack, which could adversely affect our operations.

In addition, our business insurance does not cover losses that may occur as a result of events associated with the security situation in the Middle East. Although the Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained. Any losses or damages incurred by us could have a material adverse effect on our business.

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

Generally, all non-exempt male adult citizens and permanent residents of Israel under the age of 45 (or older, for citizens with certain occupations), including some of our officers, directors and employees, are obligated to perform military reserve duty annually, and are subject to being called to active duty at any time under emergency circumstances. In the event of severe unrest or other conflict, individuals could be required to serve in the military for extended periods of time. In response to increases in terrorist activity, there have been periods of significant call-ups of military reservists, and recently some of our employees, including those in key positions, have been called up in connection with armed conflicts. It is possible that there will be additional call-ups in the future. Our operations could be disrupted by the absence for a significant period of one or more of our officers, directors or key employees due to military service. Any such disruption could adversely affect our operations.

Our operations may be affected by negative economic conditions or labor unrest in Israel.

Due to significant economic measures adopted by the Israeli government, there were several general strikes and work stoppages in Israel in 2003 and 2004, affecting all banks, airports and ports. These strikes have had an adverse effect on the Israeli economy and on business, including our ability to deliver products to our customers and to receive raw materials from our suppliers in a timely manner. From time to time, the Israeli trade unions threaten strikes or work stoppages, which, if carried out, may have a material adverse effect on the Israeli economy and our business.

We are susceptible to additional risks from our international operations.

We derived 24% and 28% of our revenues in the years ended December 31, 2004 and 2005, respectively, 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;

•  licenses, tariffs and other trade barriers;

•  difficulties in staffing and managing foreign operations;

•  longer sales and payment cycles;

•  greater difficulties in collecting accounts receivable;

•  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;

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

•  fluctuations in freight rates and transportation disruptions;

•  political and economic instability; and

•  variance and unexpected changes in local 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 these challenges in our international operations, we could experience slower than expected revenue growth and our business could be harmed.

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It may be difficult to enforce a U.S. judgment against us, our officers and directors and some of the experts named in this prospectus or to assert U.S. securities law claims in Israel.

We are incorporated in Israel. Some of our executive officers and directors and some of our accountants and attorneys are non-residents of the United States, and a significant portion of our assets and the assets of these persons are located outside the United States. Therefore, it may be difficult to enforce a judgment obtained in the United States against us or any of these persons in U.S. or Israeli courts based on the civil liability provisions of the U.S. federal securities laws. Additionally, it may be difficult for a shareholder to enforce civil liabilities under U.S. federal securities laws in original actions instituted in Israel. Please see “Enforceability of Civil Liabilities” for a further discussion of this risk factor.

Provisions of Israeli law may delay, prevent or make difficult an acquisition of us, which could prevent a change of control and therefore depress the price of our shares.

Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals for transactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions. For example, a merger may not be completed unless at least 50 days have passed from the date that a merger proposal was filed by each merging company with the Israel Registrar of Companies and at least 30 days from the date that the shareholders of both merging companies approved the merger. In addition, the approval of a majority of each class of securities of the target company is required to approve a merger.

These provisions could delay, prevent or impede an acquisition of us, even if such an acquisition would be considered beneficial by some of our shareholders. See “Risk Factors — Provisions of our charter documents or Israeli law could delay or prevent an acquisition of our company, even if the acquisition would be beneficial to our shareholders, and could make it more difficult for shareholders to change management,” “Management — Approval of Specified Related Party Transactions under Israeli Law,” “Description of Ordinary Shares — Acquisitions under Israeli Law” and “Description of Ordinary Shares — Anti-Takeover Measures under Israeli Law” for a further discussion of this risk factor.

Exchange rate fluctuations between the U.S. dollar and the NIS may negatively affect our earnings.

Although most of our revenues and a majority of our expenses are denominated in U.S. dollars, a significant portion of our research and development expenses are incurred in new Israeli shekels, or NIS. As a result, we are exposed to risk to the extent that the inflation rate in Israel exceeds the rate of devaluation of the NIS in relation to the U.S. dollar or if the timing of these devaluations lags behind inflation in Israel. In that event, the U.S. dollar cost of our research and development operations in Israel will increase and our U.S. dollar-measured results of operations will be adversely affected. To the extent that the value of the NIS increases against the U.S. dollar, our expenses on a U.S. dollar cost basis increase. We cannot predict any future trends in the rate of inflation in Israel or the rate of devaluation of the NIS against the U.S. dollar. The Israeli rate of inflation (deflation) amounted to (1.9)%, 1.2% and 2.4% for the years ended December 31, 2003, 2004 and 2005, respectively, and 1.6% for the first half of 2006. If the U.S. dollar cost of our research and development operations in Israel increases, our dollar-measured results of operations will be adversely affected. Our operations also could be adversely affected if we are unable to guard against currency fluctuations in the future. The NIS revaluation (devaluation) in relation to the U.S. dollar amounted to (7.6)%, (1.6)% and 6.8% for the years ended December 31, 2003, 2004 and 2005. Further, because most of our international revenues are denominated in U.S. dollars, a strengthening of the dollar versus other currencies could make our products less competitive in foreign markets and collection of receivables more difficult. We do not currently engage in currency hedging activities but we may choose to do so in the future. These measures, however, may not adequately protect us from material adverse effects due to the impact of inflation in Israel.

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” status by the Investment Center in the Israeli Ministry of Industry Trade and Labor, which makes us eligible for tax benefits under the Israeli Law for

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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 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” 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. See “Israeli Tax Considerations and Government Programs — Taxation of Companies” for additional information concerning these tax benefits.

The Israeli government grants that we currently receive require us to meet several conditions and may be reduced or eliminated due to government budget cuts, and these grants restrict our ability to manufacture and engineer products and transfer know-how outside of Israel and require us to satisfy specified conditions.

We have received, and may receive in the future, grants from the government of Israel through the Office of the Chief Scientist of Israel’s Ministry of Industry, Trade and Labor, or the OCS, for the financing of a portion of our research and development expenditures in Israel. When know-how or products are developed using OCS grants, the terms of these grants restrict the transfer of the know-how out of Israel. Transfer of know-how abroad is subject to various conditions, including payment by us of royalties to the OCS, and payment of a percentage of the consideration paid to us or our shareholders in the transaction in which the technology is transferred. In addition, any decrease of the percentage of manufacturing performed locally, as originally declared in the application to the OCS, may require us to notify, or to obtain the approval of, the OCS, and may result in increased royalty payments to the OCS. These restrictions may impair our ability to enter into agreements for those products or technologies without the approval of the OCS. We cannot be certain that any approval of the OCS will be obtained on terms that are acceptable to us, or at all. Furthermore, in the event that we undertake a transaction involving the transfer to a non-Israeli entity of technology developed with OCS funding pursuant to a merger or similar transaction, the consideration available to our shareholders may be reduced by the amounts we are required to pay to the OCS. Any approval, if given, will generally be subject to additional financial obligations. If we fail to comply with the conditions imposed by the OCS, including the payment of royalties with respect to grants received, we may be required to refund any payments previously received, together with interest and penalties. In the years ended December 31, 2003, 2004 and 2005 the OCS approved grants totaling, $1.4 million, $1.3 million and $43,000, respectively, of funding in support of some of our research and development programs.

We may be classified as a passive foreign investment company, which could result in adverse U.S. federal income tax consequences to U.S. holders of our ordinary shares.

We do not expect to be considered a “passive foreign investment company,” or PFIC, for U.S. federal income tax purposes for our current taxable year ending December 31, 2006. However, the application of the PFIC rules is subject to ambiguity in several respects, and, in addition, we must make a separate determination each taxable year as to whether we are a PFIC (after the close of each taxable year). Accordingly, we cannot assure you that we will not be a PFIC for our current taxable year or any future taxable year. A non-U.S. corporation will be considered a PFIC for any taxable year if either (i) at least 75% of its gross income is passive income or (ii) at least 50% of the value of its assets is attributable to assets that produce or are held for the production of passive income. The market value of our assets generally will be determined based on the market price of our ordinary shares, which is likely to fluctuate after this offering. In addition, the composition of our income and assets will be affected by how, and how quickly, we spend the cash we raise in this offering. If we were treated as a PFIC for any taxable year during which a U.S. person held an ordinary share, certain adverse U.S. federal income tax consequences could apply to such U.S. person, including:

•  having gains realized on the sale of our ordinary shares treated as ordinary income, rather than capital gain;

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•  the loss of the preferential rate applicable to dividends received on our ordinary shares by individuals who are U.S. holders; and

•  having interest charges apply to the proceeds of share sales.

See “U.S. Federal Income Tax Considerations — Passive Foreign Investment Company.”

Your rights and responsibilities as a shareholder will be governed by Israeli law and differ in some respects from the rights and responsibilities of shareholders under U.S. law.

We are incorporated under Israeli law. The rights and responsibilities of holders of our ordinary shares are governed by our amended and restated articles of association and by Israeli law. These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders in typical U.S. corporations. In particular, a shareholder of an Israeli company has a duty to act in good faith toward the company and other shareholders and to refrain from abusing his, her or its power in the company, including, among other things, in voting at the general meeting of shareholders on certain matters. Please see “Description of Authorized Share Capital” for a further discussion of shareholder rights and responsibilities under Israeli law.

Risks Related to This Offering

The price of our ordinary shares may be volatile, and you may not be able to resell your shares at or above the initial public offering price.

Prior to this offering, there has been no public market for our ordinary shares. An active and liquid trading market for our ordinary shares may not develop or be sustained after this offering. You may be unable to resell your ordinary shares at or above the initial public offering price due to fluctuations in the market price of our ordinary shares resulting from changes in our operating performance or prospects. 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 or our customers of acquisitions, new products, significant contracts, commercial relationships or capital commitments;

•  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; and

•  changes in earnings estimates or recommendations by securities analysts.

In addition, the stock markets in general, and the markets for semiconductor stocks in particular, have experienced extreme volatility that often has been unrelated to the operating performance of the issuer. These broad market fluctuations may adversely affect the trading price or liquidity of our ordinary shares. In the past, when the market price of a stock has been volatile and declined, holders of that stock have sometimes instituted securities class action litigation against the issuer. If any of our shareholders were to bring such a lawsuit against us, we could incur substantial costs defending the lawsuit and the attention of our management would be diverted from the operation of our business.

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The ownership of our ordinary shares will continue to be highly concentrated, and your interests may conflict with the interests of our existing shareholders.

Our executive officers and directors and their affiliates, together with our current significant shareholders, will beneficially own approximately  % of our outstanding ordinary shares upon completion of this offering (excluding any shares that may be purchased by our existing shareholders in this offering). Moreover, three of our shareholders, Sequoia Capital Partners, U.S. Venture Partners and Intel Atlantic, Inc., will beneficially own approximately  % of our outstanding ordinary shares upon completion of this offering. In addition, individual partners of U.S. Venture Partners and Bessemer Venture Partners serve on our board of directors. Accordingly, these shareholders, acting as a group, will continue to have significant influence over the outcome of corporate actions requiring shareholder approval, including the election of directors, any merger, consolidation or sale of all or substantially all of our assets or any other significant corporate transaction. These shareholders could delay or prevent a change of control of our company, even if such a change of control would benefit our other shareholders. The significant concentration of share ownership may adversely affect the trading price of our ordinary shares due to investors’ perception that conflicts of interest may exist or arise.

A significant portion of our outstanding ordinary shares may be sold into the market in the near future. Substantial sales of our shares, or the perception such sales are likely to occur, could cause the price of our ordinary shares to decline.

If our existing shareholders sell a large number of our ordinary shares or the public market perceives that existing shareholders might sell our ordinary shares, the market price of our ordinary shares could decline significantly. All of the shares offered under this prospectus will be freely tradable without restriction or further registration under the U.S. federal securities laws, unless purchased by our “affiliates” as that term is defined in Rule 144 under the Securities Act of 1933, as amended. An aggregate of           of the remaining           shares outstanding upon the closing of this offering may be sold pursuant to Rule 144, 144(k) and 701 upon the expiration of 180-day lock-up agreements.

Existing shareholders holding an aggregate of           ordinary shares have rights with respect to the registration of these ordinary shares with the SEC. If we register their ordinary shares following the expiration of the lock-up agreements, they can sell those shares in the public market.

Promptly following this offering, we intend to register with the SEC           ordinary shares that are authorized for issuance under our share option plans and options granted outside our share option plans. As of June 30, 2006, 7,618,630 shares were subject to outstanding options, of which 4,845,977 shares were vested. Once we register these shares, they can be freely sold in the public market upon issuance, subject to the lock-up agreements referred to above and the restrictions imposed on our affiliates under Rule 144.

Investors in this offering will suffer immediate and substantial dilution of their investment.

If you purchase ordinary shares in this offering, you will pay more for your shares than our pro forma as adjusted net tangible book value per share. You will incur immediate and substantial dilution of $      per share, representing the difference between our initial public offering price and our pro forma as adjusted net tangible book value per share. In the past, we issued options to acquire ordinary shares at prices significantly below the initial public offering price. To the extent these outstanding options are exercised, you will incur further dilution.

If we sell our ordinary shares in future financings, ordinary shareholders will experience immediate dilution and, as a result, our share price may go down.

We may from time to time issue additional ordinary shares at a discount from the current trading price of our ordinary shares. As a result, our ordinary shareholders would experience immediate dilution upon the purchase of any ordinary shares sold at such discount. In addition, as opportunities present themselves, we may enter into equity financings or similar arrangements in the future, including the issuance of debt securities, preferred shares or ordinary shares. If we issue ordinary shares or securities convertible into ordinary shares, our ordinary shareholders could experience dilution.

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Provisions of our charter documents or Israeli law could delay or prevent an acquisition of our company, even if the acquisition would be beneficial to our shareholders, and could make it more difficult for shareholders to change management.

Provisions of our amended and restated articles of association may discourage, delay or prevent a merger, acquisition or other change in control that shareholders may consider favorable, including transactions in which shareholders might otherwise receive a premium for their shares. In addition, these provisions may frustrate or prevent any attempt by our shareholders to replace or remove our current management by making it more difficult to replace or remove our board of directors. These provisions include:

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

•  an advance notice requirement for shareholder proposals and nominations.

Please see “Risk Factors — Israeli law may delay, prevent or make difficult an acquisition of us, which could prevent a change of control and therefore depress the price of our shares” for a further discussion of Israeli laws relating to mergers and acquisitions. These provisions in our amended and restated articles of association and other provisions of Israeli law could limit the price that investors are willing to pay in the future for our ordinary shares.

We have never paid cash dividends on our share capital, and we do not anticipate paying any cash dividends in the foreseeable future.

We have never declared or paid cash dividends on our share capital, nor do we anticipate paying any cash dividends on our share capital in the foreseeable future. We currently intend to retain all available funds and any future earnings to fund the development and growth of our business. As a result, capital appreciation, if any, of our ordinary shares will be your sole source of gain for the foreseeable future.

We may apply the proceeds of this offering to uses that do not improve our operating results or increase the value of shareholders’ investment.

We intend to use a portion of the net proceeds from the ordinary shares sold by us in this offering to fund development of our products. We expect to use the remaining amount of the net proceeds of this offering for general corporate purposes, including working capital, sales and marketing activities, research and development activities, general and administrative matters and capital expenditures. We may also use a portion of the net proceeds to acquire or invest in complementary technologies, products or businesses or to obtain rights to such complementary technologies, products or businesses. However, we do not have more specific plans for the net proceeds from this offering and will have broad discretion in how we use the net proceeds of this offering. These proceeds could be applied in ways that do not improve our operating results or increase the value of shareholders’ investment.

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We will incur increased costs as a result of being a public company, and may incur increased costs as a result of changes in laws and regulations relating to corporate governance matters.

As a public company, we will incur significant accounting, legal and other expenses that we did not incur as a private company. We will incur costs associated with our public company reporting requirements. We also anticipate that we will incur costs associated with corporate governance requirements, including requirements under Sarbanes-Oxley, as well as rules implemented by the SEC and The Nasdaq Stock Market. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. We are currently evaluating and monitoring developments with respect to these rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

Changes in the laws and regulations affecting public companies, including the provisions of Sarbanes-Oxley and rules adopted by the SEC and by The Nasdaq Stock Market, will result in increased costs to us as we respond to their requirements. These laws and regulations could make it more difficult or more costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers. We cannot predict or estimate the amount or timing of additional costs we may incur to respond to their requirements.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting the financial condition of our business. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made and/or management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to:

•  levels of capital spending in the semiconductor industry, in general, and of the market for high-performance interconnect products, specifically;

•  our ability to achieve new design wins;

•  our ability to successfully introduce new products;

•  competition and competitive factors;

•  our dependence on a relatively small number of customers;

•  our ability to expand our presence with existing customers;

•  our ability to protect our intellectual property;

•  future costs and expenses; and

•  other risk factors included under “Risk Factors” in this prospectus.

In addition, in this prospectus, the words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “predict,” “potential” and similar expressions, as they relate to Mellanox, our business and our management, are intended to identify forward-looking statements. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this prospectus may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements.

Forward-looking statements speak only as of the date of this prospectus. You should not put undue reliance on any forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable laws. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

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USE OF PROCEEDS

We estimate that the net proceeds to us from the sale of the ordinary shares offered by us will be approximately $     , or approximately $      if the underwriters’ over-allotment option is exercised in full, based on an assumed initial public offering price of $      per share and after deducting underwriting discounts and commissions and estimated offering expenses.

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

We currently intend to use the net proceeds from this offering primarily to fund the development of our products and for general corporate purposes, including working capital, sales and marketing activities, research and development activities, general and administrative matters and capital expenditures. We intend to increase our research and development and sales and marketing staff to develop and introduce new products, and we intend to increase our general and administrative staff to manage our expanding operations as a public company. We may use a portion of the net proceeds for the acquisition of, or investment in, companies, technologies or products that complement our business. We have no present understandings, commitments or agreements to enter into any acquisitions or investments. Our management will have broad discretion over the use of the net proceeds in this offering. Pending these uses, we intend to invest the net proceeds of this offering in short-term, investment-grade interest-bearing securities or guaranteed obligations of the U.S. government.

By establishing a public market for our ordinary shares, this offering is also intended to facilitate our future access to public markets.

DIVIDEND POLICY

We have never declared or paid, and do not anticipate declaring or paying, any cash dividends on our ordinary shares. Any future determination as to the declaration and payment of dividends, if any, will be at the discretion of our board of directors and will depend on then existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant.

The Israel Companies Law, 1999, or the Companies Law, also restricts our ability to declare dividends. We can only distribute dividends from profits (as defined in the Companies Law), or if we do not meet the profit test, with court approval, provided in each case that there is no reasonable concern that the dividend distribution will prevent us from meeting our existing and foreseeable obligations as they come due.

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CAPITALIZATION

The following table shows:

•  our capitalization as of June 30, 2006;

•  our capitalization as of June 30, 2006, on a pro forma basis, giving effect to the conversion of all outstanding preferred shares into an aggregate of          ordinary shares as if such conversions had occurred on June 30, 2006; and

•  our capitalization as of June 30, 2006, on a pro forma as adjusted basis, giving effect to the sale by us of           ordinary shares in this offering, assuming an initial public offering price of $      per share or greater, after deducting underwriting discounts and commissions and estimated offering expenses.

	As of June 30, 2006
					Pro Forma,
	Actual			Pro Forma	As Adjusted
	(in thousands of dollars, except per share data)
Mandatorily redeemable convertible preferred shares	$	55,671
Convertible preferred shares		36,338
Shareholders’ deficit
Ordinary shares		30
Additional paid-in capital		2,637
Accumulated deficit		(75,961	)
Total shareholders’ deficit		(73,294	)
Total capitalization	$	18,715		$	$

The outstanding share information set forth above is as of June 30, 2006, and excludes:

•  an aggregate of 7,516,630 ordinary shares issuable upon the exercise of outstanding options to purchase our ordinary shares granted pursuant to our 1999 United States Equity Incentive Plan, 1999 Israeli Share Option Plan and 2003 Israeli Share Option Plan as of June 30, 2006, at a weighted average exercise price of $1.74 per share;

•  an aggregate of 1,024,763 additional ordinary shares reserved for future issuance under our 1999 United States Equity Incentive Plan and our 2003 Israeli Share Option Plan;

•            additional ordinary shares to be reserved for issuance under our 2006 Global Share Incentive Plan, which we plan to adopt in connection with the completion of this offering; 

•  an aggregate of 102,000 ordinary shares issuable upon the exercise of outstanding options granted outside of our equity incentive plans as of June 30, 2006, at a weighted average exercise price of $0.69 per share; and

•  1,268,574 ordinary shares issuable upon the exercise of warrants outstanding as of June 30, 2006, with an exercise price of $6.61 per share.

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

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DILUTION

The historical net tangible book value of our ordinary shares as of June 30, 2006 was a deficit of $      million, or $      per share. Historical net tangible book value per share is determined by dividing the net tangible book value by the number of outstanding ordinary shares. If you invest in our ordinary shares in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per share and the pro forma as adjusted net tangible book value per share of our ordinary shares.

After giving effect to the (i) conversion of our outstanding preferred shares into ordinary shares in connection with this offering and (ii) receipt of the net proceeds from the sale of           ordinary shares in this offering at an assumed initial public offering price of $      per share, after deducting underwriting discounts and commissions and estimated offering expenses, our pro forma as adjusted net tangible book value as of June 30, 2006 would have been approximately $      million, or $      per share. This represents an immediate increase in pro forma as adjusted net tangible book value of $      per share to existing shareholders and an immediate dilution of $      per share to new investors purchasing ordinary shares in this offering.

The following table illustrates this dilution on a per share basis to new investors:

Assumed initial public offering price		$
Historical net tangible book value per share as of June 30, 2006	$
Increase per share attributable to conversion of preferred shares
Pro forma net tangible book value before this offering
Increase per share attributable to this offering
Pro forma net tangible book value, as adjusted to give effect to this offering
Dilution to new investors		$

The table below summarizes as of June 30, 2006, on a pro forma as adjusted basis described above, the number of our ordinary shares, the total consideration and the average price per share (i) paid to us by existing shareholders and (ii) to be paid by new investors purchasing our ordinary shares in this offering at an assumed initial public offering price of $      per share. The table below excludes          ordinary shares subject to our right of repurchase.

	Shares purchased				Total consideration				Average price
	Number	Percent			Amount	Percent			per share
Existing shareholders				%	$			%	$
New investors
Total			100.0	%		$	100.0	%

The above discussion and tables are based on           ordinary shares issued and outstanding as of June 30, 2006 and exclude:

•  an aggregate of 7,516,630 ordinary shares issuable upon the exercise of outstanding options to purchase our ordinary shares granted pursuant to our 1999 United States Equity Incentive Plan, 1999 Israeli Share Option Plan and 2003 Israeli Share Option Plan as of June 30, 2006, at a weighted average exercise price of $1.74 per share;

•  an aggregate of 1,024,763 additional ordinary shares reserved for future issuance under our 1999 United States Equity Incentive Plan and our 2003 Israeli Share Option Plan;

•        additional ordinary shares to be reserved for issuance under our 2006 Global Share Incentive Plan, which we plan to adopt in connection with the completion of this offering;

•  an aggregate of 102,000 ordinary shares issuable upon the exercise of outstanding options granted outside of our equity incentive plans as of June 30, 2006, at a weighted average exercise price of $0.69 per share; and

•  1,268,574 ordinary shares issuable upon the exercise of warrants outstanding as of June 30, 2006, with an exercise price of $6.61 per share.

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

CONVERSION OF SERIES D PREFERRED SHARES

In connection with the closing of this offering, all of our outstanding preferred shares will convert into ordinary shares. Due to the antidilution provisions of our amended and restated articles of association, the conversion ratio of our Series D preferred shares may be adjusted in connection with the conversion of our outstanding preferred shares into ordinary shares. The per share conversion rate of our Series D preferred shares will be determined by multiplying $6.612, as adjusted for stock splits, by 2.5, and dividing by the price per share paid in this offering. Therefore, depending on the price of the shares sold in this offering, the holders of the Series D preferred shares may receive more than one ordinary share for each share of Series D preferred shares converted in connection with this offering. Under the provisions of our amended and restated articles of association, we will not know the conversion rate of our Series D preferred shares until the public offering price is determined.

In this prospectus, we have estimated the number of ordinary shares issuable upon conversion of the Series D preferred shares assuming an initial public offering price of $   per share or greater (as adjusted for any share dividends, combinations, splits, recapitalizations and the like with respect to such shares), the amount required under the Company’s amended and restated articles of association for the Series D preferred shares to convert into ordinary shares. Assuming an initial public offering price of          , up to           additional shares would be issued as further described in “Note 9 — Redeemable Convertible Preferred Shares and Redeemable Convertible Preferred Shares — Anti-dilution adjustments,” of the accompanying notes to our consolidated financial statements.

Upon completion of this offering, our existing shareholders will continue to have significant influence over the outcome of corporate actions requiring shareholder approval, including the election of directors, any merger, consolidation or sale of all or substantially all of our assets or any other significant corporate transaction. As only some of our shareholders own Series D preferred shares, changes in our valuation in connection with this offering will impact the conversion ratio of our Series D preferred shares and thus the relative ownership of our ordinary shares upon completion of this offering among our existing shareholders.

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SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus. We derived the consolidated balance sheet data for the years ended December 31, 2001, 2002 and 2003 and our consolidated statements of operations data for the years ended December 31, 2001 and 2002, from our audited consolidated financial statements not included in this prospectus. We derived the consolidated statements of operations data for each of the three years in the period ended December 31, 2005, as well the consolidated balance sheet data as of December 31, 2004 and 2005, from our audited consolidated financial statements included elsewhere in this prospectus. We derived the consolidated statements of operations data for the six months ended June 30, 2005 and 2006, as well as the consolidated balance sheet data as of June 30, 2006, from our unaudited interim consolidated financial statements included elsewhere in this prospectus. The unaudited interim consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of our management, reflect all adjustments, which include only normal recurring adjustments necessary to state fairly our consolidated financial position as of June 30, 2006 and the results of our operations and our cash flows for the periods presented. Our historical results are not necessarily indicative of results to be expected in any future period.

																Six Months Ended
	Years Ended December 31,															June 30,
	2001			2002			2003			2004			2005			2005			2006
	(in thousands, except share and per share data)
																(unaudited)
Consolidated Statement of Operations Data:
Total revenues	$	1,741		$	4,002		$	10,151		$	20,254		$	42,068		$	17,722		$	19,319
Cost of revenues		(700	)		(1,514	)		(4,535	)		(8,736	)		(15,203	)		(7,192	)		(5,950	)
Gross profits		1,041			2,488			5,616			11,518			26,865			10,530			13,369
Operating expenses:
Research and development		16,743			17,297			14,457			12,864			13,081			6,100			7,243
Sales and marketing		4,474			4,749			5,298			5,640			7,395			3,340			3,958
General and administrative		2,033			2,141			1,720			1,719			3,094			1,325			1,618
Restructuring		0			2,327			0			0			0			0			0
Total operating expenses		23,250			26,514			21,475			20,223			23,570			10,765			12,819
Income (loss) from operations		(22,209	)		(24,026	)		(15,859	)		(8,705	)		3,295			(235	)		550
Other income, net		750			993			308			123			326			218			131
Income (loss) before taxes on income		(21,459	)		(23,033	)		(15,551	)		(8,582	)		3,621			(17	)		681
Provision for taxes on income		—			—			(12	)		(306	)		(462	)		(240	)		(123	)
Net income (loss)	$	(21,459	)	$	(23,033	)	$	(15,563	)	$	(8,888	)	$	3,159		$	(257	)	$	558
Net income (loss) per share attributable to ordinary shareholders — basic and diluted		(1.85	)		(1.95	)		(1.33	)		(0.73	)		0.00			(0.03	)		0.00
Shares used to compute net income (loss) per share		11,605			11,837			11,839			12,438			13,161			13,156			13,429
Shares used to compute diluted net income (loss) per share		11,605			11,837			11,839			12,438			15,913			13,156			16,727

See Note 1 to our consolidated financial statements for a description of the method used to compute shares used in computing basic and diluted net loss per share and shares used in computing pro forma basic and diluted net loss per share.

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																Six Months Ended
	Years Ended December 31,															June 30,
	2001			2002			2003			2004			2005			2006
	(In thousands of dollars, except per share data)
																(unaudited)
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	15,933		$	4,945		$	12,883		$	10,944		$	12,350		$	12,963
Working capital		29,742			29,980			19,978			13,391			15,648			17,088
Total assets		50,187			44,362			32,239			25,822			31,154			31,413
Total liabilities		5,531			7,574			10,439			11,473			13,270			12,698
Mandatorily redeemable convertible preferred shares		39,922			55,118			55,262			55,417			55,583			55,671
Convertible preferred shares		36,338			36,338			36,338			36,338			36,338			36,338
Total shareholders’ deficit	$	(31,604	)	$	(54,668	)	$	(69,800	)	$	(77,406	)	$	(74,037	)	$	(73,294	)

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

You should read the following discussion of our financial condition and results of operations in conjunction with the financial statements and the notes thereto included elsewhere in this prospectus. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this prospectus, particularly in the “Risk Factors.”

Overview

General

We are a leading supplier of semiconductor-based, high-performance interconnect products that facilitate data transmission between servers and storage systems through communications infrastructure equipment. Our products are an integral part of a total solution focused on computing, storage and communication applications used in enterprise data center, high-performance computing and embedded systems.

We are a fabless semiconductor company that provides high-performance interconnect solutions based on semiconductor integrated circuits, or ICs. We design, develop and market host channel adapter, or HCA, and switch ICs (both of which are silicon devices that provide InfiniBand connectivity). We also offer HCA cards that incorporate our ICs. Since we introduced our first product in 2001, we have shipped products containing more than 1.4 million InfiniBand ports, which we believe demonstrates an established customer and end-user base for our products. Growth in our target markets is being driven by the need to improve the efficiency and performance of clustered systems, as well as the need to significantly reduce the total cost of ownership. In addition, we believe that demand for our products will largely depend upon the magnitude and timing of capital spending by end users.

We outsource our manufacturing, assembly, packaging and production test functions, which enables us to focus on the design, development, sales and marketing of our products. As a result, our business has relatively low capital requirements. However, our ability to bring new products to market, fulfill customer orders and achieve long-term growth depends on our ability to maintain sufficient technical personnel and obtain sufficient external subcontractor capacity.

We have experienced rapid growth in our total revenues in each of the last two years. Our revenues increased from $10.2 million to $20.3 million to $42.1 million for the years ended December 31, 2003, 2004 and 2005, respectively. In order to continue to increase our revenues, we must continue to achieve design wins over other InfiniBand providers and providers of competing interconnect technologies. We consider a design win to occur when an 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.

It is difficult for us to forecast the demand for our products, in part because of the highly complex supply chain between us and the end-user markets that incorporate our products. Demand for new features changes rapidly. Due to our lengthy product development cycle, it is critical for us to anticipate changes in demand for our various product features and the applications they serve to allow sufficient time for product design. Our failure to accurately forecast demand can lead to product shortages that can impede production by our customers and harm our relationship with these customers. Conversely, our failure to forecast declining demand or shifts in product mix can result in excess or obsolete inventory.

Revenues.  We derive revenues from sales of our ICs and cards. To date, we have derived a substantial portion of our revenues from a relatively small number of customers. Total sales to customers representing more than 10% of revenues accounted for 36%, 52% and 56% of our total revenues for the years ended December 31, 2003, 2004 and 2005, respectively. The loss of one or more of our principal customers or the reduction or deferral of purchases of our products by one of these customers could cause our revenues to decline materially if we are unable to increase our revenues from other customers. We expect sales to customers representing more than 10% of revenues to account for a decreasing but significant portion of our revenues for at least the remainder of 2006.

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Cost of revenues and gross profit.  The cost of revenues consists primarily of the cost of silicon wafers purchased from our foundry supplier, TSMC, costs associated with the assembly, packaging and production testing of our products by ASE, outside processing costs associated with the manufacture of our HCA cards by Flextronics, royalties due to third parties, including the OCS, the Binational Industrial Research and Development Foundation and a third-party licensor, warranty costs, excess and obsolete inventory costs and costs of personnel associated with production management and quality assurance. In addition, after we purchase wafers from our foundries, we also have the 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 TSMC and ASE. Accordingly, our costs are subject to price fluctuations based on the 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 and that lead times for delivery from our HCA card manufacturing subcontractors are approximately eight to ten weeks. We build inventory based on forecasts of customer orders rather than the actual orders themselves. In addition, as customers are increasingly seeking opportunities to reduce their lead times, we may be required to increase our inventory to meet customer demand.

We expect our cost of revenues to increase over time as a result of the expected increase in our sales volume. Generally, our cost of revenues as a percentage of sales revenues has decreased over time, primarily due to manufacturing cost reductions, economies of scale related to higher unit volumes and our decision to discontinue sales of our lower margin switch systems products in 2005. This trend may not continue in the future, and 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 and associated costs for employees engaged in research and development, costs associated with computer aided design software tools, depreciation expense and tape out costs. Tape out costs are expenses related to the manufacture of new products, including charges for mask sets, prototype wafers, mask set revisions and testing incurred before releasing new products. We anticipate these expenses will increase in future periods based on an increase in personnel to support our product development activities and the introduction of new products. We anticipate that our research and development expenses may fluctuate over the course of a year based on the timing of our product tape outs.

We received grants from the OCS for several projects. Under the terms of these grants, we are required to pay a royalty of 4% of the net sales of products developed from an OCS-funded project as soon as we begin to sell such products until 100% of the dollar value of the grant plus interest at LIBOR is repaid. In 2003, 2004 and 2005, we received an aggregate of $1.4 million, $1.3 million and $43,000, respectively, of approved grants in support of some of our research and development programs. As of June 30, 2006, our contingent accrued obligation for royalties, based on royalty-bearing government grants, net of royalties already paid, totaled approximately $2.5 million, payable out of future net sales of products that were developed under projects funded by the OCS. All reported research and development expenses are net of OCS and other government grants.

Sales and marketing expenses.  Sales and marketing expenses consist primarily of salaries and associated costs for employees engaged in sales, marketing and customer support, commission payments to external, third party sales representatives and charges for trade shows, promotions and travel. We expect these expenses will increase in absolute dollars in future periods based on an increase in sales and marketing personnel and increased commission payments on higher sales volumes.

General and administrative expenses.  General and administrative expenses consist primarily of salaries and associated costs for employees engaged in finance, human resources and administrative activities and charges for accounting and legal fees. We expect these expenses will increase in absolute dollars in future periods based on an increase in personnel to meet the requirements associated with our anticipated growth and being a public company.

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Taxes on Income

Our operations in Israel have been granted “Approved Enterprise” status by the Investment Center of the Israeli Ministry of Industry, Trade and Labor, which makes us eligible for tax benefits under the Israeli Law for Encouragement of Capital Investments, 1959. Under the terms of the Approved 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 when we first generate taxable income (after setting off our losses from prior years). Income that is attributable to our operations in Tel Aviv, Israel will be exempt from income tax for a period of two years commencing when we first generate taxable income (after setting off our losses from prior years), and will be subject to a reduced income tax rate (generally 10-25%, depending on the percentage of foreign investment in our company) for the following five to eight years. See “Israeli Tax Considerations and Government Programs — Taxation of Companies” for a more detailed discussion.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with GAAP. The preparation of these 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, allowance for doubtful accounts, inventory valuation, warranty provision, income taxes and share-based compensation have the greatest potential impact on our 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 of the accompanying notes to our consolidated financial statements.

Revenue recognition

We account for our revenue under the provisions of Staff Accounting Bulletin No. 104, “Revenue Recognition in Financial Statements” (SAB 104). Under SAB 104, revenues from sales of products are recognized when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable and collection is reasonably assured. Our standard arrangement with our customers typically includes freight-on-board shipping point, 30-day payment terms, no right of return and no customer acceptance provisions. We generally rely upon a purchase order as persuasive evidence of an arrangement.

We determine whether collectibility is probable on a customer-by-customer basis. When assessing the probability of collection, we consider the number of years the customer has been in business and the history of our collections. Customers are subject to a credit review process that evaluates the customers’ financial position and ultimately their ability to pay. If it is determined at the outset of an arrangement that collection is not probable, no product is shipped and no revenue is recognized unless cash is received in advance.

Allowance for doubtful accounts

We estimate the allowance for doubtful accounts based on an assessment of the collectibility of specific customer accounts. If we determine that a specific customer is unable to meet its financial obligations, we provide a specific allowance for credit losses to reduce the net recognized receivable to the amount we reasonably believe will be collected. Probability of collection is assessed on a customer-by-customer basis and our historical experience with each customer. Customers are subject to an ongoing credit review process that evaluates the customers’ financial positions. We review and update our estimates for allowance for doubtful accounts on a quarterly basis. Our allowance for doubtful accounts totaled approximately $0, $50,000 and $95,000 at December 31, 2003, 2004 and 2005, respectively. Our bad debt expense totaled approximately $47,000, $72,000 and $70,000 for the years ended December 31, 2003, 2004 and 2005, respectively.

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Inventory valuation

We value our inventory at the lower of cost or market. Market is determined based on net realizable value. Cost is determined for raw materials on a “first-in, first-out” basis, for work in process based on actual costs and for finished goods based on standard cost, which approximates actual cost on a first-in, first-out basis. We reserve for excess and obsolete inventory based on forecasted demand generally over a nine-month period and market conditions. Inventory reserves are not reversed and permanently reduce the cost basis of the affected inventory until it is either sold or scrapped.

Warranty provision

We provide a standard 12-month warranty from the date of delivery against defects in materials and workmanship. If a customer has a defective product, we will either repair the goods or provide replacement products at no charge. We record estimated warranty expenses at the time we recognize the associated product revenues based on our historical rates of return and costs of repair over the preceding 12-month period. In addition, we recognize estimated warranty expenses for specific defects at the time those defects are identified.

Share-based compensation

Through December 31, 2005, we elected to account for share-based compensation in accordance with the intrinsic value method described in Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (APB 25) and related interpretations rather than adopting the fair value method provided under SFAS No. 123, “Accounting for Stock Based Compensation” (SFAS 123). We have generally not recognized any compensation expense for share options we granted to our employees where the exercise price equals the fair market value of the shares on the date of grant and the exercise price, number of shares eligible for issuance under the options and vesting period are fixed.

Effective January 1, 2006, we adopted SFAS No. 123 (revised 2004), “Share-Based Payment” (SFAS 123(R)), which requires that we measure compensation expense for all share-based payment awards made to employees and directors, including employee share options, based on estimated fair values and recognize that expense over the required service period.

We adopted SFAS 123(R) using the prospective transition method. Under this method, SFAS 123(R) is applied to new awards and to awards modified, repurchased or cancelled after January 1, 2006. Compensation cost previously recorded under APB 25 for unvested options will continue to be recognized as the required services are rendered. Accordingly, for the six-month period ended June 30, 2006, share-based compensation expense includes compensation costs related to estimated fair values of awards granted after the date of adoption of SFAS 123(R) and compensation costs related to unvested awards at the date of adoption based on the intrinsic values as previously recorded under APB 25.

For options granted after January 1, 2006, and valued in accordance with SFAS 123(R), we use the straight-line method for expense attribution. For options granted prior to January 1, 2006, we use the multiple grant approach for expense attribution, which results in substantially higher amounts of amortization in earlier years as opposed to the straight-line method, which results in equal amortization over the vesting period of the options.

Upon adoption of SFAS 123(R), we were required to estimate the number of outstanding options that are not expected to vest. In subsequent periods, if actual forfeitures differ from these estimates, we will revise our estimates. No compensation cost is recognized for options that do not vest. Under the multiple grant approach, forfeitures of unvested options resulting from employee terminations result in the reversal during the period in which the termination occurred of previously expensed share compensation associated with the unvested options. Share compensation from vested options, whether forfeited or not, is not reversed.

We estimated the fair value of options granted after January 1, 2006 using the Black-Scholes option valuation model. This valuation model requires us to make assumptions and judgments about the variables used in the calculation. These variables and assumptions include the weighted average period of time that the options granted are expected to be outstanding, the volatility of our ordinary shares, the risk-free interest rate and the estimated rate of forfeitures of unvested share options. If actual results differ from our estimates, we will record the difference as a

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cumulative adjustment in the period we revise our estimates. Since our ordinary shares have not been actively traded in the past, we used the simplified calculation of expected life described in the SEC Staff Accounting Bulletin 107 and we estimated our ordinary shares’ volatility based on an average of the historical volatilities of the Company’s peer group in the industry in which it does business. The risk-free rate is based on U.S. Treasury securities. We estimated expected forfeitures based on our historical experience.

Significant factors, assumptions and methodologies used in determining fair value

The estimated fair value of our ordinary shares was determined by our board of directors using a model based on a fixed multiple of net income for a trailing 12-month period. If a valuation model using different input variables had been used, our ordinary share valuation may have been different. During the third quarter of 2005, we obtained a contemporaneous valuation from an unrelated third-party valuation specialist. A number of objective and subjective factors were considered in determining the fair value of our ordinary shares, including important operational events, such as the release of new products, the risk and non-liquid nature of the ordinary shares and underlying market conditions. The estimated fair values determined by the valuation specialist were not significantly different from our estimated fair values. Therefore, we have not adjusted out consolidated financial statements based upon the valuation.

During the 18-month period ended June 30, 2006, we granted share options with the following exercise prices:

			Weighted Average
	Number of Options		Exercise Price per		Weighted Average
Date of Grant	Granted		Share		Fair Value Per Share
June 27, 2006		46,000		5.10		5.10
May 26, 2006		90,500		4.90		4.90
March 10, 2006		12,000		4.25		4.25
February 3, 2006		29,000		4.25		4.25
December 8, 2005		1,383,203		3.80		3.80
November 28, 2005		200,000		3.60		3.60
October 28, 2005		14,200		3.15		3.15
September 1, 2005		74,850		3.10		3.10
July 13, 2005		59,000		3.00		3.00
June 2, 2005		211,600		2.90		2.90
April 29, 2005		470,500		2.60		2.60
March 15, 2005		34,500		2.50		2.50
February 3, 2005		800		2.50		2.50

Accounting for income taxes

Income taxes are accounted for using an asset and liability approach, which requires the recognition of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in our financial statements or tax returns. The measurement of current and deferred tax liabilities and assets are based on the provisions of enacted tax law; the effects of future changes in tax laws or rates are not anticipated. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realized.

Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are provided if, based on the weight of available evidence, it is considered more likely than not that some or all of the deferred tax assets will not be realized.

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Results of Operations

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

										Six months ended
	Years ended December 31,									June 30,
	2003			2004			2005			2005			2006
Total Revenues		100	%		100	%		100	%		100	%		100	%
Cost of revenues		45			43			36			41			31
Gross profit		55			57			64			59			69
Operating expenses:
Research and development		142			64			31			34			37
Sales and marketing		52			28			18			19			21
General and administrative		17			8			7			7			8
Total operating expenses		211			100			56			60			66
Income (loss) from operations		(156	)		(43	)		8			(1	)		3
Other income, net		3			1			1			1			1
Provision for taxes on income		0			(2	)		(1	)		(1	)		(1	)
Net income (loss)		(153	)		(44	)		8			(1	)		3

Comparison of Six Months Ended June 30, 2006 to Six Months Ended June 30, 2005

Revenues.  Revenues were approximately $19.3 million for the six months ended June 30, 2006 compared to approximately $17.7 million for the six months ended June 30, 2005, representing an increase of 9%. This increase in revenues resulted primarily from increased unit sales of approximately 27%, driven by broader adoption of InfiniBand and our products, offset by a decrease in average sales prices of 14%. A portion of the decrease in average sales prices was due to the decline from 9% to 0.2% in the percentage of revenues attributable to switch systems which have significantly higher sales prices. In addition, one of our largest customers that represented approximately 10% of our revenues in the six months ended June 30, 2006 represented approximately 53% of our revenues in the six months ended June 30, 2005. A portion of this percentage decline was attributable to a material accumulation of inventory in 2005 by this customer, which we believe has been sold in 2005 and 2006. We expect this customer to remain one of our largest customers for the remainder of 2006.

Gross Profit and Margin.  Gross profit was approximately $13.4 million for the six months ended June 30, 2006 compared to approximately $10.5 million for the six months ended June 30, 2005, representing an increase of 28%. As a percentage of revenues, gross margin increased to 69% in the six months ended June 30, 2006 from 59% in the six months ended June 30, 2005. This increase in gross margin was due primarily to a reduction in production costs associated with outsourced labor, raw materials and volume discounts. In addition, part of the gross margin improvement was due to increased sales of next generation products for which we receive higher margins.

Research and Development.  Research and development expenses were approximately $7.2 million for the six months ended June 30, 2006 compared to approximately $6.1 million for the six months ended June 30, 2005, representing an increase of 18%. The increase was attributable to higher salary related expenses associated with increased headcount of approximately $450,000, increases in non-recurring engineering and IC qualification (outside testing and validation) expenses of approximately $335,000, increased software license and maintenance fees of approximately $93,000 and depreciation and amortization of approximately $78,000.

Sales and Marketing.  Sales and marketing expenses were approximately $4.0 million for the six months ended June 30, 2006 compared to approximately $3.3 million for the six months ended June 30, 2005, representing an increase of 21%. The increase was primarily attributable to higher salary related expenses associated with increased headcount of approximately $562,000, and an increase in travel related expenses of approximately $153,000.

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General and Administrative.  General and administrative expenses were approximately $1.6 million for the six months ended June 30, 2006 compared to approximately $1.3 million for the six months ended June 30, 2005, representing an increase of 23%. The increase was primarily due to higher salary related expenses associated with increased headcount of approximately $256,000 and an increase in legal and accounting fees of approximately $76,000, offset by a decrease in bad debt expense of approximately $59,000.

Other Income, net.  Other income, net consists of interest earned on cash equivalents and marketable securities and foreign currency exchange gains and losses. Other income, net was approximately $131,000 for the six months ended June 30, 2006 compared to approximately $218,000 for the six months ended June 30, 2005, representing a decrease of 40%. The decrease consisted of approximately $139,000 of higher interest income, offset by foreign currency exchange losses of approximately $237,000.

Provision for Taxes on Income.  Provision for taxes on income was approximately $123,000 for the six months ended June 30, 2006 compared to approximately $240,000 for the six months ended June 30, 2005, representing a decrease of 49%. The decrease was related to lower income attributable to Mellanox Technologies, Inc., our wholly-owned U.S. subsidiary.

Comparison of the Year Ended December 31, 2005 to the Year Ended December 31, 2004

Revenues.  Revenues were approximately $42.1 million for the year ended December 31, 2005 compared to approximately $20.3 million for the year ended December 31, 2004, representing an increase of 107%. This significant increase in revenues resulted primarily from increased unit sales of approximately 103%, driven by broader adoption of InfiniBand and our products, and an increase in average sales prices of 2%.

Gross Profit and Margin.  Gross profit was approximately $26.9 million for the year ended December 31, 2005 compared to approximately $11.5 million for the year ended December 31, 2004, representing an increase of 133%. As a percentage of revenues, gross profit increased to 64% in 2005 from 57% in 2004. This increase in gross profit margin was due primarily to a 5% reduction in production costs coupled with a 2% increase in average sales prices. Part of the gross margin improvement was also due to a decline in the percentage of revenues attributable to switch systems, historically a lower margin business, which declined to 6% from 14% of total revenues during the year.

Research and Development.  Research and development expenses were approximately $13.1 million for the year ended December 31, 2005 compared to approximately $12.9 million for the year ended December 31, 2004, representing an increase of 2%. The change in spending consisted of a reduction in tape out costs of approximately $1.2 million in 2004 and lower depreciation expenses of $739,000, partially offset by higher non-recurring engineering expenses of $745,000. We did not incur any tape out costs in 2005. The company received $1.3 million in OCS funding, which historically has been recorded as a credit to research and development expenses.

Sales and Marketing.  Sales and marketing expenses were approximately $7.4 million for the year ended December 31, 2005 compared to approximately $5.6 million for the year ended December 31, 2004, representing an increase of 32%. The increase was primarily attributable to approximately $1.1 million of higher external sales representative commissions associated with increased revenues, higher salary and travel related expenses due to staff additions of approximately $828,000, marketing related expenses of approximately $291,000 and higher enterprise resource planning, or ERP, related expenses of approximately $121,000, offset by approximately $488,000 of lower share-based compensation expense.

General and Administrative.  General and administrative expenses were approximately $3.1 million for the year ended December 31, 2005 compared to approximately $1.7 million for the year ended December 31, 2004, representing an increase of 82%. The increase was due to higher salary related expenses associated with headcount additions of approximately $788,000, increased facilities related expenses of approximately $326,000, increased legal and accounting costs of approximately $251,000 and ERP system implementation related consulting expenses of approximately $149,000, partially offset by approximately $176,000 of lower share-based compensation expense.

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Other Income, net.   Other income, net was approximately $326,000 for the year ended December 31, 2005 compared to approximately $123,000 for the year ended December 31, 2004, representing an increase of 165%. The increase was primarily attributable to gains from foreign currency exchange fluctuations.

Provision for Taxes on Income.  Provision for taxes on income was approximately $462,000 for the year ended December 31, 2005 compared to approximately $306,000 for the year ended December 31, 2004, representing an increase of 51%. The increase was related to higher income attributable to Mellanox Technologies, Inc.

Comparison of the Year Ended December 31, 2004 to the Year Ended December 31, 2003

Revenues.  Revenues were approximately $20.3 million for the year ended December 31, 2004 compared to approximately $10.2 million for the year ended December 31, 2003, representing an increase of 99%. This increase in revenues resulted primarily from an increase in unit sales of approximately 130%, offset by a decrease in average sales prices of 13%.

Gross Profit and Margin.  Gross profit was approximately $11.5 million for the year ended December 31, 2004 compared to approximately $5.6 million for the year ended December 31, 2003, representing an increase of 105%. As a percentage of revenues, gross profit increased to 57% in 2004 from 55% in 2003. This increase in gross margin was due primarily to a reduction in production costs coupled with a decline in the percentage of revenues attributable to switch systems, historically a lower margin business, which declined to 14% from 30% of total revenues during the year.

Research and Development.  Research and development expenses were approximately $12.9 million for the year ended December 31, 2004 compared to approximately $14.5 million for the year ended December 31, 2003, representing a decrease of 11%. The decrease was primarily due to a decline of approximately $902,000 in salary related expenses associated with lower headcount as part of restructuring activities in May 2004, approximately $1.7 million of lower depreciation and amortization expenses on technology equipment and software and approximately $459,000 of lower software maintenance fees. This was partially offset by an increase of approximately $494,000 in tape out costs, $329,000 of share-based compensation expense and approximately $664,000 of expensed third-party license rights.

Sales and Marketing.  Sales and marketing expenses were approximately $5.6 million for the year ended December 31, 2004 compared to approximately $5.3 million for the year ended December 31, 2003, representing an increase of 6%. The increase was primarily attributable to an increase in outside sales representative commissions of approximately $216,000 associated with higher revenues and an increase in salary and travel related expenses of approximately $367,000 associated with staffing additions, offset by approximately $209,000 of lower marketing related expenses.

General and Administrative.  General and administrative expenses were approximately $1.7 million for the years ended December 31, 2004, and December 31, 2003. Lower salary related and travel expenses of approximately $280,000 were offset by approximately $158,000 of share-based compensation expense and approximately $128,000 of recruiting fees.

Other Income, net.  Other income, net was approximately $123,000 for the year ended December 31, 2004 compared to approximately $308,000 for the year ended December 31, 2003, representing a decrease of 60%. The decrease was attributable primarily to a decline in interest income of approximately $333,000 associated with lower levels of marketable securities and net interest earning instruments, offset by approximately $150,000 of gains from foreign currency exchange fluctuations.

Provision for Taxes on Income.  Provision for taxes on income was approximately $306,000 for the year ended December 31, 2004 compared to approximately $12,000 for the year ended December 31, 2003, representing an increase of approximately $294,000. The increase was associated with tax expenses on income from Mellanox Technologies, Inc.

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Liquidity and Capital Resources

Since our inception, we have financed our operations primarily through private placements of our convertible preferred shares totaling approximately $89.3 million. We incurred net losses from operations since inception until the second quarter of 2005 and had an accumulated deficit of approximately $76.0 million as of June 30, 2006. As of June 30, 2006, our principal source of liquidity consisted of cash and cash equivalents of approximately $13.0 million. In August 2005, we entered into an agreement with a financial institution to provide us with a line of credit of up to approximately $5.0 million for general working capital requirements. As of June 30, 2006, we have not drawn down on this line of credit.

Over the next 12 months, we expect cash flows from operating activities, along with net proceeds from this offering, and our existing cash and cash equivalents to be sufficient to fund our operations, taking into account expected increases in research and development expenses, including tape out costs, sales and marketing expenses, general and administrative expenses, primarily for increased headcount, and capital expenditures to support our infrastructure and growth. In addition, as of June 30, 2006, we are required to make total payments of approximately $1.4 million to a third-party licensor pursuant to a license agreement before December 31, 2006.

Operating Activities

Net cash generated by our operating activities amounted to approximately $1.2 million in the six months ended June 30, 2006. Net cash generated by operating activities was primarily attributable to net income of approximately $558,000 offset by a decrease in accounts payable of approximately $1.0 million.

Net cash used for operating activities amounted to approximately $12.3 million for the year ended December 31, 2003 and approximately $5.7 million for the year ended December 31, 2004 and generated net cash of approximately $770,000 for the year ended December 31, 2005.

Net cash used for operating activities in 2003 was approximately $12.3 million. Our net losses of approximately $15.6 million were offset by non-cash charges of approximately $3.3 million for depreciation and amortization and approximately $545,000 for share-based compensation expense. Cash used for operating activities in 2003 included an increase in inventories of approximately $1.1 million resulting from increased projected product demand and an increase in accounts receivable of $957,000 resulting from increased product sales partially offset by increases in accounts payable of approximately $1.7 million.

Net cash used for operating activities in 2004 was approximately $5.7 million. Our net losses of approximately $8.9 million were offset by non-cash charges of approximately $2.5 million for depreciation and amortization and approximately $1.0 million for share-based compensation expense. Cash used for operating activities in 2004 included increases in accounts receivable of approximately $2.9 million, partially offset by a decrease in prepaid expenses of approximately $1.3 million and an increase in accounts payable of approximately $1.4 million.

Net cash generated by operating activities in 2005 was approximately $770,000. Our net income of approximately $3.2 million was impacted by a non-cash charge of approximately $1.7 million for depreciation and amortization. Cash generated by operating activities in 2005 included increases in accounts receivable resulting from increased product sales and inventories resulting from increased projected product demand of approximately $3.2 million and $2.3 million, respectively, and an increase in accrued liabilities and other payables of approximately $1.0 million.

In the years ended December 31, 2003, 2004 and 2005, we received from the OCS an aggregate of $1.4 million, $1.3 million and $43,000, respectively, of approved grants in support of some of our research and development programs.

Investing Activities

Net cash used in investing activities was approximately $607,000 in the six months ended June 30, 2006. Cash used in investment activities was attributable to purchases of property and equipment and severance-related insurance policies.

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Net cash generated by investment activities amounted to approximately $21.0 million in the year ended December 31, 2003, approximately $3.9 million in the year ended December 31, 2004 and approximately $462,000 in the year ended December 31, 2005 and was primarily attributable to net sales and maturities of marketable securities (net of purchases) offset by purchases of property and equipment and severance-related insurance policies.

Financing Activities

Our financing activities generated approximately $42,000 in the six months ended June 30, 2006. Cash generated by financing activities was attributable to proceeds from the exercise of share options, offset by principal payments on capital lease obligations.

Our financing activities used approximately $800,000 and $65,000 in the years ended December 31, 2003 and 2004, respectively, and were primarily attributable to principal payments on capital lease obligations partially offset by proceeds from share option exercises. Our financing activities generated approximately $174,000 in 2005 and were attributable to proceeds from the exercise of share options, partially offset by principal payments on capital lease obligations.

Contractual Obligations

The following table summarizes our contractual obligations at June 30, 2006 and the effect those obligations are expected to have on our liquidity and cash flow in future periods:

			Payments Due by Period
			Less Than				Beyond
Contractual Obligations:	Total		1 Year		1-3 Years		3 Years
Commitments under capital lease	$	854,261	$	307,833	$	546,428	$	—
Non-cancelable operating lease commitments		2,498,323		1,518,196		980,127		—
Purchase commitments		2,946,447		2,694,447		252,000		—
Total	$	6,299,031	$	4,520,476	$	1,778,555	$	—

For purposes of this table, purchase obligations for the purchase of goods or services 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. Our purchase orders are based on our current manufacturing needs and are fulfilled by our vendors within short time horizons. In addition, we have purchase orders that represent authorizations to purchase rather than binding agreements. 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.

Recent Accounting Pronouncements

In November 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 151, “Inventory Cost” (SFAS 151). SFAS 151 amends the guidance in Accounting Research Bulletin No. 43, Chapter 4, “Inventory Pricing” (ARB 43) to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs and wasted material (spoilage). Paragraph 5 of ARB 43, Chapter 4, previously stated that “under some circumstances, items such as idle facility expense, excessive spoilage, double freight, and rehandling costs may be so abnormal as to require treatment as current period charges.” SFAS 151 requires that those items be recognized as current-period charges regardless of whether they meet the criterion of “so abnormal.” In addition, this statement requires that allocation of fixed production overhead to the costs of conversion be based on the normal capacity of the production facilities. The provisions of SFAS 151 were effective for fiscal years beginning after June 15, 2005. The adoption of SFAS 151 did not have an impact on our consolidated results of operations or financial condition.

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In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections” (SFAS 154), which replaces Accounting Principles Board Opinions No. 20, “Accounting Changes” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements — An Amendment of APB Opinion No. 28.” SFAS 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes retrospective application, or the latest practicable date, as the required method for reporting a change in accounting principle and the reporting of a correction of an error. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005 and is required to be adopted by us in the first quarter of 2006. The adoption of SFAS 154 did not have an impact on our consolidated results of operations or financial condition.

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

In June 2006, the FASB ratified Emerging Issues Task Force, or EITF, issued Issue 06-3, “How Sales Taxes Collected From Customers and Remitted to Governmental Authorities Should be Presented in the Income Statement.” EITF 06-3 requires a company to disclose its accounting policy (i.e., gross or net presentation) regarding the presentation of taxes within the scope of EITF 06-3. If taxes are significant, a company should disclose the amount of such taxes for each period for which an income statement is presented. The guidance is effective for periods beginning after December 15, 2006. We are currently evaluating the effect that the adoption of EITF 06-3 will have on our financial position and results of operations.

Quantitative and Qualitative Disclosure About Market Risk

Market risk is the risk of loss related to changes in market prices of financial instruments that may adversely impact our consolidated financial position, results of operations or cash flows.

Interest rate fluctuation risk

We do not have any long-term borrowings. Our investments consist of cash and cash equivalents, short-term deposits and interest bearing investments in marketable securities with maturities of one year or less, consisting of commercial paper, government and non-government debt securities. The primary objective of our investment activities is to preserve principal while maximizing income without significantly increasing risk. 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 10% increase 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 to any degree by a sudden change in market interest rates.

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Foreign currency exchange risk

We derive all of our revenues in U.S. dollars. The U.S. dollar is our functional and reporting currency. However, a significant portion of our headcount related expenses, consisting principally of salaries and related personnel expenses, are denominated in 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 profit margins. To manage this risk, we have on occasion converted U.S. dollars into NIS within two to three weeks of monthly pay dates in Israel to lock in the related salary expense given the different currencies. We do not currently engage in currency hedging activities but we may choose to do so in the future. These measures, however, may not adequately protect us from material adverse effects due to the impact of inflation in Israel.

Inflation related risk

We believe that the rate of inflation in Israel has not had a material impact on our business to date. However, 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.

Off-Balance Sheet Arrangements

As of June 30, 2006, we did not have any off-balance sheet arrangements.

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BUSINESS

Overview

We are a leading supplier of semiconductor-based, high-performance interconnect products that facilitate data transmission between servers and storage systems through communications infrastructure equipment. Our products are an integral part of a total solution focused on computing, storage and communication applications used in enterprise data centers, high-performance computing and embedded systems. We are one of the pioneers of InfiniBand, an industry standard architecture that provides specifications for high-performance interconnects. We are the leading merchant supplier of field-proven InfiniBand semiconductor products that deliver industry-leading performance and capabilities.

We are a fabless semiconductor company that provides high-performance interconnect solutions based on semiconductor integrated circuits, or ICs. We design, develop and market host channel adapter, or HCA, and switch ICs (both of which are silicon devices that provide InfiniBand connectivity). We also offer HCA cards that incorporate our ICs. These ICs are added to servers, storage, communications infrastructure equipment and embedded systems by either integrating them directly on circuit boards or inserting adapter cards into slots on the circuit board. Since we introduced our first product in 2001, we have shipped products containing more than 1.4 million InfiniBand ports, which we believe demonstrates an established customer and end-user base for our products. We have established significant expertise with high-performance interconnect solutions from successfully developing and implementing multiple generations of our products. Our expertise enables us to develop and deliver products that serve as building blocks for creating reliable and scalable interconnect solutions with leading performance at significantly lower cost than products based on alternative interconnect technologies.

As the leading merchant supplier of InfiniBand ICs, we play a significant role in enabling the providers of computing, storage and communications applications to deliver high-performance interconnect solutions. We have developed strong relationships with our customers, many of which are leaders in their respective markets. Our products are included in servers from the five largest vendors, IBM, Hewlett-Packard, Dell, Sun Microsystems and Fujitsu, which collectively shipped the majority of servers in 2005, according to the industry research firm IDC. We also supply leading storage and communications infrastructure equipment vendors such as Cisco Systems, LSI Logic, Network Appliance, SilverStorm Technologies and Voltaire. Additionally, our products are used by GE Fanuc, Mercury Computers, SeaChange International and other vendors of embedded systems.

In order to accelerate adoption of InfiniBand solutions and our products, we partner with leading vendors across related industries, including:

•  processor vendors such as Intel, AMD, IBM and Sun Microsystems;

•  operating system vendors such as Microsoft, Novell and Red Hat; and

•  software applications vendors such as Oracle, IBM and VMWare, an EMC company.

We are a Steering Committee member of the InfiniBand Trade Association, or IBTA, and the OpenFabrics Alliance, or OFA, both of which are industry trade organizations that maintain and promote InfiniBand technology.

Our business headquarters are in Santa Clara, California, and our engineering headquarters are in Yokneam, Israel. During the year ended December 31, 2005 and six months ended June 30, 2006, we generated approximately $42.1 million and $19.3 million in revenues, respectively, and approximately $3.2 million and $558,000 in net income, respectively.

Industry Background

High-Performance Interconnect Market Overview

Computing and storage systems such as servers, supercomputers and storage arrays handling large volumes of data require high-performance interconnect solutions which enable fast transfer of data and efficient sharing of resources. Interconnect solutions are based on ICs that handle data transfer and associated processing which are

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added to server, storage, communications infrastructure equipment and embedded systems by either integrating the ICs on circuit boards or by inserting adapter cards that contain these ICs into slots on the circuit board.

Interconnect solution requirements, such as high bandwidth, low latency (response time), reliability, scalability and price/performance, generally depend on the systems and the applications they support. High-performance interconnect solutions are used in the following markets:

•  Enterprise Data Center, or EDC.  EDCs are facilities that house servers, storage, communications infrastructure equipment and embedded systems that enable deployment of commercial applications such as customer relationship management, financial trading and risk management applications, enterprise resource planning and E-commerce and web service applications. EDCs typically provide multiple data processing and storage resources to one or many organizations and are capable of supporting several applications at the same time.

•  High-Performance Computing, or HPC.  HPC encompasses applications that utilize the computing power of advanced parallel processing over multiple servers, commonly called a supercomputer. The expanding list of HPC applications includes financial modeling, government research, computer automated engineering, geoscience and bioscience research and digital content creation. HPC systems typically focus data processing and storage resources on one application at a time.

•  Embedded.  Embedded applications encompass computing, storage and communication functions that use interconnect solutions contained in a chassis which has been optimized for a particular environment. Examples of embedded applications include storage and data acquisition equipment, military operations, industrial and medical equipment and telecommunications and data communications infrastructure equipment.

A number of semiconductor-based interconnect solutions have been developed to address different applications. These solutions include Ethernet, Fibre Channel, Myrinet and most recently InfiniBand, which was specifically created for high-performance computing, storage and embedded applications.

Trends Affecting High-Performance Interconnect

Demand for computing power and data storage capacity is rising at a high rate, fueled by the increasing reliance of enterprises on information technology, or IT, for everyday operations. Because enterprises rely on compute- and data-intensive applications that create greater amounts of information to be processed, stored and retrieved, they need high-performance computing and high-capacity storage systems that optimize price/performance, minimize total cost of ownership and simplify management. We believe that several IT trends impact the demand for interconnect solutions and the performance required from these solutions. These trends include:

•  Transition to clustered computing and storage using connections among multiple standard components.  Historically, enterprises addressed the requirements for high-end computing and storage using monolithic systems, which are based on proprietary components. These systems typically require significant upfront capital expenditures as well as high ongoing operating and maintenance expense. More recently, enterprises have deployed systems with multiple off-the-shelf standardized servers and storage systems linked by high-speed interconnects, also known as clusters. Clustering enables significant improvements in performance, reliability, scalability and cost.

•  Transition to multiple and multi-core processors in servers.  In order to increase processing capabilities, processor vendors have integrated multiple computing cores into a single processor device. In addition, server OEMs are incorporating several multi-core processors into a single server. While this significantly increases the computing capabilities of an individual server, the total performance of a cluster of these servers is impacted by the total input/output, or I/O, bandwidth. Inadequate cluster I/O bandwidth results in processor underutilization, thereby reducing the overall capability and performance of the cluster.

•  Enterprise data center infrastructure consolidation.  IT managers are increasingly faced with the need to optimize total cost of ownership associated with the EDCs they manage. They are focused on reducing the

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costs associated with running multiple networks, such as power consumption and cabling, increasing flexibility and scalability, and improving the utilization of existing resources in the EDC. This has led to a widespread trend of consolidating the EDC infrastructure to reduce costs and generate a higher return on IT investments. The need for better utilization of floor space has helped drive the adoption of compact form factor (size and shape) blade servers. Additionally, enterprises are turning to virtualization software, which allows multiple applications to run on a single server, thereby improving resource utilization and requiring increased I/O bandwidth in the EDC.

•  Increasing deployments of mission-critical, latency sensitive applications.  There is an increasing number of applications that require extremely fast response times in order to deliver an optimal result or user experience. Reducing latency, the absolute time it takes for information to be sent from one resource to another over a high-performance interconnect, is critical to enhancing application performance in clustered computing and storage environments. Some examples of applications that benefit from low-latency interconnect include financial trading, clustered databases and parallel processing solutions used in HPC.

Challenges Faced by High-Performance Interconnect

The trends described above indicate that high-performance interconnect solutions will play an increasingly important role in IT infrastructures and will drive strong growth in unit demand. However, performance requirements for interconnect solutions continue to evolve and lead to high demand for solutions that are capable of resolving the following challenges to facilitate broad adoption:

•  Performance limitations.  In clustered computing and storage environments, high bandwidth and low latency are key requirements to capture the full performance capabilities of a cluster. With the usage of multiple multi-core processors in server, storage and embedded systems, I/O bandwidth has not been able to keep pace with processor advances, creating performance bottlenecks. Fast data access has become a critical requirement to accommodate microprocessors’ increased compute power. In addition, interconnect latency has become a limiting factor in a cluster’s overall performance.

•  Increasing complexity.  The increasing usage of clustered servers and storage systems as a critical IT tool has led to an increase in complexity of interconnect configurations. The number of configurations and connections have also proliferated in EDCs, making them increasingly complicated to manage and expensive to operate. Additionally, managing multiple software applications utilizing disparate interconnect infrastructures has become increasingly complex.

•  Interconnect inefficiency.  The deployment of clustered computing and storage has created additional interconnect implementation challenges. As additional computing and storage systems, or nodes, are added to a cluster, the interconnect must be able to scale in order to provide the expected increase in cluster performance. Additionally, recent government attention on data center energy efficiency is causing IT managers to look for ways to adopt more energy-efficient implementations.

•  Limited reliability and stability of connections.  Most interconnect solutions are not designed to provide reliable connections when utilized in a large clustered environment, which can cause data transmission interruption. As more applications in EDCs share the same interconnect, advanced traffic management and application partitioning become necessary to maintain stability and reduce system down time. Such capabilities are not offered by most interconnect solutions.

•  Poor price/performance economics.  In order to provide the required system bandwidth and efficiency, most high-performance interconnects are implemented with complex, multi-chip semiconductor solutions. These implementations have traditionally been extremely expensive.

In addition to InfiniBand, proprietary and other standards-based, high-performance interconnect solutions, including Myrinet, Ethernet and Fibre Channel, are currently used in EDC, HPC and embedded markets. However,

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performance and usage requirements continue to evolve and are now challenging the capabilities of these other interconnect solutions:

•  Myrinet is a proprietary interconnect solution that has been primarily used in supercomputer applications. The number of supercomputers that use Myrinet has been declining largely due to the availability of industry standards-based interconnects that offer superior price/performance.

•  Ethernet is an industry-standard interconnect solution that was initially designed to enable basic connectivity between a local area network of computers or over a wide area network, where latency and communication processing are non-critical. While Ethernet is capable of providing relatively high bandwidth, its overall efficiency and reliability are inferior to certain alternative interconnect solutions.

•  Fibre Channel is an industry standard interconnect solution limited to storage applications. This interconnect solution lacks a standard software interface, has limited bandwidth and remains more expensive relative to other standards-based interconnects.

We believe that InfiniBand-based solutions have significant advantages compared to the above interconnect solutions.

Overview of InfiniBand and OpenFabrics

InfiniBand is an industry standard, high-performance interconnect architecture that effectively addresses the challenges faced by the IT industry by enabling cost-effective, high-speed data communications. We believe that InfiniBand has significant advantages compared to alternative interconnect technologies and that products based on the InfiniBand standard are well positioned to become the leading high-performance interconnect solution. InfiniBand defines specifications for designing HCAs that fit into standard, off-the-shelf servers and storage systems, and switch solutions that connect all the systems together. The physical connection of multiple HCAs and switches is commonly known as an InfiniBand fabric.

The InfiniBand standard was developed under the auspices of IBTA which was founded in 1999 and is composed of leading IT vendors and hardware and software solution providers including Mellanox, Brocade, Cisco Systems, Fujitsu, Hewlett-Packard, Hitachi, IBM, Intel, LSI Logic, NEC, Network Appliance, QLogic Corporation, SilverStorm Technologies, Sun Microsystems and Voltaire. InfiniBand products have achieved increasing market adoption, particularly in high-performance computing applications, and are expanding into mainstream financial, retail and other commercial enterprise data centers.

OFA is an organization responsible for the development and distribution of open-source, industry-standard software solutions that are compatible with InfiniBand hardware solutions. Founded in June 2004 as the OpenIB Alliance and a partner organization to IBTA, OFA’s initial sole charter was to develop InfiniBand software solutions that are interoperable among multiple vendors. As a result of its success at developing standard InfiniBand software solutions, the organization expanded its charter in March 2006 to leverage its software development capabilities over other interconnect solutions including Ethernet, and changed its name from OpenIB to OpenFabrics. OFA’s members include leading enterprise IT vendors, hardware and software solution providers including Mellanox, AMD, Cisco Systems, Dell, IBM, Intel, Network Appliance and Sun Microsystems in addition to end users such as Sandia, Los Alamos and Lawrence Livermore National Laboratories.

InfiniBand has gained significant market share within the HPC market, including clustered computing deployments for government, academic, scientific and research oriented applications. According to IDC, InfiniBand’s share of the HPC cluster interconnect revenue has grown from 1.7% in 2003 to 17.2% in 2005.

In addition to growth within the HPC market, InfiniBand usage is expanding in the EDC market. This growth is facilitated by the availability of production released software solutions for mainstream financial, retail and other commercial applications.

We believe the primary driver of InfiniBand product shipments in the near future is the increasing usage of InfiniBand in server and storage systems. IDC predicts that of the 7.7 million servers that will ship to the entire server market in 2006, approximately 4% will integrate InfiniBand products. Further, IDC estimates that from 2006 to 2010, usage of InfiniBand in servers will increase at a 40% compound annual growth rate, resulting in over

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1.1 million InfiniBand servers in 2010. Because there currently is significant capacity for growth of InfiniBand products in servers regardless of the growth of the overall server market, we believe that fluctuations in volumes of the overall server market will not impact InfiniBand’s rate of adoption in the near future. In addition to servers, storage systems represent another significant opportunity for InfiniBand products. According to IDC, shipments of Fibre Channel adapters is expected to increase from 1.8 million in 2005 to 4.7 million in 2010, and we believe that this is representative of the market opportunity for InfiniBand in storage applications.

Advantages of InfiniBand

We believe that InfiniBand-based solutions have significant advantages compared to solutions based on alternative interconnect architectures and are well positioned to become the leading high-performance interconnect solution. InfiniBand addresses the significant challenges within IT infrastructures created by more demanding requirements of the high-performance interconnect market. More specifically, we believe that InfiniBand has the following advantages:

•  Superior performance.  In comparison to other interconnect technologies that were architected to have a heavy reliance on communication processing, InfiniBand was designed for implementation in an IC that relieves the central processing unit, or CPU, of communication processing functions. InfiniBand is able to provide superior bandwidth and latency relative to other existing interconnect technologies and has maintained this advantage with each successive generation of products. For example, our current InfiniBand HCAs provide bandwidth up to 20 gigabits per second, or Gb/s (a unit of data transfer rate), and our current switch ICs support bandwidth up to 60Gb/s, which is significantly higher than the 10Gb/s or less supported by competing technologies. InfiniBand specification supports the design of interconnect products with up to 120Gb/s bandwidth, which is the highest performance industry-standard interconnect specification. In addition, InfiniBand fully leverages the I/O capabilities of PCI Express, a high-speed bus interface standard.

•  Reduced complexity.  While other interconnects require use of individual cables to connect servers, storage and communications infrastructure equipment, InfiniBand allows for the consolidation of multiple I/Os on a single cable or backplane interconnect, which is critical for blade servers and embedded systems. InfiniBand also consolidates the transmission of clustering, communications, storage and management data types over a single connection. Competing interconnect technologies are not well suited to be unified fabrics because their fundamental architectures are not designed to support multiple traffic types. Additionally, InfiniBand was designed to enable distributed, clustered systems to be centrally managed and controlled for more efficient and simplified overall system management.

•  Highest interconnect efficiency.  InfiniBand was developed to provide efficient scalability of multiple systems. InfiniBand provides communication processing functions in hardware, relieving the CPU of this task, and enables the full resource utilization of each node added to the cluster. In addition, InfiniBand incorporates Remote Direct Memory Access, or RDMA, which is an optimized data transfer protocol that further enables the server processor to focus on application processing. This contributes to optimal application processing performance.

•  Reliable and stable connections.  InfiniBand is the only industry standard high-performance interconnect solution which provides reliable end-to-end data connections. In addition, InfiniBand facilitates the deployment of virtualization solutions, which allow multiple applications to run on the same interconnect with dedicated application partitions. As a result, multiple applications run concurrently over stable connections, thereby minimizing down time.

•  Superior price/performance economics.  In addition to providing superior performance and capabilities, standards-based InfiniBand solutions are generally available at a lower cost than other high-performance interconnects. By facilitating clustering and reducing complexity, InfiniBand offers further opportunity for cost reduction.

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Our Solution

We provide comprehensive solutions based on InfiniBand, including HCA and switch ICs, HCA cards and software. InfiniBand enables us to provide products that we believe offer superior performance and meet the needs of the most demanding applications, while also offering significant improvements in total cost of ownership compared to alternative interconnect technologies. For example, our current InfiniBand HCAs provide bandwidth up to 20Gb/s and our switch ICs provide bandwidth up to 60Gb/s, which is significantly higher than the 10Gb/s or less supported by competing technologies. As part of our comprehensive solution, we perform validation and interoperability testing from the physical interface to the applications software. Our expertise in performing validation and testing reduces time to market for our customers and improves the reliability of the fabric solution.

Data provided in the most recent list of World’s Fastest Supercomputers published by TOP500.org in June 2006 illustrates the benefits of our solution. TOP500.org is an independent organization that was founded in 1993 to provide a reliable basis for reporting trends in high-performance computing. The number of InfiniBand implementations using Mellanox products has grown from 18 as of June 2005 to 40 as of June 2006. Additionally, the current cluster implementations based on our products in the June 2006 TOP500 list of World’s Fastest Supercomputers compare favorably to clusters based on other high-performance interconnect technologies. Specifically, clusters that incorporate our products compare as follows:

•  Performance.  Performance of clusters is measured in GFLOPS, where one GFLOPS represents one billion mathematical calculations per second. Clusters that utilize our products average approximately 7,300 GFLOPS, while clusters based on Myrinet technology average 4,300 GFLOPS and clusters based on Gigabit Ethernet technology average 3,100 GFLOPS. According to the June 2006 TOP500 list of World’s Fastest Supercomputers, there were no clusters reported using 10 Gigabit Ethernet technology.

•  Efficiency.  Efficiency is measured by the actual performance achieved divided by the theoretical maximum performance. Clusters that utilize our products average 72% efficiency, compared to 66% and 53% for clusters that utilize Myrinet and Gigabit Ethernet, respectively.

•  Scalability.  Clusters that utilize our products average approximately 1,700 CPUs per cluster, compared to approximately 1,200 and 1,000 average CPUs per cluster for clusters that utilize Myrinet and Gigabit Ethernet, respectively.

Our Strengths

We apply our strengths to enhance our position as a leading supplier of semiconductor-based, high-performance interconnect products. We consider our key strengths to include the following:

•  We have expertise in developing high-performance interconnect solutions.  Mellanox was founded by a team with an extensive background in designing and marketing semiconductor solutions. Since our founding, we have been focused on high-performance interconnect and have successfully launched several generations of InfiniBand products. We believe we have developed strong competencies in integrating mixed-signal design, including industry-leading data transmission technology such as Serializer/Deserializer, or SerDes, and developing complex ICs. We also consider our software development capability as a key strength, and we believe that our software allows us to offer complete solutions. We have developed a significant portfolio of intellectual property, or IP, and have 15 approved patents. We believe our experience, competencies and IP will enable us to remain a leading supplier of high-performance interconnect solutions.

•  We are the leading merchant supplier of InfiniBand ICs with a multi-year competitive advantage.  We have developed in-depth knowledge of the InfiniBand standard through active participation in its development. We were first to market with InfiniBand products in 2001 and InfiniBand products that support the standard PCI Express interface in 2004. We have sustained our leadership position through the introduction of several generations of products. Because of our market leadership, vendors have developed and continue to optimize their software products based on our semiconductor solutions. We believe that this places us in an advantageous position to benefit from continuing market adoption of InfiniBand interconnect products.

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•  We have a comprehensive set of technical capabilities to deliver innovative and reliable products.  In addition to designing our ICs, we design standard HCA card products and custom HCA card and switch products, providing us a deep understanding of the associated circuitry and component characteristics. We believe this knowledge enables us to develop solutions that are innovative and can be efficiently implemented in target applications. We have devoted significant resources to develop our in-house test development capabilities, which enables us to rapidly finalize our mass production test programs, thus reducing time to market. We have synchronized our test platform with our outsourced testing provider and are able to conduct quality control tests with minimal disruption. We believe that because our capabilities extend from product definition, through IC design, and ultimately management of our high-volume manufacturing partners, we have better control over our production cycle and are able to improve the quality, availability and reliability of our products.

•  We have extensive relationships with our key OEM customers and many end users.  Since our inception we have worked closely with major OEMs, including leading server, storage, communications infrastructure equipment and embedded systems vendors, to develop products that accelerate market adoption of InfiniBand. During this process we have obtained valuable insight into the challenges and objectives of our customers, and gained visibility into their product development plans. We also have established end-user relationships with influential IT executives which allow us access to firsthand information about evolving EDC, HPC and embedded market trends. We believe that our OEM customer and end-user relationships allow us to stay at the forefront of developments and improve our ability to provide compelling solutions to address their needs.

Our Strategy

Our goal is to be the leading supplier of semiconductor-based, high-performance interconnect products for computing, storage and communications applications. To accomplish this goal, we intend to:

•  Continue to develop leading, high-performance interconnect products.  We will continue to expand our technical expertise and customer relationships to develop leading interconnect products. We are focused on extending our leadership position in high-performance interconnect technology and pursuing a product development plan that addresses emerging customer and end-user demands and industry standards.

•  Facilitate and increase the continued adoption of InfiniBand.  We will facilitate and increase the continued adoption of InfiniBand in the high-performance interconnect marketplace by expanding our partnerships with key vendors that drive high-performance interconnect adoption, such as suppliers of processors, operating systems and other associated software. In conjunction with our OEM customers, we will continue to promote the benefits of InfiniBand directly to end users to increase demand for InfiniBand-based solutions.

•  Expand our presence with existing server OEM customers.  We believe the leading server vendors are influential drivers of high-performance interconnect technologies to end users. We plan to continue working with and building our relationships with server OEMs to increase our presence in their current and future product platforms.

•  Broaden our customer base with storage, communications infrastructure and embedded systems OEMs.  We believe there is a significant opportunity to expand our global customer base with storage, communications infrastructure and embedded systems OEMs. In storage solutions specifically, we believe InfiniBand is well suited to replace existing technologies such as Ethernet and Fibre Channel. We believe that InfiniBand is the superior interconnect fabric for unifying disparate storage interconnects, including back-end, clustering and front-end connections, primarily due to its ability to be a unified fabric and superior price/performance economics.

•  Leverage our fabless business model to deliver strong financial performance.  We intend to continue operating as a fabless semiconductor company and consider outsourced manufacturing of our ICs and adapter cards to be a key element of our strategy. Our fabless business model offers flexibility to meet market

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demand and allows us to focus on delivering innovative solutions to our customers. We plan to continue to leverage the flexibility and efficiency offered by our business model to deliver strong financial results.

Our Products

We provide complete solutions based on the InfiniBand standard, including HCA and switch ICs, HCA cards and software. Our main product families include:

•  InfiniHost^tm family of HCA ICs and standard cards.  We provide HCAs to server, storage, communications infrastructure and embedded systems OEMs as ICs or standard card form factors with PCI-X or PCI Express interfaces. HCAs are incorporated into OEM server and storage systems to provide InfiniBand connectivity. We are currently in production with our third generation of HCA products. Our HCAs interoperate with standard programming interfaces and are compatible with previous generations, providing broad industry support. We also support server operating systems including Linux, Windows, AIX, HPUX, OSX, Solaris and VxWorks.

•  InfiniScale^tm family of switch ICs.  Our InfiniScale switch ICs are used by server, storage, communications infrastructure and embedded systems OEMs to create switching equipment that are at the core of InfiniBand fabrics. To deploy an InfiniBand fabric, any number of server or storage systems that contain an HCA can be connected to an InfiniBand-based communications infrastructure system such as an InfiniBand switch. We are currently in production with our third generation of switch ICs.

The figure below illustrates the components of servers and storage equipment clustered with an InfiniBand fabric and how our products are incorporated into the total solution.

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Our products generally vary by the number and performance of InfiniBand ports supported. The tables below summarize the available HCA and switch ICs that Mellanox provides.

				Uni-directional InfiniBand
HCA ICs and Cards	Interface	# InfiniBand Ports		Bandwidth per Port		Total Bandwidth(3)
InfiniBridge(1)	PCI(2)		8		2.5Gb/s		40Gb/s
			2		10Gb/s		40Gb/s
InfiniHost	PCI-X(2)		2		10Gb/s		40Gb/s
InfiniHost III Lx	PCI Express		1		20Gb/s		40Gb/s
InfiniHost III Ex	PCI Express		2		20Gb/s		80Gb/s

			Uni-directional InfiniBand
Switch ICs	# InfiniBand Ports		Bandwidth per Port		Total Bandwidth(3)
InfiniBridge(1)		8		2.5Gb/s		40Gb/s
		2		10Gb/s		40Gb/s
InfiniScale		8		10Gb/s		160Gb/s
InfiniScale III		24		20Gb/s		960Gb/s
		8		60Gb/s		960Gb/s

(1)	InfiniBridgetm functions as both a HCA and switch and is our first generation device.
(2)	PCI and PCI-X are the predecessor interface standards to PCI Express.
(3)	Total bandwidth is the aggregate bandwidth of all input and output ports operating simultaneously.

We also offer custom products that incorporate our ICs to select server and storage OEMs that meet their special system requirements. Through these custom product engagements we gain insight into the OEMs’ technologies and product strategies.

We also provide our OEM customers software and tools that facilitate the use and management of our products. Developed in conjunction with the OFA, our Linux- and Windows-based software enables applications to utilize the InfiniBand fabric efficiently. We have expertise in optimizing the performance of software that spans the entire range of upper layer protocols down through the lower level drivers that interface to our products. We also provide basic software tools for managing, testing and verifying the operation of InfiniBand fabrics.

Technology

We have technological core competencies in the design of high-performance interconnect ICs that enable us to provide a high level of integration, efficiency, flexibility and performance for our HCA and switch ICs. Our products integrate multiple complex components onto a single IC, including high-performance mixed-signal design, specialized communication processing functions and advanced interfaces.

High-performance mixed-signal design

One of the key technology differentiators of our ICs is our mixed-signal SerDes technology. SerDes I/O directly drives the InfiniBand signaling and transmission of data over copper connects and cables, or fiber optic interfaces for longer distance connections. We are the only company that has shipped field-proven ICs that operate with a 5Gb/s SerDes over a ten meter InfiniBand copper cable (up to 60Gb/s connections with 12 SerDes working in parallel on our switch IC). Additionally, we are able to integrate several of these high-performance SerDes onto a single, low-power IC, enabling us to provide the highest bandwidth, merchant switch ICs based on an industry-standard specification. We are currently developing a 10Gb/s SerDes I/O that is intended for use in several future generation devices and is designed to enable up to 120Gb/s bandwidth.

Specialized communication processing and switching functions

We also specialize in high-performance, low-latency design architectures that incorporate significant memory and logic areas requiring proficient synthesis and verification. Our HCA ICs are specifically designed to perform

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communication processing, effectively offloading this very intensive task from server and storage processors in a cost-effective manner. Our switch ICs are specifically designed to switch InfiniBand data transmissions from one port to another with high bandwidth and low latency, and we have developed a packet switching engine and non-blocking crossbar switch fabric to address this.

We have developed a custom embedded Reduced Instruction Set Computer, or RISC, processor called InfiniRISC that specializes in offloading network processing from the host server or storage system and adds flexibility, product differentiation and customization. We integrate a different number of these processors in a device depending on the application and feature targets of the particular product. Integration of these processors also shortens development cycles as additional features can be added by providing new programming packages after the ICs are manufactured, and even after they are deployed in the field.

Advanced interfaces

In addition to InfiniBand interfaces, we also provide other industry-standard, high-performance advanced interfaces such as PCI Express which also utilize our mixed-signal SerDes I/O technology. PCI Express is a high-speed chip-to-chip interface which provides a high-performance interface between the HCA and processor in server and storage systems. InfiniBand and PCI Express are complementary technologies that facilitate optimal bandwidth for data transmissions along the entire connection starting from a processor of one system in the cluster to another processor in a different system. We were among the first to market with an IC solution that integrates the PCI Express interface in 2004, and we believe this demonstrates an example of the technical proficiency of our development team.

Not only has PCI Express increased the performance of our products, but it has lowered cost, reduced power consumption, minimized board area requirements and increased the overall reliability of card and system products using our HCA ICs by enabling a technology we call MemFree. Typically, memory is designed onto high-performance adapter cards in addition to the controller in order to store fabric connection information that is required for cluster data transmission. With the introduction of the high bandwidth PCI Express interface, the server’s or storage system’s main memory can be used for this purpose instead, and we have designed MemFree HCA card solutions that are completely free of additional memory components. We believe that we are the only company that provides high-performance interconnect products with MemFree or equivalent technology.

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The below diagrams depict our HCA and switch IC architecture.

Customers

EDC, HPC and embedded end-user markets for systems utilizing our products are mainly served by large server, storage and communications infrastructure OEMs. In addition, our customer base includes leading embedded systems OEMs that integrate computing, storage and communication functions that use interconnect solutions contained in a chassis which has been optimized for a particular environment.

Representative OEM customers in these areas include:

		Communications
Server	Storage	Infrastructure Equipment	Embedded Systems
Dell	Isilon Systems	Cisco Systems	GE Fanuc
Hewlett-Packard	LSI Logic	SilverStorm Technologies	Mercury Computer Systems
IBM	Network Appliance	Voltaire	SeaChange International
Sun Microsystems

We sold products to more than 100 customers worldwide in the year ended December 31, 2005, many of whom are at the evaluation stage of their product development. We currently anticipate that several of these evaluations will result in increased orders for our products as they move into the production stage.

For the year ended December 31, 2005, Cisco Systems (including its acquisition of Topspin Communications) accounted for approximately 44%, Voltaire accounted for approximately 12%, SilverStorm Technologies accounted for approximately 9% and Network Appliance accounted for approximately 7% of our net revenues. In the six months ended June 30, 2006, Voltaire accounted for approximately 15%, SilverStorm Technologies

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accounted for approximately 11%, Network Appliance accounted for approximately 11% and Cisco Systems accounted for approximately 10% of our net revenues.

Sales and Marketing

We sell our products worldwide through multiple channels, including our direct sales force and our network of domestic and international sales representatives. We have strategically located our direct sales personnel in the United States, Europe, China and Taiwan. Our sales directors focus their efforts on leading OEMs and target key decision makers. We are also in frequent communication with our customers’ and partners’ sales organizations to jointly promote our products and partner solutions into end-user markets. We have dedicated specific resources to promote the benefits of our products to end users, which we believe creates additional demand for our customers’ products that incorporate our products.

Our sales support organization is responsible for supporting our sales channels and managing the logistics from order entry to delivery of products to our customers. In addition, our sales support organization is responsible for customer and revenue forecasts, customer agreements and program management for our large, multi-national customers. Customers within the United States are supported by our sales staff in California and customers outside of the United States are supported by our sales staff in Israel.

To accelerate design and qualification of our products into our OEM customers’ systems, and ultimately the deployment of our technology by our customers to end users, we have a field applications engineering, or FAE, team and an internal support engineering team that provide direct technical support. In certain situations, our OEM customers will also utilize our expertise to support their end-user customers jointly. Our technical support personnel have expertise in hardware and software, and have access to our development team to ensure proper service and support for our OEM customers. Our FAE team provides OEM customers with design and review capabilities of their systems in addition to technical training on the technology we have implemented in our products.

Our marketing team is responsible for product strategy and management, future product plans and positioning, pricing, product introductions and transitions, competitive analysis, marketing communications and raising the overall visibility of our company. The marketing team works closely with both the sales and research and development organizations to properly align development programs and product launches with market demands.

Our marketing team leads our efforts to promote InfiniBand technology and our products to the entire industry by:

•  assuming leadership roles within IBTA, OFA and other industry trade organizations;

•  participating in trade shows, press and analyst briefings, conference presentations and seminars for end-user education; and

•  building and maintaining active partnerships with industry leaders whose products are important in driving InfiniBand adoption, including vendors of processors, operating systems and software applications.

Research and Development

Our research and development team is composed of experienced semiconductor designers, software developers and system designers. Our semiconductor design team has extensive experience in all phases of complex, high-volume design, including product definition and architecture specification, hardware code development and mixed-signal design and verification. Our software team has extensive experience in development, verification, interoperability testing and performance optimization of software for use in computing and storage applications. Their efforts are focused on standard, open-source software stacks, drivers, management software and tools that work together with our IC and card products. Our systems design team has extensive experience is all phases of high-volume adapter card and custom switch designs including product definition and architectural specification, product design and design verification.

We design our products with careful attention to quality, reliability, cost and performance requirements. We utilize a methodology called Customer Owned Tooling, or COT, where we control and manage a significant portion of timing and layout design and verification in-house, before sending the semiconductor design to our third-party

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manufacturer. Although COT requires a significant up-front investment in tools and personnel, it provides us with greater control over the quality and reliability of our IC products as opposed to relying on third-party verification services.

We choose first tier technology vendors for our state-of-the-art design tools and continue to maintain long-term relationships with our vendors to ensure timely support and updates. We also select a mainstream silicon manufacturing process only after it has proven its production worthiness for at least one year. We verify that actual silicon characterization and performance measurements strongly correlate to models that were used to simulate the device while in design, and that our products meet frequency, power and thermal targets with good margins. Furthermore, we insert Design-for-Test circuitry into our IC products which increases product quality, provides expanded debugging capabilities and ultimately enhances system-level testing and characterization capabilities once the device is integrated into our customers’ products. In addition, we use an internally developed tool that examines IC designs before sending them for manufacturing that is proven to increase the yield (and consequently reduce device cost) by increasing the performance margin on critical design areas.

Frequent interaction between our silicon, software and systems design teams gives us a comprehensive view of the requirements necessary to deliver quality, high-performance products to our OEM customers. For the years ended December 31, 2004 and 2005, our research and development expenses were approximately $12.9 million and $13.1 million, respectively. For the six months ended June 30, 2006, our research and development expenses were approximately $7.2 million.

Manufacturing

We depend on third-party vendors to manufacture, package and production test our products as we do not own or operate a semiconductor fabrication, packaging or production testing facility. By outsourcing manufacturing, we are able to avoid the high cost associated with owning and operating our own facilities. This allows us to focus our efforts on the design and marketing of our products.

Manufacturing and Testing.  We use TSMC to manufacture and ASE to assemble, package and production test our IC products. We use Flextronics to manufacture our standard HCA card products and custom HCA cards and switch systems. We maintain close relationships with our suppliers, which improves the efficiency of our supply chain. We focus on mainstream processes, materials, packaging and testing platforms, and have a continuous technology assessment program in place to choose the appropriate technologies to use for future products. We provide all of our suppliers a 12-month rolling forecast, and receive their confirmation that they are able to accommodate our needs on a monthly basis. We have access to on-line production reports that provide up-to-date status information of our products as they flow through the manufacturing process. On a quarterly basis, we review lead-time, yield enhancements and pricing with all of our suppliers to obtain the optimal cost for our products.

Quality Assurance.  We maintain an ongoing review of product manufacturing and testing processes. Our IC products are subjected to extensive testing to assess whether their performance exceeds the design specifications. We own an in-house Teradyne Tiger IC tester which provides us with immediate test data and generation of characterization reports that we make available to our customers. Our HCA cards and custom switch system products are subject to similar levels of testing and characterization, and are additionally tested for regulatory agency certifications such as Safety and EMC (radiation test) which are made available to our customers. We only use components on these products that are qualified to be on our approved vendor list.

Requirements Associated with OCS.  Israeli law requires that we manufacture our products developed with government grants in Israel unless we obtain approval otherwise from the OCS. This approval, if provided, is generally conditioned on an increase in the total amount to be repaid to the OCS, up to 300% of the amount of funds granted. The specific increase would depend on the extent of the manufacturing to be conducted outside of Israel. The restriction on manufacturing outside of Israel does not apply to the extent that we disclosed our plans to manufacture outside of Israel when we filed the application for funding (and provided the application was approved based on the information disclosed in the application). We have indicated our intent to manufacture outside of Israel on some of our grant applications. Under applicable Israeli law, Israeli government consent is required to transfer to Israeli third parties technologies developed under projects funded by the government. Under a recent amendment to the relevant legislation, transfer of OCS-funded technologies outside of Israel is permitted with the approval of the

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OCS and in accordance with the restrictions and payment obligations set forth under Israeli law. Israeli law further specifies that both the transfer of know-how as well as the transfer of IP rights in such know-how are subject to the same restrictions. These restrictions do not apply to exports from Israel or the sale of products developed with these technologies.

Employees

As of June 30, 2006, we had 148 full-time employees and 24 part time employees located in the United States and Israel, including 94 in research and development, 25 in sales and marketing, 15 in general and administrative, 6 in operations and 8 in other administrative functions. Of our 148 full-time employees, 118 are located in Israel.

Certain provisions of the collective bargaining agreements between the Histadrut (General Federation of Labor in Israel) and the Coordination Bureau of Economic Organizations (including the Industrialists’ Associations) are applicable to our employees in Israel by order of the Israeli Ministry of Labor. These provisions primarily concern the length of the workday, minimum daily wages for professional workers, pension fund benefits for all employees, insurance for work-related accidents, procedures for dismissing employees, determination of severance pay and other conditions of employment. We generally provide our employees with benefits and working conditions beyond the required minimums. Further, in addition to salary and other benefits, certain of our sales personnel are paid commissions based on our performance in certain territories worldwide.

Israeli law generally requires severance pay equal to one month’s salary for each year of employment upon the retirement, death or termination without cause (as defined in the Israel Severance Pay Law) of an employee. To satisfy this requirement, we make contributions on behalf of most of our employees to a fund known as Managers’ Insurance. This fund provides a combination of pension plan, insurance and severance pay benefits to the employee, giving the employee or his or her estate payments upon retirement or death and securing the severance pay, if legally entitled, upon termination of employment. Each full-time employee is entitled to participate in the plan, and each employee who participates contributes an amount equal to 5% of his or her salary to the pension plan and we contribute between 13.33% and 15.83% of his or her salary (consisting of 5% to the pension plan, 8.33% for severance payments and up to 2.5% for insurance).

Furthermore, Israeli employees and employers are required to pay predetermined sums to the National Insurance Institute, which is similar to the U.S. Social Security Administration. Such amounts also include payments by the employee for national health insurance. The total payments to the National Insurance Institute are equal to approximately 14.5% of the wages (up to a specified amount), of which the employee contributes approximately 66% and the employer contributes approximately 34%.

We have never experienced any employment-related work stoppages and believe our relationship with our employees is good.

Intellectual Property

One of the key values and drivers for future growth of our high-performance interconnect IC products is the IP we develop and use to improve them. We believe that the main value proposition of our high-performance interconnect products and success of our future growth will depend on our ability to protect our IP. We rely on a combination of patent, copyright, trademark, mask work, trade secret and other IP laws, both in the United States and internationally, as well as confidentiality, non-disclosure and inventions assignment agreements with our employees, customers, partners, suppliers and consultants to protect and otherwise seek to control access to, and distribution of, our proprietary information and processes. In addition, we have developed technical knowledge, which, although not patented, we consider to be significant in enabling us to compete. The proprietary nature of such knowledge, however, may be difficult to protect and we may be exposed to competitors who independently develop the same or similar technology or gain access to our knowledge.

The semiconductor industry is characterized by frequent claims of infringement and litigation regarding patent and other IP rights. We, like other companies in the semiconductor industry, believe it is important to aggressively protect and pursue our IP rights. Accordingly, to protect our rights, we may file suit against parties whom we believe are infringing or misappropriating our IP rights. These measures may not be adequate to protect our technology

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from third party infringement or misappropriation, and may be costly and may divert management’s attention away from day-to-day operations. We may not prevail in these lawsuits. If any party infringes or misappropriates our IP rights, this infringement or misappropriation could materially adversely affect our business and competitive position.

As of July 31, 2006, we had 10 issued patents and 27 patent applications pending in the U.S., 5 issued patents in Taiwan and 6 applications pending in Israel, each of which covers aspects of the technology in our products. The term of any issued patent in the United States is 20 years from its filing date and if our applications are pending for a long time period, we may have a correspondingly shorter term for any patent that may issue. Our present and future patents may provide only limited protection for our technology and may not be sufficient to provide competitive advantages to us. Furthermore, we cannot assure you that any patents will be issued to us as a result of our patent applications.

In addition to our own IP, we also rely on third-party technologies for the development of our interconnect IC products. Pursuant to a license agreement dated September 10, 2001, Vitesse Semiconductor Corporation, or Vitesse, a provider of high-speed physical layer semiconductor products for the communications market, has granted us a non-exclusive, worldwide, perpetual right and license to use and incorporate into our Infiniband products Vitesse’s 2.5Gb/s SerDes macro cell implemented in TSMC’s 0.18 micron Complementary Metal-Oxide Semiconductor, or CMOS, processes. We have agreed only to use Vitesse’s technology licensed under the agreement for integrated SerDes applications. In exchange for this license, we have agreed to pay a royalty to Vitesse based on the total number of devices sold by us that use Vitesse’s technology.

Pursuant to a separate license agreement dated December 16, 2002, Vitesse has also granted us a non-exclusive, worldwide, perpetual right and license to use and incorporate into our Infiniband products Vitesse’s 3.1Gb/s SerDes macro cell implemented in TSMC’s 0.13 micron CMOS processes. In exchange for this license, we have agreed to pay a royalty to Vitesse based on the total number of devices sold by us that use Vitesse’s technology, subject to certain caps and limitations. We have guaranteed a certain minimum payment pursuant to this agreement, which we have not yet made.

We have registered “Mellanox,” “InfiniBridge,” “InfiniHost,” “InfiniPCI,” “InfiniRISC” and “InfiniScale” as trademarks in the United States.

Competition

The markets in which we compete are highly competitive and are characterized by rapid technological change, evolving industry standards and new demands on features and performance of interconnect solutions. We compete primarily on the basis of:

•  price/performance;

•  time to market;

•  features and capabilities;

•  wide availability of complementary software solutions;

•  reliability;

•  power consumption;

•  customer support; and

•  product roadmap.

We believe that we compete favorably with respect to each of these criteria. Many of our current and potential competitors, however, have longer operating histories, significantly greater resources, greater economies of scale, stronger name recognition and a larger base of customers than we do. This may allow them to respond more quickly than we are able to respond to new or emerging technologies or changes in customer requirements. In addition, these competitors may have greater credibility with our existing and potential customers. They may be able to introduce new technologies, respond more quickly to changing customer requirements or devote greater resources to the

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development, marketing and sales of their products than we can. Furthermore, in the event of a manufacturing capacity shortage, these competitors may be able to manufacture products when we are unable to do so.

With respect to InfiniBand products, we compete with QLogic Corporation. In EDCs, products based on the InfiniBand standard primarily compete with two different industry-standard interconnect technologies, namely Ethernet and Fibre Channel. For Ethernet technology, the leading IC vendors include Marvell Technology Group and Broadcom Corporation. The leading IC vendors that provide Ethernet and Fibre Channel products to the market include Emulex Corporation and QLogic Corporation. In HPC, products based on the InfiniBand standard primarily compete with the industry-standard interconnect technologies used in EDC mentioned above, in addition to proprietary technologies including Myrinet, where ICs are developed only by Myricom. In embedded markets, we typically compete with interconnect technologies that are developed in-house by system OEM vendors and created for specific applications.

Facilities

We currently lease office space in Yokneam, Israel and Santa Clara, California pursuant to leases that expire in December 31, 2006 and March 31, 2009, respectively. We rent office space in Tel Aviv, Israel on a month-to-month basis. We believe that our space is adequate for our current needs and that suitable additional or substitute space will be available on acceptable terms to accommodate our foreseeable needs.

Legal Proceedings

From time to time, we may be involved in litigation relations to claims arising out of our operations. We are not currently involved in any material legal proceedings.

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MANAGEMENT

The following table provides information regarding our executive officers, significant employees and directors as of July 31, 2006:

Name	Age		Position(s)
Eyal Waldman		46	Chief Executive Officer, President, Chairman of the Board and Director
Roni Ashuri		46	Vice President of Engineering
Shai Cohen		43	Vice President of Operations and Engineering
Michael Gray		50	Chief Financial Officer
Michael Kagan		49	Vice President of Architecture
Thad Omura		32	Vice President of Product Marketing
David Sheffler		51	Vice President of Worldwide Sales
H. Raymond Bingham(1)		60	Director
Rob S. Chandra(2)		40	Director
Irwin Federman(1)(2)		71	Director
S. Atiq Raza		57	Director
C. Thomas Weatherford(1)		60	Director

(1)	Member of the audit committee
(2)	Member of the compensation committee
(3)	Member of the nominating and governance committee

Executive Officers and Significant Employees

Eyal Waldman is a co-founder of Mellanox, and has served as our chief executive officer, president and chairman of our board of directors since March 1999. From March 1993 to February 1999, Mr. Waldman served as vice president of engineering and was a cofounder of Galileo Technology Ltd., or Galileo, a semiconductor company, which was acquired by Marvell Technology Group Ltd. in January 2001. From August 1989 to March 1993, Mr. Waldman held a number of design and architecture related positions at Intel Corporation, a manufacturer of computer, networking and communications products. Mr. Waldman holds a Bachelor of Science in Electrical Engineering and a Master of Science in Electrical Engineering from the Technion — Israel Institute of Technology.

Roni Ashuri is a co-founder of Mellanox and has served as our vice president of engineering since June 1999. From March 1998 to May 1999, Mr. Ashuri served as product line director of system controllers at Galileo. From May 1987 to February 1998, Mr. Ashuri worked at Intel Corporation, where he was a senior staff member in the Pentium processors department and a cache controller group staff member. Mr. Ashuri holds a Bachelor of Science in Electrical Engineering from the Technion — Israel Institute of Technology.

Shai Cohen is a co-founder of Mellanox and has served as our vice president of operations and engineering since June 1999. From September 1989 to May 1999, Mr. Cohen worked at Intel Corporation, where he was a senior staff member in the Pentium processors department and a circuit design manager at the cache controllers group. Mr. Cohen holds a Bachelor of Science in Electrical Engineering from the Technion — Israel Institute of Technology.

Michael Gray has served as our chief financial officer since December 2004. Prior to joining Mellanox, from March 1995 until July 2004, Mr. Gray served in various capacities at SanDisk Corporation, a data storage company, including director of finance from March 1995 to July 1999, vice president of finance from August 1999 to February 2002 and as senior vice president of finance and administration and chief finance officer from March 2002 to July 2004. From July 1990 to February 1995, Mr. Gray served as controller of Consilium, Inc., a systems software development company which was acquired by Applied Materials, Inc. in December 1998. From October 1981 to June 1990, Mr. Gray served in various capacities at ASK Computer Systems, Inc., an ERP solutions provider, including as treasury manager. Mr. Gray holds a Bachelor of Science in Finance from the University of Illinois and a

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Master of Business Administration from Santa Clara University, and is an alumnus of the Stanford/AEA Executive Institute Program.

Michael Kagan is a co-founder of Mellanox and has served as our vice president of architecture since May 1999. From August 1983 to April 1999, Mr. Kagan held a number of architecture and design positions at Intel Corporation. While at Intel Corporation, between March 1993 and June 1996, Mr. Kagan managed Pentium MMX design, and between July 1996 to April 1999, he managed the architecture team of the Basic PC product group. Mr. Kagan holds a Bachelor of Science in Electrical Engineering from the Technion — Israel Institute of Technology.

Thad Omura has served as our vice president of product marketing since October 2005, and served as director of product marketing from May 2004 to October 2005. Prior to joining Mellanox, from January 2003 to April 2004, Mr. Omura served as a market development manager in the semiconductor product sector (now Freescale Semiconductor, Inc.) of Motorola, Inc., a communications company. From August 1996 to December 2002, Mr. Omura held a number of marketing, field applications and sales positions at Galileo and Marvell Technology Group Ltd. following its acquisition of Galileo in January 2001. Mr. Omura holds a Bachelor of Science in Electrical Engineering/Computer Science from the University of California at Berkeley.

David Sheffler has served as our vice president of worldwide sales since 1999. From August 1991 until January 2000, Mr. Sheffler held various sales positions at NexGen, Inc., or NexGen, a fabless semiconductor company, and at Advanced Micro Devices, Inc., or AMD, an integrated circuit manufacturer, following its acquisition of NexGen in January 1996. During that time Mr. Sheffler served as vice president of sales and marketing for the Americas (AMD), vice president of channel sales and field marketing, director of channel marketing (AMD), vice president of worldwide sales (NexGen) and director of sales (NexGen). From 1990 to 1991, Mr. Sheffler served as division manager at Dell Inc., a computer company, and held a number of sales and management positions at Motorola, Inc. Mr. Sheffler holds a Bachelor of Arts in Business Education from the University of Northern Colorado.

Board of Directors

H. Raymond Bingham has been a member of our board of directors since November 2005. Mr. Bingham was appointed with a view to serving as an outside director in accordance with the Israel Companies Law, 1999, or the Companies Law. Mr. Bingham was executive chairman of the board of directors of Cadence Design Systems Inc., or Cadence, a supplier of electronic design automation software and services, from May 2004 to July 2005 and served as a director of Cadence from November 1997 to July 2005. Prior to being executive chairman, he served as president and chief executive officer of Cadence from April 1999 to May 2004, and as executive vice president and chief financial officer from April 1993 to April 1999. Before joining Cadence in 1993, Mr. Bingham served for eight years as executive vice president and chief financial officer for Red Lion Hotels Inc. Mr. Bingham also serves on the boards of directors of Oracle Corporation, a supplier of software for enterprise information management, KLA Tencor Corporation, a supplier of yield monitoring and process control systems for the semiconductor industry, and Freescale Semiconductor, Inc., a semiconductor manufacturer. Mr. Bingham received his Bachelor of Science degree in Economics from Weber State University and holds a Master of Business Administration from Harvard Business School.

Rob S. Chandra has been a member of our board of directors since November 2001. Mr. Chandra is a general partner of Bessemer Venture Partners, or Bessemer, a venture capital firm, which he joined in September 2000. Mr. Chandra serves on the boards of several privately held companies. Prior to joining Bessemer, Mr. Chandra was a general partner with Commonwealth Capital Ventures, a venture capital firm, from January 1996 to September 2000. From September 1993 to December 1995, Mr. Chandra was an engagement manager with McKinsey & Company, a management consulting firm. Previously, from September 1988 to September 1993, Mr. Chandra was a consultant at Accenture, a management consulting and technology services company. Mr. Chandra holds a Bachelor of Arts from the University of California at Berkeley and a Master of Business Administration from Harvard Business School.

Irwin Federman has served as a member of our board of directors since June 1999. Mr. Federman has been a general partner of U.S. Venture Partners, a venture capital firm, since April 1990. From 1988 to 1990, he was a managing director of Dillon Read & Co., an investment banking firm, and a general partner in its venture capital

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affiliate, Concord Partners. From 1978 to 1987, Mr. Federman was president and chief executive officer of Monolithic Memories, Inc., a semiconductor company which was acquired by AMD in 1987. Mr. Federman serves on the boards of directors of SanDisk Corporation, a data storage company, Check Point Software Technologies, Ltd., an Internet security software company, and a number of private companies. Mr. Federman was two-term chairman of the Semiconductor Industry Association, has served on the board of directors of the National Venture Capital Association and served two terms on the Dean’s Advisory Board of Santa Clara University. Mr. Federman holds a Bachelor of Science in Economics from Brooklyn College.

S. Atiq Raza has served on our board of directors from March 2000 to March 2003 and from December 2004 to present. Mr. Raza is the chairman and chief executive officer of Raza Microelectronics, Inc., a semiconductor company, which he founded in June 2002. Mr. Raza was the president and chief operating officer of AMD from 1996 to 1999, and a member of the board of directors of AMD from 1996 to 1999. Mr. Raza joined AMD following its acquisition of NexGen in January 1996. At NexGen, Mr. Raza served as chairman and chief executive officer from 1988 to 1996. Before joining NexGen, Mr. Raza held various engineering and management positions within VLSI Technology, Inc., a semiconductor company, including vice president of technology centers. Mr. Raza also serves on the boards of directors of several private companies. Mr. Raza holds a Bachelor’s degree from the University of London and a Master’s degree from Stanford University.

C. Thomas Weatherford has been a member of our board of directors since November 2005. Mr. Weatherford was appointed with a view toward serving as an outside director in accordance with the Companies Law. From August 1997 until his retirement in December 2002, Mr. Weatherford served as executive vice president and chief financial officer of Business Objects, a provider of business intelligence software. Mr. Weatherford also serves on the boards of directors of Synplicity, Inc., a provider of software for the design and verification of semiconductors, Advanced Analogic Technologies, Inc., a maker of analog and power semiconductors, SMART Modular Technologies, Inc., a manufacturer of memory products, Saba Software, Inc., a software and services provider, Tesco Corporation, a global provider of technology-based solutions to the upstream energy industry, and several privately held companies. Mr. Weatherford holds a Bachelor of Business Administration from the University of Houston.

Board Composition

In accordance with our amended and restated articles of association, immediately after this offering, our board of directors will be divided into three classes with staggered three-year terms. At each annual general meeting of shareholders, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following election. Our directors have been divided among the three classes as follows:

•  the Class I directors will be          ,          and          , and their terms will expire at the annual general meeting of shareholders to be held in 2007;

•  the Class II directors will be          ,          and          , and their terms will expire at the annual general meeting of shareholders to be held in 2008; and

•  the Class III directors will be          ,           and          , and their terms will expire at the annual general meeting of shareholders to be held in 2009.

Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors.

The division of our board of directors into three classes with staggered three-year terms may delay or prevent a change of our management or a change in control.

Under Israeli law, the chief executive officer of a public company cannot serve as the chairman of the board of the company unless approved by the holders of a majority of the shares of the company, including the affirmative vote of at least two-thirds of the shares held by persons who are not controlling shareholders of the company. With respect to the initial public offering of a company, the chief executive officer may serve as the chairman of the board for an interim period, not to exceed 90 days, until such shareholder approval is received. We intend to hold a meeting

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of our shareholders within 90 days of the completion of this offering in order to seek approval for Eyal Waldman, our chief executive officer, to continue to serve as the chairman of our board of directors.

Outside Directors

Qualifications of Outside Directors

Under the Companies Law, companies incorporated under the laws of the State of Israel with shares listed on an exchange, including The Nasdaq Global Market, must appoint at least two outside directors. Our directors, H. Raymond Bingham and           qualify as outside directors under the Companies Law. The appointment of our outside directors must be confirmed by a general meeting of our shareholders no later than three months following the completion of this offering. The Companies Law provides that a person may not be appointed as an outside director if the person, or the person’s relative, partner, employer or any entity under the person’s control, has or had during the two years preceding the date of appointment any affiliation with the company or any entity controlling, controlled by or under common control with the company. The term affiliation includes:

•  an employment relationship;

•  a business or professional relationship maintained on a regular basis;

•  control; and

•  service as an office holder, excluding service as a director in a private company prior to the first offering of its shares to the public if such director was appointed as a director of the private company in order to serve as an outside director following the public offering.

“Office holder” is defined as a director, general manager, chief business manager, deputy general manager, vice general manager, executive vice president, vice president, other manager directly subordinate to the general manager or any other person assuming the responsibilities of any of the foregoing positions, without regard to such person’s title. Each person listed under “— Executive Officers and Significant Employees” and “— Board of Directors” is an office holder.

No person can serve as an outside director if his or her position or other business interests create, or may create, a conflict of interest with his or her responsibilities as an outside director or may otherwise interfere with his or her ability to serve as an outside director. If all members of the board of directors are of the same gender at the time the outside directors are appointed by a general meeting of our shareholders no later than three months from the date of the closing of this offering, then at least one of the outside directors must be of the other gender. We will be required to comply with the gender requirement.

Our outside directors are required to possess professional qualifications as set out in regulations promulgated under the Companies Law. In addition, our board of directors is required to determine how many of our directors should be required to have financial and accounting expertise. In determining such number the board of directors must consider, among other things, the type and size of the company and the scope and complexity of its operations.

Our board of directors has determined that Mr. Bingham has the requisite financial and accounting expertise and that both of our external directors possess the requisite professional qualifications.

Until the lapse of two years from termination of office, we may not engage an outside director to serve as an office holder and cannot employ or receive services from that person, either directly or indirectly, including through a corporation controlled by that person.

Election of Outside Directors

Outside directors are elected by a majority vote at a shareholders’ meeting, provided that either:

•  at least one-third of the shares of non-controlling shareholders voted at the meeting are voted in favor of the election of the outside director (disregarding abstentions); or

•  the total number of shares of non-controlling shareholders voted against the election of the outside director does not exceed one percent of the aggregate voting rights in the company.

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The initial term of an outside director is three years, and he or she may be reelected to one additional term of three years. Thereafter, he or she may be reelected by our shareholders for additional periods of up to three years each, in each case provided that the audit committee and the board of directors confirm that, in light of the outside director’s expertise and special contribution to the work of the board of directors and its committees, the reelection for such additional period(s) is beneficial to the company. An outside director may be removed only by the same percentage of shareholders as is required for his or her election, or by a court, and then only if he or she ceases to meet the statutory requirements for his or her appointment or if he or she violates the duty of loyalty to the company. If an outside directorship becomes vacant, our board of directors is required under the Companies Law to call a shareholders’ meeting immediately to appoint a new outside director.

Each committee of our board of directors that has the right to exercise powers delegated by the board is required to include at least one outside director and our audit committee is required to include all of the outside directors. Our outside directors are entitled to compensation as provided in regulations adopted under the Companies Law and are otherwise prohibited from receiving any other compensation, directly or indirectly, from the company.

Board Committees

As of the closing of this offering, our board of directors will have the following committees: an audit committee, a compensation committee and a nominating and corporate governance committee. The composition and responsibilities of each committee are described below. Members serve on these committees until their resignation or until otherwise determined by our board.

Audit Committee

Our board of directors must appoint an audit committee comprised of at least three directors including all of the outside directors, but excluding the chairman of our board of directors, our general manager, our chief executive officer, any controlling shareholder, any relative of the foregoing persons and any director employed by the company or who provides services to the company on a regular basis.

Our audit committee oversees our corporate accounting and financial reporting process. Among other matters, our audit committee evaluates the independent auditors’ qualifications, independence and performance, determines the engagement of the independent auditors, reviews and approves the scope of the annual audit and the audit fee, discusses with management and the independent auditors the results of the annual audit and the review of our quarterly financial statements, approves the retention of the independent auditors to perform any proposed permissible non-audit services, monitors the rotation of partners of the independent auditors on the Mellanox engagement team as required by law, reviews our critical accounting policies and estimates, oversees our internal audit function, reviews, approves and monitors our code of ethics and “whistleblower” procedures for the treatment of reports by employees of concerns regarding questionable accounting or auditing matters and annually reviews the audit committee charter and the committee’s performance.

Our audit committee must approve specified actions and transactions with office holders and controlling shareholders. A “controlling shareholder” is a shareholder who has the power to direct the company’s operations, other than by virtue of being a director or other office holder of the company, and includes a shareholder who holds 50% or more of our voting rights or, if we have no shareholder that owns more than 50% of the voting rights, then a “controlling shareholder” also includes any shareholder who holds 25% or more of the voting rights. Our audit committee may not approve any action or a transaction with a controlling shareholder or with an office holder unless, at the time of approval, our two outside directors are serving as members of the audit committee and at least one of them is present at the meeting at which the approval is granted.

Additionally, under the Companies Law, the role of our audit committee is to identify any irregularities in the business management of the company in consultation with our internal auditor and independent accountants and to suggest an appropriate course of action. The audit committee charter allows the committee to rely on interviews and consultations with our management, our internal auditor and our independent public accountant, and does not obligate the committee to conduct any independent investigation or verification.

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The current members of our audit committee are C. Thomas Weatherford, H. Raymond Bingham and Irwin Federman. Mr. Weatherford serves as the audit committee’s chairperson. All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and The Nasdaq Stock Market. Our board has determined that Mr. Weatherford is an audit committee financial expert as defined by the SEC rules and has the accounting and financial expertise to qualify as a “financial expert” as defined by the Companies Law, and has the requisite financial sophistication as defined by The Nasdaq Stock Market rules and regulations. Our board has also determined that H. Raymond Bingham has the requisite professional qualifications that are promulgated by regulations to required under the Companies Law, and that each of the members of our audit committee is independent within the meaning of the independent director standards of The Nasdaq Stock Market and the SEC. Upon completion of this offering,          will be appointed as a member of the audit committee.

Compensation Committee

Our compensation committee reviews and recommends policy relating to compensation and benefits of our officers and employees. The compensation committee reviews corporate goals and objectives set by our board relevant to compensation of the chief executive officer and other executive officers, evaluates the performance of these officers in light of those goals and objectives and sets the compensation of these officers based on such evaluations. The compensation committee also manages the issuance of share options and other awards under our share option plans. The compensation committee will review and evaluate, at least annually, the goals and objectives of our incentive compensation plans and monitors the results against the approved goals and objectives. The current members of our compensation committee are          ,          and          .          serves as the compensation committee’s chairperson. All members of our compensation committee are independent under the applicable rules and regulations of the SEC, The Nasdaq Stock Market and the U.S. Internal Revenue Service.

Nominating and Corporate Governance Committee

Our nominating and corporate governance committee is responsible for making recommendations to the board of directors regarding candidates for directorships and the composition and organization of our board. In addition, the nominating and corporate governance committee is responsible for overseeing our corporate governance guidelines and reporting and making recommendations to the board concerning governance matters. The current members of our nominating and corporate governance committee are          ,           and          .           serves as the nominating and corporate governance committee’s chairperson. We believe that the composition of our nominating and corporate governance committee meets the criteria for independence under, and the functioning of our nominating and corporate governance committee complies with, the applicable rules and regulations of the SEC and The Nasdaq Stock Market.

There are no family relationships among any of our directors or executive officers.

Compensation Committee Interlocks and Insider Participation

None of the members of the compensation committee has at any time during the prior three years been an officer or employee of ours. None of our executive officers currently serves, or in the prior three years has served, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our board or compensation committee.

Internal Auditor

Our board of directors must appoint an internal auditor nominated by the audit committee. The role of the internal auditor under the Companies Law is to examine whether a company’s actions comply with applicable law and orderly business procedure. Our internal auditor may be one of our employees, but cannot be an interested party, office holder, affiliate or a relative of an interested party or an office holder, and cannot be our independent accountant or its representative. The Companies Law defines an “interested party” as the holder of 5% or more of a company’s shares, any person or entity who has the right to designate one or more of a company’s directors, the chief executive officer or any person who serves as a director or chief executive officer. We intend to appoint an internal auditor following the closing of this offering.

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Approval of Specified Related Party Transactions under Israeli Law

Fiduciary Duties of Office Holders

The Companies Law imposes a duty of care and a duty of loyalty on all office holders of a company, including directors and executive officers. The duty of care requires our office holders to act with the degree of care with which a reasonable office holder in the same position would have acted under the same circumstances, including a duty to use reasonable means to obtain:

•  information on the appropriateness of a given action brought for his or her approval or performed by virtue of his or her position; and

•  all other important information pertaining to these actions.

The duty of loyalty requires our office holders to, among other things:

•  refrain from any conflict of interest between the performance of his or her duties to us and his or her personal affairs;

•  refrain from any activity that is competitive with us;

•  refrain from exploiting any of our business opportunities to receive a personal gain for himself or herself or others; and

•  disclose to us any information or documents relating to our affairs which the office holder received as a result of his or her position as an office holder.

Disclosure of Personal Interests of an Office Holder

The Companies Law requires that an office holder promptly disclose any personal interest that he or she may have and all related material information known to him or her relating to any of our existing or proposed transactions, and in any event not later than the first meeting of our board of directors at which any such transaction is considered. If the transaction is an “extraordinary transaction,” the office holder must also disclose any personal interest held by:

•  the office holder’s spouse, siblings, parents, grandparents, descendants, spouse’s descendants and the spouses of any of these people; or

•  any corporation in which the office holder is a 5% or greater shareholder, director or general manager or in which he or she has the right to appoint at least one director or the general manager.

Under Israeli law, an “extraordinary transaction” is a transaction:

•  other than in the ordinary course of business;

•  that is not on market terms; or

•  that is likely to have a material impact on our profitability, assets or liabilities.

Once an office holder complies with the above disclosure requirement, the board of directors may approve a transaction between us and an office holder, or a third party with which an office holder has a personal interest, provided that (i) the office holder acted in good faith and the transaction is not adverse to the company’s interest, and (ii) the office holder disclosed to the company, a reasonable time prior to the time of approval of the transaction, his or her personal interest in the transaction. If the transaction is an extraordinary transaction, both the audit committee and the board of directors must approve the transaction. Under certain circumstances, shareholder approval may also be required. A director who has a personal interest in a matter which is considered at a meeting of the board of directors or the audit committee may generally not be present at this meeting or vote on this matter unless a majority of the directors or members of the audit committee have a personal interest in the matter. If a majority of the directors or members of the audit committee have a personal interest in the matter, the matter will also require approval of the company’s shareholders.

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All arrangements to compensate and agreements to indemnify or insure office holders who are not directors require approval by the board of directors. In general, arrangements regarding the compensation, indemnification and insurance of directors require approval of the audit committee, the board of directors and the shareholders, in that order.

Disclosure of Personal Interests of a Controlling Shareholder

Under the Companies Law, the disclosure requirements that apply to an office holder also apply to a controlling shareholder of a public company. An extraordinary transaction with a controlling shareholder or in which a controlling shareholder has a personal interest, and the terms of compensation of a controlling shareholder who is an office holder, require the approval of the audit committee, the board of directors and the shareholders of the company. In addition, the shareholder approval must fulfill one of the following requirements:

•  at least one-third of the shares held by shareholders who have no personal interest in the transaction and are present and voting, in person, by proxy or by written ballot, at the meeting must be voted in favor of approving the transaction; or

•  the shareholders who have no personal interest in the transaction who vote against the transaction may not represent more than 1% of the voting rights in the company.

The approval of the board of directors and shareholders is required for a private issuance of securities (or a series of related private issuances during a 12-month period or that are part of one continuous transaction or transactions conditioned upon each other) that:

•  (i) represents at least 20% of a company’s voting power prior to the issuance of such securities, (ii) is issued other than in consideration of cash or securities listed on a recognized stock exchange, or other than for fair market value, and (iii) results in a person becoming the holder of 5% or more of the company’s securities, or in the increase in the shareholdings of a person who previously held 5% or more of the company’s securities; or

•  results in a person becoming a controlling shareholder of the company.

Director Compensation

We reimburse our non-employee directors for expenses incurred in connection with attending board and committee meetings. Non-employee directors are currently eligible to receive share options under our 1999 United States Equity Incentive Plan and our 2003 Israeli Share Option Plan. Each of Messrs. Bingham and Weatherford currently is paid $20,000 per year for service on our board of directors, and Mr. Weatherford currently is paid an additional $5,000 per year for service as chairperson of the audit committee. In addition, in November 2005, each of Messrs. Bingham and Weatherford received an option pursuant to our 1999 United States Equity Incentive Plan to purchase 100,000 ordinary shares at an exercise price of $3.15 per share. These option grants vest in equal monthly installments over four years, provided that the option grants will fully vest and become immediately exercisable upon a change in control of our company.

We intend to adopt a compensation program for non-employee directors, to be effective immediately prior to the effective date of this offering. Pursuant to this program, each member of our board of directors who is not our employee will receive the following cash compensation for board services, as applicable:

•  $      per year for service as a board member;

•  $      per year for service as chairperson of the audit committee and $      per year each for service as chairperson of the compensation and of the nominating and governance committees;

•  $      for each board meeting attended in person ($      for meetings attended by video or telephone conference) and $      for each committee meeting attended in person ($      for committee meetings attended by video or telephone conference).

In addition, each of our non-employee directors will receive initial and annual, automatic, non-discretionary grants pursuant to our 2006 Global Share Incentive Plan, which is described below under the heading “Employee

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Benefit Plans,” of nonqualified share options, in the case of non-employee directors who are U.S. tax payers, and options that qualify in accordance with Section 102 of the Israeli Tax Ordinance, 1961, in the case of non-employee directors who are Israeli tax payers. Each new non-employee director will receive an option to purchase           ordinary shares as of the date he or she first becomes a non-employee director. This option grant vests in equal monthly installments over three years. On the date of each annual meeting, each individual who continues to serve as a non-employee director on such date will receive an automatic option grant to purchase ordinary shares and each individual who continues to serve as committee chairperson on such date will receive an automatic option grant to purchase an additional          ordinary shares, commencing in each case with our 2007 annual meeting of shareholders. These option grants vest in equal monthly installments over 12 months following the date of grant.

The exercise price of each option granted to a non-employee director will be equal to 100% of the fair market value on the date of grant of the shares covered by the option. Options will have a maximum term of ten years measured from the grant date, subject to earlier termination in the event of the optionee’s cessation of board service.

Our compensation program for non-employee directors will provide that the optionee will have a three-month period following a cessation of board service in which to exercise any outstanding vested options, except in the case of a director’s death, in which case the options will be exercisable by the director’s estate or beneficiary for a 12-month period following the director’s death. Options granted to our non-employee directors pursuant to our compensation program for non-employee directors will fully vest and become immediately exercisable upon a change in control of our company.

The compensation of our outside directors is subject to restrictions imposed by Israeli law, and cannot be greater than the average compensation paid to all other non-executive directors nor less than the lowest compensation paid to any other non-executive director.

Executive Compensation

The following table presents compensation information during the year ended December 31, 2005 paid to or accrued for our chief executive officer and each of our four other most highly compensated executive officers who were serving as executive officers as of December 31, 2005, who we refer to as our named executive officers. The compensation includes long-term awards granted in 2005. The compensation table excludes other compensation in the form of perquisites and other personal benefits that constituted less than 10% of the total annual salary and bonus for the executive officer in 2005.

Summary Compensation Table

					Long-term
					compensation
					Shares
	Annual compensation				underlying		All other
Name and position(s)	Salary		Bonus		options		compensation
Eyal Waldman	$	236,000	$	0		—	$	17,742	(1)
President and Chief Executive Officer
Shai Cohen		128,076		4,364		—		18,882	(2)
Vice President, Operations
Michael Gray		205,000		6,730		17,500		21,002	(1)
Chief Financial Officer
Thad Omura		182,000		5,768		240,000		22,048	(1)
Vice President, Product Marketing
David Sheffler		207,000		6,730		20,000		25,211	(1)
Vice President, Worldwide Sales

⁽¹⁾ Includes employer contributions to the employee’s health and dental insurance and payments for the employee’s life insurance.

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⁽²⁾ Includes employer contributions to the employee’s Managers’ Insurance (pension and severance fund components) in the amount of $      in addition to payments for the employee’s education fund and disability component of the employee’s Managers’ Insurance.

Option Grants in 2005

The following table sets forth information regarding options granted to each of our named executive officers during the year ended December 31, 2005. The exercise prices of the options we granted were equal to the fair market value of our ordinary shares on the date of grant, as determined by our board of directors.

The potential realizable value is calculated based on the ten-year term of the option at the time of grant. The potential realizable values at 5% and 10% appreciation are calculated by:

•  multiplying the number of ordinary shares underlying the option by the exercise price per share;

•  assuming the aggregate share value derived from that calculation compounds at the annual 5% or 10% rate shown in the table for the entire ten-year term of the option; and

•  subtracting from that result the aggregate option exercise price.

Share price appreciation of 5% and 10% is assumed pursuant to the rules promulgated by the SEC and does not represent our prediction of our share price performance. The options in this table were granted under our 1999 United States Equity Incentive Plan and our 2003 Israeli Share Option Plan, have ten year terms and, unless otherwise noted, vest over a period of four years. We have not granted any share appreciation rights.

The percentage shown below of options granted is based on options to purchase an aggregate of 1,837,653 ordinary shares we granted to employees during 2005.

										Potential realizable
	Individual grants									value at assumed
	Number of									annual rates of
	securities		% of Total							share price
	underlying		options granted			Exercise				appreciation for
	options		to employees in			price per		Expiration		option term
Name	granted		2005			share		date		5%		10%
Eyal Waldman		—		0	%	$—			—	$	—	$	—
Shai Cohen		—		0	%		—		—
Michael Gray		17,500		0.95	%		3.80		12/08/2015
Thad Omura		240,000		13.06	%		3.80		12/08/2015
David Sheffler		20,000		1.08	%		3.80		12/08/2015

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values

The following table sets forth the number and value of securities underlying exercisable and unexercisable options held as of December 31, 2005 by each of our named executive officers. The value realized and the value of unexercised in-the-money options at December 31, 2005 is calculated based on a value of $      per share of our ordinary shares, which is the midpoint of the range listed on the cover of this prospectus, less the per share exercise price multiplied by the number of shares issued upon exercise of the options.

	Number of								Value of unexercised
	shares				Number of shares underlying				in-the-money options at
	acquired		Value		unexercised options at fiscal year-end				fiscal year-end
Name	on exercise		realized		Exercisable		Unexercisable		Exercisable		Unexercisable
Eyal Waldman		—		—		—		—	$	—	$	—
Shai Cohen		—		—		149,063		8,437	$		$
Michael Gray		—		—		427,500		—	$		$	—
Thad Omura		—		—		300,000		—	$		$	—
David Sheffler		—		—		200,000		—	$		$	—

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Employee Benefit Plans and Change of Control Arrangements

Equity Incentive Award Plans

To date we have granted equity awards under three plans: our 1999 United States Equity Incentive Plan, or the U.S. Plan, our 1999 Israeli Share Option Plan, or the 1999 ISOP, and our 2003 Israeli Share Option Plan, or the 2003 ISOP, which we will refer to collectively as our Prior Plans. Immediately prior to the effective date of this offering our Prior Plans will be replaced with our 2006 Global Share Incentive Plan, or Global Plan. As of July 31, 2006, an aggregate of 7,453,890 ordinary shares were subject to outstanding awards under our Prior Plans, and 1,074,503 ordinary shares remained available for future awards under the Prior Plans. Following the effective date of this offering, all of our ordinary shares reserved but not ultimately issued or subject to share awards that have expired or otherwise terminated under our Prior Plans without having been exercised in full will become available for issuance pursuant to awards granted under our Global Plan. We intend to grant all future share awards under our Global Plan. However, all share awards outstanding under our Prior Plans will continue to be governed by the terms of the applicable Prior Plans and agreements evidencing the share awards.

1999 United States Equity Incentive Plan

In 1999, we adopted our U.S. Plan. Under the U.S. Plan, eligible employees, including executive officers, and consultants of our company or any of our affiliates, and members of the board of directors may be granted incentive stock options, or ISOs, within the meaning of the U.S. Internal Revenue Code of 1986, as amended, nonstatutory share options, or NSOs, share bonuses and rights to acquire restricted shares, although ISOs may be granted only to employees. The U.S. Plan will be replaced with our Global Plan immediately prior to the effective date of this offering.

Administration.  Our board of directors administers the U.S. Plan, and it may in turn delegate authority to administer the plan to a committee. At such time as our ordinary shares become publicly traded, our board has the power to delegate administration of the U.S. Plan to a committee that, in our board’s discretion, may be composed of two or more non-employee directors.

Share Option Provisions Generally.  Share options are granted under the U.S. Plan pursuant to option agreements. Options granted under the U.S. Plan vest and become exercisable at the rate specified in the option agreement, and generally vest at a rate of no less than 20% per year over five years. The U.S. Plan also allows for the early exercise of unvested options, if that right is set forth in an applicable option agreement. All remaining unvested ordinary shares acquired through early exercised options are subject to repurchase by us in the event the recipient’s service relationship with us or any of our affiliates ceases.

In general, the term of share options granted under the U.S. Plan may not exceed ten years. The exercise price of an ISO cannot be less than 100% of the fair market value of the underlying ordinary shares on the date of grant and the exercise price of an NSO cannot be less than 85% of the fair market value of the underlying ordinary shares on the date of grant.

Unless the terms of a participant’s option agreement provide for earlier or later termination, if a participant’s service relationship with us or with any of our affiliates ceases for any reason other than disability or death, the participant may exercise any options that are vested as of the termination date up to three months from cessation of service. Unless the terms of a participant’s option agreement provide for earlier or later termination, if a participant’s service relationship with us or with any of our affiliates ceases due to disability, the participant may exercise any options that are vested as of the termination date up to 12 months after the date such service relationship ends. Unless the terms of a participant’s option agreement provide for earlier or later termination, if a participant’s service relationship with us or with any of our affiliates ceases due to death or the participant dies within the period specified in his or her option agreement after the termination of the participant’s service relationship with us (or with any of our affiliates), the participant’s estate or beneficiary may exercise any options that are vested as of the termination date up to 18 months after the date of death. In no event may an option be exercised after its expiration date.

The purchase price of ordinary shares acquired pursuant to the exercise of an option under the U.S. Plan must generally be paid in cash at the time the option is exercised. At the discretion of our board of directors and to the

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extent it is determined at the time of the grant of the option, or subsequently in the case of NSOs, the purchase price of shares may be paid for with any other form of legal consideration that may be acceptable to our board of directors.

Transfer Restrictions.  In general, share options may not be sold or otherwise transferred or disposed of by the participant other than by will or the laws of descent and distribution. Shares obtained from exercising options under the U.S. Plan may not be sold by a participant for a period of time specified by the underwriter (not to exceed 180 days) following the effective date of this offering.

Share Option Limitations.  The aggregate fair market value, determined at the time of grant, of our ordinary shares subject to ISOs that are exercisable for the first time by a participant during any calendar year under all of our share plans may not exceed $100,000. An option or portion of an option that exceeds this limit is treated as an NSO. No ISO, and before our shares are publicly traded, no NSO, may be granted to any person who, at the time of the grant, owns or is deemed to own shares possessing more than 10% of our total combined voting power or any of our affiliates unless the following conditions are satisfied:

•  the option exercise price is at least 110% of the fair market value of the underlying ordinary shares subject to the option on the date of grant; and

•  the term of any ISO award must not exceed five years from the date of grant.

Share Bonus Awards Provisions Generally.  Shares issued as part of share bonus awards that have been granted to employees, members of our board or consultants for their past services to our company or any of our affiliates and that are unvested upon termination of the participant’s service relationship are subject to our right to repurchase at such time.

Restricted Share Awards Provisions Generally.  In general, share purchase rights that have been awarded to employees, members of our board or consultants must have a per share purchase price equal to at least 85% of the fair market value of the underlying shares on the date of grant or at the time the purchase is consummated. Such rights are subject to a repurchase right by us for any shares that are unvested at the time the participant’s service relationship with us or with any of our affiliates ceases. A share purchase right granted to a person who at the time of the grant owns or is deemed to own more than 10% of the total combined voting power of our company or of any of our affiliates must have a purchase price of at least 100% of the fair market value of the underlying shares. Restricted shares purchased pursuant to a share purchase right may be paid for in cash at the time of purchase, through a deferred payment arrangement at the discretion of our board of directors, or any other form of legal consideration that may be acceptable to our board of directors in its discretion. The restricted shares purchased pursuant to the share purchase right may be subject to a vesting schedule as determined by our board of directors.

In general, a restricted share holder may not sell or otherwise transfer or dispose of the restricted shares or any interest in the restricted shares while such restricted shares are subject to the repurchase right by us.

Effect of Merger on Share Awards.  In the event we merge with or into another corporation, and the surviving entity elects not to assume or substitute for the unvested share awards, our board of directors may provide that the vesting of share awards will accelerate in full prior to such merger. Individual options or other share award agreements may provide for additional accelerated vesting and exercisability of awards.

Effect of Liquidation on Share Awards.  In the event we are liquidated or dissolved, our board may determine that outstanding share awards may be exercised in full as of the date of the liquidation or dissolutions, regardless of whether the share awards are then fully vested.

Plan Amendments.  Our board of directors has the authority to amend or terminate the U.S. Plan. However, no amendment or termination of the plan may adversely affect any rights under awards already granted to a participant unless agreed to by the affected participant.

1999 Israeli Share Option Plan and 2003 Israeli Share Option Plan

Pursuant to our 1999 ISOP and our 2003 ISOP, which were adopted in 1999 and 2003, respectively, eligible employees and consultants of our company or any of our affiliates and members of our board of directors may be granted options to purchase our ordinary shares. We will refer to the 1999 ISOP and the 2003 ISOP collectively as

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the ISOPs. Options granted under the ISOPs may qualify for special tax treatment under Section 102 of the Israeli Income Tax Ordinance (New Version) 1961, or the Ordinance, which we will refer to as the Section 102 Options. Options that do not qualify for special tax treatment under Section 102 of the Ordinance are referred to as 3(i) Options. Only employees and board members, in each case who are not controlling shareholders, may be granted Section 102 Options. Consultants and controlling shareholders may be granted only 3(i) Options under the ISOPs.

The ISOPs will be replaced with our Global Plan immediately prior to the effective date of this offering.

Administration.  Our board of directors administers the ISOPs, and our board may in turn delegate authority to administer the plans to a committee.

Share Option Provisions Generally.  Options under the ISOPs are granted pursuant to option agreements. ISOP options vest and become exercisable at the rate specified in the option agreement. The exercise price of the ordinary shares subject to an ISOP option is determined by the administrator of the ISPO in its sole and absolute discretion in accordance with applicable law and subject to any guidelines as may be determined by our board of directors.

In general, the term of options granted under the ISOPs may not exceed ten years. If a participant’s service relationship with us or with any of our affiliates terminates for any reason other than death, disability or cause (as this term is defined in the applicable ISOP), the participant may exercise any options vested as of the termination date up to three months from the date of termination. In general, if a participant’s service relationship with us or with any of our affiliates ceases due to death or disability, the participant may exercise any options vested as of the termination date up to 18 months from the date of termination in the event of death and 12 months from the date of termination in the event of disability. The administrator of the ISOP may authorize an extension of the post-termination exercisability period of all or part of options granted under the ISOPs beyond the date of termination for a period not to exceed the period during which the options by their terms would otherwise have been exercisable had the participant continued the service relationship. If a participant’s service relationship with us or with any of our affiliates is terminated for cause, all options granted to such participant will immediately expire. In no event may an option be exercised after its expiration date.

Acceptable forms of consideration for the exercise of options granted under the ISOPs are determined by the administrator of the ISOP, which include but is not limited to cash or check.

In general, a participant may not transfer his or her option. Shares obtained from exercising options under the 2003 ISOP may not be sold by a participant for a period of time specified by the underwriter (not to exceed 180 days) following the effective date of this offering.

Section 102 Option and Shares Holding Period.  Section 102 Options, any ordinary shares issued upon the exercise of Section 102 Options and any other ordinary shares that are received subsequently with respect to these options or ordinary shares, including bonus shares, must be issued to a trustee that is nominated by the administrator of the ISOP to serve as a trustee in accordance with Section 102 of the Ordinance. These 102 Options and ordinary shares must be held by the trustee for the benefit of the participants for at least two years from the date of grant of the Section 102 Options, and the participant may not sell or otherwise transfer any of the shares held by the trustee until the holding period has lapsed.

Effect of Certain Corporate Transactions Upon Options.  Under the 1999 ISOP, in the event we merge with or into another corporation or we sell all or substantially all of our assets or ordinary shares, and the surviving entity elects not to assume or substitute for unvested options outstanding under the 1999 ISOP, the vesting of the options held by participants whose service with us or our affiliates has not already terminated, in general, will accelerate in full prior to such corporate transaction. Under the 2003 ISOP, in the event of our merger, acquisition or reorganization with or into another corporation, or a sale of all or substantially all of our assets, and the surviving entity elects not to assume or substitute for unvested options outstanding under the 2003 ISOP, our board of directors or the committee that administers the 2003 ISOP may determine with respect to specified option agreements that the vesting of such options will be accelerated in full prior to such corporate transaction.

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Under the 1999 ISOP, in the event we are liquidated or dissolved, our board may determine that outstanding unexercised options may be exercised in full as of the date of the liquidation or dissolution, regardless of whether the option is then fully vested.

Plan Amendments.  Under the 1999 ISOP, the administrator of the 1999 ISOP has the authority to amend or terminate the 1999 ISOP. Under the 2003 ISOP, our board of directors, after consulting with the trustee holding Section 102 Options and related ordinary shares, has the authority to amend or terminate the 2003 ISOP. However, no amendment or termination of the applicable ISOPs may adversely affect any rights under awards already granted to a participant unless agreed to by the affected participant.

Change of Control Arrangements

The options held by some of our named executive officers located in the U.S. have an acceleration feature. If we terminate a named executive officer without cause, or the employee resigns for good reason, within 12 months following a change of control, the named executive officer’s option will immediately vest with respect to 50% of shares that are unvested on the termination date. Our form of share option agreement defines a change of control as a merger or consolidation resulting in a change to at least 50% of our total voting power or a plan to completely liquidate or to sell all or substantially all of our assets. Cause is defined as an employee’s willful refusal or failure to comply with a lawful instruction of our board of directors or conviction of any felony involving an act of moral turpitude. In order to terminate for cause, however, we must give an employee 30 days written notice of our intent and allow 30 days for the employee to cure the wrong. Good reason is defined as any reduction of or failure to pay the employee’s base salary in effect immediately prior to the change of control; any other material breach by the company of any material term of the employee’s employment with the company; any material adverse change in the employee’s job title, duties, responsibilities, status, reporting responsibilities or perquisites, without the employee’s consent; or any change in the employee’s principal work location which increases the employee’s one-way commute from home to the office by more than 50 miles.

401(k) Plan

Mellanox Technologies, Inc. maintains a defined contribution retirement and profit sharing plan that is intended to qualify under Section 401(a) of the U.S. Internal Revenue Code of 1986, as amended. Substantially all non-union employees of Mellanox Technologies, Inc. who are 21 years of age or older are eligible to participate in the 401(k) Plan. Participants may voluntarily make pre-tax contributions, through payroll deductions, under the 401(k) Plan of up to a maximum statutorily prescribed limit, which for most employees is $15,000 in 2006. All amounts contributed by participants and earnings on these contributions are fully vested at all times and are not taxable to participants until withdrawn. Participants may elect to invest their contributions in authorized investment alternatives. We are also permitted to make under the 401(k) Plan matching, discretionary and profit sharing contributions, subject to established limits and a vesting schedule. To date, we have not made any matching, discretionary or profit sharing contributions on behalf of participants in the 401(k) Plan.

Exculpation, Insurance and Indemnification of Directors and Officers

We indemnify our office holders for certain liabilities. The Companies Law allows us to indemnify or insure our office holders against the following liabilities incurred for acts performed as an office holder:

•  a breach of duty of loyalty to the company, 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;

•  a breach of duty of care to the company or to a third party; and

•  a financial liability imposed on or incurred by the office holder in favor of a third party.

We cannot, however, indemnify or insure our office holders against any of the following:

•  a breach of duty of loyalty, except 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;

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

•  an act or omission committed with intent to derive illegal personal benefit; or

•  a fine levied against the office holder.

An Israeli company may not exculpate an office holder from liability for a breach of the duty of loyalty of the office holder. The company may, however, approve an office holder’s act performed in breach of the duty of loyalty, provided that the office holder acted in good faith, the act or its approval does not harm the company and the office holder discloses the nature of his or her personal interest in the act and all material facts and documents a reasonable time before discussion of the approval. An Israeli company may exculpate an office holder in advance from liability to the company, in whole or in part, for a breach of duty of care, but only if a provision authorizing such exculpation is inserted in its articles of association. Our amended and restated articles of association include such a provision. An Israeli company may not exculpate a director for liability arising out of a prohibited dividend or distribution to shareholders.

Pursuant to the Companies Law, we may indemnify an office holder only for judgments, settlements or arbitrators’ awards approved by a court that were rendered in connection with events that the board of directors deemed foreseeable based on the company’s actual activities at the time of the approval by the board of the indemnification, provided that the indemnification is limited to an amount or criteria determined by the board of directors as reasonable under the circumstances and that the indemnification undertaking states the foreseeable activities and the amount or criteria. In addition, we may indemnify an office holder against the following liabilities incurred for acts performed as an office holder:

•  reasonable litigation expenses, including attorneys’ fees, incurred by the office holder as a result of an investigation or proceeding instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided that (i) no indictment was filed against such office holder as a result of such investigation or proceeding and (ii) either (A) no financial liability was imposed upon him or her as a substitute for the criminal proceeding as a result of such investigation or proceeding or (B) if the financial liability was imposed, it was imposed with respect to an offense that does not require proof of criminal intent; and

•  reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against him or her by the company, on its behalf or by a third party or in connection with criminal proceedings in which the office holder was acquitted or in which the office holder was convicted of an offense that does not require proof of criminal intent.

Under the Companies Law, exculpation, indemnification and insurance of office holders must be approved by our audit committee and our board of directors and, in respect of our directors, by our shareholders.

Our amended and restated articles of association allow us to indemnify and insure our office holders to the fullest extent permitted by the Companies Law. We are not aware of any pending or threatened litigation or proceeding involving any of our directors or officers in which indemnification is sought. In addition, we have entered into agreements with each of our office holders undertaking to indemnify them to the fullest extent permitted by law, including with respect to liabilities resulting from this offering. This indemnification is limited to events determined as foreseeable by our board of directors based on the company’s activities, and to an amount or criteria determined by the board of directors as reasonable under the circumstances, and the insurance is subject to our discretion depending on its availability, effectiveness and cost.

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The limitation of liability and indemnification provisions in our amended and restated articles of association may discourage shareholders from bringing a lawsuit against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might benefit us and our shareholders. A shareholder’s investment may be harmed to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, or the Securities Act, may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. There is no pending litigation or proceeding naming any of our directors or officers as to which indemnification is being sought, nor are we aware of any pending or threatened litigation that may result in claims for indemnification by any director or officer.

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

We describe below transactions and series of similar transactions, during our last three fiscal years, to which we were a party or will be a party, in which:

•  the amounts involved exceeded or will exceed $60,000; and

•  any of our directors, executive officers, holders of more than 5% of our ordinary shares or any member of their immediate family had or will have a direct or indirect material interest.

Sales of Preferred Shares

Since inception, we have sold an aggregate of 20,366,014 preferred shares, as adjusted for subsequent stock splits, in the following rounds of financing:

•  in June 1999, we sold 4,800,000 Series A-1 preferred shares and 2,800,000 Series A-2 preferred shares, each at a price of $1.00 per share;

•  in March 2000, we sold 2,993,698 Series B-1 preferred shares and 899,952 Series B-2 preferred shares, each at a price of $6.61 per share;

•  in November 2000, June 2001 and May 2002, we issued an aggregate of 404,979 Series C preferred shares in exchange for software valued at approximately $3,000,000; and

•  in October 2001, November 2001 and February 2002, we issued an aggregate of 8,467,384 Series D redeemable preferred shares at a price of $6.61 per share.

Immediately prior to completion of this offering, all of the outstanding Series A-1 preferred shares, Series A-2 preferred shares, Series B-1 preferred shares, Series B-2 preferred shares, Series C preferred shares and Series D redeemable preferred shares will convert into ordinary shares on a          basis.

Transactions with Management and 5% Shareholders

The following table summarizes purchases of our preferred shares and warrants to purchase ordinary shares (issued in connection with our Series D redeemable preferred share financing) since inception by our directors, executive officers and holders of more than 5% of our ordinary shares:

	Series A-1		Series B-1						Ordinary
	and		and						shares subject
Name of Beneficial Owner	Series A-2		Series B-2		Series C		Series D		to warrants and options
Rob S. Chandra(1)		—		—		—		1,134,644		270,193
Irwin Federman(2)		3,400,000		639,976		—		491,679		173,750
S. Atiq Raza(3)		—		605,142		—		136,157		120,423
Intel Atlantic, Inc.		—		1,512,858		—		302,572		45,385
Entities affiliated with Sequoia Capital Partners(4)		3,400,000		639,976		—		491,680		73,751
Entities affiliated with U.S. Venture Partners(2)		3,400,000		639,976		—		491,679		73,750

⁽¹⁾ Includes (i) 402,912 Series D redeemable preferred shares (which will convert into an aggregate of           ordinary shares upon the consummation of this offering) and 60,436 ordinary shares issuable upon exercise of a warrant held by Bessec Ventures V L.P., (ii) 357,300 Series D redeemable preferred shares (which will convert into an aggregate of ordinary shares upon the consummation of this offering) and 53,595 ordinary shares issuable upon exercise of a warrant held by Bessemer Venture Partners V L.P., (iii) 160,351 Series D redeemable preferred shares (which will convert into an aggregate of           ordinary shares upon the consummation of this offering) and 24,052 ordinary shares issuable upon exercise of a warrant held by BVE 2001(Q) LLC, (iv) 136,157 Series D redeemable preferred shares (which will convert into an aggregate of           ordinary shares upon the consummation of this offering) and 20,423 ordinary shares issuable upon exercise of a warrant held by BIP 2001 L.P., (v) 68,078 Series D redeemable preferred shares (which will convert into an aggregate of           ordinary shares upon the consummation of this offering) and 10,211 ordinary shares issuable upon exercise of a

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	warrant held by Bessemer Venture Investors III L.P., (vi) 9,846 Series D redeemable preferred shares (which will convert into an aggregate of           ordinary shares upon the consummation of this offering) and 1,476 ordinary shares issuable upon exercise of a warrant held by BVE 2001 LLC. All such warrants are immediately exercisable and (vii) a nonqualified stock option to purchase 100,000 ordinary shares granted to Mr. Chandra on December 8, 2005, which vests monthly over a period of four years. The general partner of each of the Bessemer-related entities that own shares of the company is Deer V Co. LLC. Robert Goodman, Robin S. Chandra, J. Edmund Colloton and David J. Cowan are the managing members of Deer V Co. LLC and share dispositive power over the shares of the company held by the Bessemer-related entities. Mr. Chandra is also a member of Deer Management Co. LLC, or DMC, the management company affiliate of the Bessemer-related entities that own shares of the company. Unless otherwise agreed by DMC’s members, members of DMC are required to contribute shares acquired from the exercise of options granted to them in their capacity as a director of a portfolio company, or the profits derived from the sale of the underlying shares, to DMC. It is expected that the options held by Mr. Chandra will be subject to this arrangement. Mr. Chandra disclaims beneficial ownership of these shares, except to the extent of his pecuniary interest therein.
(2)	Includes (i) 1,860,000 Series A-1 preferred shares, 1,302,000 Series A-2 preferred shares, 176,700 Series B-1 preferred shares, 418,478 Series B-2 preferred shares and 457,261 Series D redeemable preferred shares (which will convert into an aggregate of           ordinary shares upon the consummation of this offering) and 68,589 ordinary shares issuable upon exercise of a warrant held by U.S. Venture Partners VI, L.P., (ii) 58,000 Series A-1 preferred shares, 40,600 Series A-2 preferred shares, 5,510 Series B-1 preferred shares, 13,049 Series B-2 preferred shares and 14,259 Series D redeemable preferred shares (which will convert into an aggregate of           ordinary shares upon the consummation of this offering) and 2,138 ordinary shares issuable upon exercise of a warrant held by U.S.V.P. Entrepreneur Partners VI, L.P., (iii) 52,000 Series A-1 preferred shares, 36,400 Series A-2 preferred shares, 4,940 Series B-1 preferred shares, 11,699 Series B-2 preferred shares and 12,784 Series D redeemable preferred shares (which will convert into an aggregate of           ordinary shares upon the consummation of this offering) and 1,917 ordinary shares issuable upon exercise of a warrant held by U.S.V.P. VI Affiliates Fund, L.P. (iv) 30,000 Series A-1 preferred shares, 21,000 Series A-2 preferred shares, 2,850 Series B-1 preferred shares, 6,750 Series B-2 preferred shares and 7,375 Series D redeemable preferred shares (which will convert into an aggregate of           ordinary shares upon the consummation of this offering) and 1,106 ordinary shares issuable upon exercise of a warrant held by 2180 Associates Fund VI, L.P. and (v) a nonqualified stock option to purchase 100,000 ordinary shares granted to Mr. Federman on December 8, 2005, which vests monthly over a period of four years. All such warrants are immediately exercisable. Presidio Management Group VI, L.L.C., or PMG VI, is the general partner of each of U.S. Venture Partners, may be deemed to share voting and disposition control over the holdings with each of U.S. Venture Partners VI, L.P., USVP VI Affiliates Fund, L.P., 2180 Associates Fund VI, L.P. and USVP Entrepreneur Partners VI, L.P. and may be deemed to share voting and disposition control over the holdings of each of these entities. PMG VI disclaims beneficial ownership of such shares held by the U.S. Venture Partners entities, except as to its pecuniary interest therein arising as a result of its interest in each of the entities. Each of Irwin Federman, Steven M. Krausz, Jonathan D. Root and Philip M. Young is a managing member of PMG VI, and may be deemed to share voting and disposition control over the holdings of each of the entities affiliated with U.S. Venture Partners. Each of Messrs. Federman, Krausz, Root and Young disclaims beneficial ownership of such shares held by each of them, except as to each of his pecuniary interest therein arising as a result of each of his interest in each of the entities.
(3)	Includes (i) 544,628 Series B-1 preferred shares (which will convert into an aggregate of           ordinary shares upon the consummation of this offering) held by Raza Venture Fund A, L.P., (ii) 136,157 Series D redeemable preferred shares (which will convert into an aggregate of           ordinary shares upon the consummation of this offering) and 20,423 ordinary shares issuable upon exercise of a warrant held by Raza Venture Fund B, L.P., (iii) 53,858 Series B-1 preferred shares (which will convert into an aggregate of           ordinary shares upon the consummation of this offering) held by Saiyed Atiq Raza & Noreen Tirmizi Raza, Trustees N&A Raza Revocable Trust UAD 03/22/97, for which Mr. Raza is a trustee, (iv) 3,328 Series B-1 preferred shares (which will convert into an aggregate of           ordinary shares upon the consummation of this offering) held by Aezed S. Raza, Mr. Raza’s son, (v) 3,328 Series B-1 preferred shares (which will convert into an aggregate of           ordinary shares upon the consummation of this offering) held by Nadia N. Raza, Mr. Raza’s daughter and (vi) a nonqualified stock option to purchase 100,000 ordinary shares granted to Mr. Raza on December 8, 2005, which vests monthly over a period of four years. Mr. Raza is a managing member of Raza Venture Management LLC, the general partner of Raza Venture Fund A, L.P. and Raza Venture Fund B, L.P. Mr. Raza disclaims beneficial ownership of the shares held by Raza Venture Fund A, L.P. and Raza Venture Fund B, L.P., except to the extent of his pecuniary interest therein.
(4)	Includes (i) 1,812,600 Series A-1 preferred shares and 1,268,820 Series A-2 preferred shares (which will convert into an aggregate of           ordinary shares upon the consummation of this offering) held by Sequoia Capital VIII, (ii) 167,200 Series B-1 preferred shares, 395,978 Series B-2 preferred shares and 432,679 Series D redeemable preferred shares (which will convert into an aggregate of           ordinary shares upon the consummation of this offering) and 64,901 ordinary shares issuable upon exercise of a warrant held by Sequoia Capital Franchise Fund, (iii) 120,000 Series A-1 preferred shares and 84,000 Series A-2 preferred shares (which will convert into an aggregate of           ordinary shares upon the

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consummation of this offering) held by SITP VIII-Q Liquidating Trust, (iv) 22,800 Series B-1 preferred shares, 53,998 Series B-2 preferred shares and 59,001 Series D redeemable preferred shares (which will convert into an aggregate of          ordinary shares upon the consummation of this offering) and 8,850 ordinary shares issuable upon exercise of a warrant held by Sequoia Capital Franchise Partners, (v) 23,000 Series A-1 preferred shares and 16,100 Series A-2 preferred shares (which will convert into an aggregate of           ordinary shares upon the consummation of this offering) held by SITP VIII Liquidating Trust, (vi) 4,400 Series A-1 preferred shares and 3,080 Series A-2 preferred shares (which will convert into an aggregate of           ordinary shares upon the consummation of this offering) held by Sequoia 1997 and (vii) 40,000 Series A-1 preferred shares and 28,000 Series A-2 preferred shares (which will convert into an aggregate of           ordinary shares upon the consummation of this offering) held by CMS Partners LLC. All such warrants are immediately exercisable. Michael L. Goguen is the managing member of SCFF Management, LLC, the general partner of Sequoia Capital Franchise Fund and Sequoia Capital Franchise Partners. Mr. Goguen is also the managing member of SC VIII Management, LLC, the general partner of Sequoia Capital VIII. Mr. Goguen has the authority to vote shares held by the Sequoia entities. Mr. Goguen disclaims beneficial ownership of all shares except to the extent of his individual pecuniary interest therein.

We issued warrants for the purchase of up to 1,270,074 ordinary shares at an exercise price of $6.61 per share to our Series D redeemable preferred shareholders in connection with the sale of our Series D redeemable preferred shares. Pursuant to the terms of the sale of our Series D redeemable preferred shares, each investor that purchased our Series D redeemable preferred shares received a warrant to purchase that number of ordinary shares equal to 15% of the Series D redeemable preferred shares purchased by such investor. As of July 31, 2006, warrants had been exercised for 1,500 ordinary shares. The outstanding warrants will terminate if not exercised prior to the closing of this offering.

Investor Rights Agreement

We and the holders of our preferred shares have entered into an agreement, pursuant to which these shareholders and warrant holders will have registration rights with respect to their ordinary shares following this offering. See “Description of Authorized Share Capital — Registration Rights” for a further description of the terms of this agreement.

Option Grants

We have made option grants to certain of our directors and executive officers. For a description of the terms of these options, see “Management — Summary Compensation Table” and “Principal Shareholders.”

Employment Agreements and Change of Control Arrangements

All of our named executive officers are at-will employees. They hold share options with accelerated vesting provisions that apply in certain circumstances in connection with a change of control. See “Management — Employee Benefit Plans and Change of Control Arrangements” for a discussion of change of control arrangements.

Indemnification of Directors and Officers

Our amended and restated articles of association provide that we may indemnify each of our directors and officers to the fullest extent permitted by Israeli law. Furthermore, we have entered into indemnification agreements with each of our directors and officers. For further information, see “Management — Exculpation, Insurance and Indemnification of Directors and Officers.”

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PRINCIPAL SHAREHOLDERS

The following table sets forth, as of July 31, 2006, information regarding beneficial ownership of our capital stock by:

•  each person, or group of affiliated persons, known by us to beneficially own more than 5% of our voting securities;

•  each of our named executive officers;

•  each of our directors; and

•  all of our executive officers and directors as a group.

Beneficial ownership is determined according to the rules of the SEC and generally means that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power of that security, and includes options and warrants that are currently exercisable or exercisable within 60 days. Except as indicated by footnote, and subject to community property laws where applicable, we believe the persons named in the table have sole voting and investment power with respect to all ordinary shares shown as beneficially owned by them.

This table lists applicable percentage ownership based on 33,841,652 ordinary shares outstanding as of July 31, 2006, after giving effect to the conversion of our outstanding preferred shares into ordinary shares in connection with this offering, and based on           ordinary shares outstanding upon completion of this offering.

Ordinary shares subject to share options and warrants currently exercisable or exercisable within 60 days of July 31, 2006 are deemed to be outstanding for computing the percentage ownership of the person holding these options and warrants and the percentage ownership of any group of which the holder is a member, but are not deemed outstanding for computing the percentage of any other person.

Unless otherwise indicated, the address for each of the shareholders in the table below is c/o Mellanox Technologies, Inc., 2900 Stender Way, Santa Clara, California 95054.

	Beneficial ownership
					Options and
			Shares subject to		warrants		Percentage of shares
	Shares		right of repurchase		exercisable		outstanding
	beneficially		within 60 days of		within		Before the			After the
Name of beneficial owner	owned(1)(2)		July 31, 2006(3)		60 days		offering			offering(2)
5% Shareholders:
Intel Atlantic, Inc.		1,860,815		—		45,385		5.49	%			%
Entities affiliated with Sequoia Capital Partners(4)		4,605,407		—		73,751		13.58
Entities affiliated with U.S. Venture Partners(5)		4,605,405		—		73,750		13.58
Yigal Arnon & Co. as trustees for Founders(6)		4,288,400		—		—		12.67
Executive Officers and Directors:
Eyal Waldman		6,271,600		—		—		18.53	%			%
H. Raymond Bingham		20,833		—		20,833		*			*
Rob S. Chandra(7)		1,323,587		—		188,943		3.89
Shai Cohen(8)		1,290,563		—		156,563		3.80
Irwin Federman(5)		4,624,155		—		92,500		13.63
Michael Gray(9)		427,500		248,125		409,792		1.25
Thad Omura		300,000		265,000		300,000		*			*
S. Atiq Raza(10)		780,472		—		39,173		2.30
David Sheffler		654,000		41,875		200,000		1.92
C. Thomas Weatherford		20,833		—		20,833		*			*
All executive officers and directors as a group (12 persons)		17,772,981		555,000		1,787,075		49.88	%			%

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*	Represents beneficial ownership of less than one percent (1%) of the outstanding ordinary shares.
(1)	Includes ordinary shares subject to a right of repurchase within 60 days of July 31, 2006 and shares issuable pursuant to share options and warrants exercisable within 60 days of July 31, 2006.
(2)	Upon completion of this offering, our existing shareholders will own           shares, representing     % of our outstanding ordinary shares.
(3)	Represents ordinary shares subject to a right of repurchase, at the original option exercise price, in the event the holder ceases to provide services to us. The option exercise prices range from $0.10 to $3.80.
(4)	Includes (i) 1,812,600 Series A-1 preferred shares and 1,268,820 Series A-2 preferred shares (which will convert into an aggregate of           ordinary shares upon the consummation of this offering) held by Sequoia Capital VIII, (ii) 167,200 Series B-1 preferred shares, 395,978 Series B-2 preferred shares and 432,679 Series D redeemable preferred shares (which will convert into an aggregate of           ordinary shares upon the consummation of this offering) held by Sequoia Capital Franchise Fund, (iii) 120,000 Series A-1 preferred shares and 84,000 Series A-2 preferred shares (which will convert into an aggregate of           ordinary shares upon the consummation of this offering) held by SITP VIII-Q Liquidating Trust, (iv) 22,800 Series B-1 preferred shares, 53,998 Series B-2 preferred shares and 59,001 Series D redeemable preferred shares (which will convert into an aggregate of           ordinary shares upon the consummation of this offering) held by Sequoia Capital Franchise Partners, (v) 23,000 Series A-1 preferred shares and 16,100 Series A-2 preferred shares (which will convert into an aggregate of           ordinary shares upon the consummation of this offering) held by SITP VIII Liquidating Trust, (vi) 4,400 Series A-1 preferred shares and 3,080 Series A-2 preferred shares (which will convert into an aggregate of           ordinary shares upon the consummation of this offering) held by Sequoia 1997 and (vii) 40,000 Series A-1 preferred shares and 28,000 Series A-2 preferred shares (which will convert into an aggregate of           ordinary shares upon the consummation of this offering) held by CMS Partners LLC. Michael L. Goguen is the managing member of SCFF Management, LLC, the general partner of Sequoia Capital Franchise Fund and Sequoia Capital Franchise Partners. Mr. Goguen is also the managing member of SC VIII Management, LLC, the general partner of Sequoia Capital VIII. Mr. Goguen has the authority to vote shares held by the Sequoia entities. Mr. Goguen disclaims beneficial ownership of all shares except to the extent of his individual pecuniary interest therein.
(5)	Includes (i) 1,860,000 Series A-1 preferred shares, 1,302,000 Series A-2 preferred shares, 176,700 Series B-1 preferred shares, 418,478 Series B-2 preferred shares and 457,261 Series D redeemable preferred shares (which will convert into an aggregate of           ordinary shares upon the consummation of this offering) held by U.S. Venture Partners VI, L.P., (ii) 58,000 Series A-1 preferred shares, 40,600 Series A-2 preferred shares, 5,510 Series B-1 preferred shares, 13,049 Series B-2 preferred shares and 14,259 Series D redeemable preferred shares (which will convert into an aggregate of           ordinary shares upon the consummation of this offering) held by U.S.V.P. Entrepreneur Partners VI, L.P., (iii) 52,000 Series A-1 preferred shares, 36,400 Series A-2 preferred shares, 4,940 Series B-1 preferred shares, 11,699 Series B-2 preferred shares and 12,784 Series D redeemable preferred shares (which will convert into an aggregate of           ordinary shares upon the consummation of this offering) and (iv) 30,000 Series A-1 preferred shares, 21,000 Series A-2 preferred shares, 2,850 Series B-1 preferred shares, 6,750 Series B-2 preferred shares and 7,375 Series D redeemable preferred shares (which will convert into an aggregate of           ordinary shares upon the consummation of this offering) held by 2180 Associates Fund VI, L.P. Presidio Management Group VI, L.L.C., or PMG VI, is the general partner of each of U.S. Venture Partners, may be deemed to share voting and disposition control over the holdings with each of U.S. Venture Partners VI, L.P., USVP VI Affiliates Fund, L.P., 2180 Associates Fund VI, L.P. and USVP Entrepreneur Partners VI, L.P. and may be deemed to share voting and disposition control over the holdings of each of these entities. PMG VI disclaims beneficial ownership of such shares held by the U.S. Venture Partners entities, except as to its pecuniary interest therein arising as a result of its interest in each of the entities. Each of Irwin Federman, Steven M. Krausz, Jonathan D. Root and Philip M. Young is a managing member of PMG VI, and may be deemed to share voting and disposition control over the holdings of each of the entities affiliated with U.S. Venture Partners. Each of Messrs. Federman, Krausz, Root and Young disclaims beneficial ownership of such shares held by each of them, except as to each of his pecuniary interest therein arising as a result of each of his interest in each of the entities.
(6)	Includes (i) 1,134,000 ordinary shares held in trust for the benefit of Roni Ashuri, (ii) 1,134,000 ordinary shares held in trust for the benefit of Shai Cohen, (iii) 567,000 ordinary shares held in trust for the benefit of Michael Kagan, (iv) 390,000 ordinary shares held in trust for the benefit of Evelyn Landsman, (v) 354,400 ordinary shares held in trust for the benefit of Shimon Rotenberg, (vi) 319,000 ordinary shares held in trust for the benefit of Eitan Zehavi, (vii) 283,600 ordinary shares held in trust for the benefit of Udi Katz and (viii) 106,400 ordinary shares held in trust for the benefit of Alon Webman. Yigal Arnon & Co. disclaims beneficial ownership of these shares.
(7)	Includes (i) 402,912 Series D redeemable preferred shares (which will convert into an aggregate of           ordinary shares upon the consummation of this offering) held by Bessec Ventures V L.P., (ii) 357,300 Series D redeemable preferred shares (which will convert into an aggregate of           ordinary shares upon the consummation of this offering) held by

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	Bessemer Venture Partners V L.P., (iii) 160,351 Series D redeemable preferred shares (which will convert into an aggregate of           ordinary shares upon the consummation of this offering) held by BVE 2001(Q) LLC, (iv) 136,157 Series D redeemable preferred shares (which will convert into an aggregate of           ordinary shares upon the consummation of this offering) held by BIP 2001 L.P., (v) 68,078 Series D redeemable preferred shares (which will convert into an aggregate of           ordinary shares upon the consummation of this offering) held by Bessemer Venture Investors III L.P. and (vi) 9,846 Series D redeemable preferred shares (which will convert into an aggregate of           ordinary shares upon the consummation of this offering) held by BVE 2001 LLC. The general partner of each of the Bessemer-related entities that own shares of the company is Deer V Co. LLC. Robert Goodman, Robin S. Chandra, J. Edmund Colloton and David J. Cowan are the managing members of Deer V Co. LLC and share dispositive power over the shares of the company held by the Bessemer-related entities. Mr. Chandra is also a member of Deer Management Co. LLC, or DMC, the management company affiliate of the Bessemer-related entities that own shares of the company. Unless otherwise agreed by DMC’s members, members of DMC are required to contribute shares acquired from the exercise of options granted to them in their capacity as a director of a portfolio company, or the profits derived from the sale of the underlying shares, to DMC. It is expected that the options held by Mr. Chandra will be subject to this arrangement. Mr. Chandra disclaims beneficial ownership of these shares, except to the extent of his pecuniary interest therein.
(8)	Includes 1,134,000 ordinary shares held in trust by Yigal Arnon & Co. as trustee for Founders.
(9)	Includes 17,708 ordinary shares held by the M&M Gray Family 2001 Trust U/T/A, for which Mr. Gray is a trustee.
(10)	Includes (i) 544,628 Series B-1 preferred shares (which will convert into an aggregate of           ordinary shares upon the consummation of this offering) held by Raza Venture Fund A, L.P., (ii) 136,157 Series D redeemable preferred shares (which will convert into an aggregate of           ordinary shares upon the consummation of this offering) held by Raza Venture Fund B, L.P., (iii) 53,858 Series B-1 preferred shares (which will convert into an aggregate of           ordinary shares upon the consummation of this offering) held by Saiyed Atiq Raza & Noreen Tirmizi Raza, Trustees N&A Raza Revocable Trust UAD 03/22/97, for which Mr. Raza is a trustee, (iv) 3,328 Series B-1 preferred shares (which will convert into an aggregate of           ordinary shares upon the consummation of this offering) held by Aezed S. Raza, Mr. Raza’s son, and (v) 3,328 Series B-1 preferred shares (which will convert into an aggregate of           ordinary shares upon the consummation of this offering) held by Nadia N. Raza, Mr. Raza’s daughter. Mr. Raza is a managing member of Raza Venture Management LLC, the general partner of Raza Venture Fund A, L.P. and Raza Venture Fund B, L.P. Mr. Raza disclaims beneficial ownership of the shares held by Raza Venture Fund A, L.P. and Raza Venture Fund B, L.P., except to the extent of his pecuniary interest therein.

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DESCRIPTION OF AUTHORIZED SHARE CAPITAL

General

Upon the completion of this offering, our authorized share capital will consist of           ordinary shares, nominal value NIS 0.01 per share, after giving effect to the conversion of all outstanding preferred shares into ordinary shares and to the amendment and restatement of our articles of association. As of June 30, 2006, assuming the conversion of all outstanding convertible preferred shares into ordinary shares immediately prior to the consummation of this offering, there were outstanding:

•  33,828,652 ordinary shares held by approximately 180 shareholders; and

•  7,618,630 shares issuable upon exercise of outstanding share options.

All of our issued and outstanding ordinary shares and preferred shares are duly authorized, validly issued, fully paid and non-assessable. Our ordinary shares are not redeemable and, following the closing of this offering, will not have preemptive rights. The ownership or voting of ordinary shares by non-residents of Israel is not restricted in any way by our amended and restated articles of association or the laws of the State of Israel, except for ownership by nationals of some countries that are, or have been, in a state of war with Israel.

As of June 30, 2006, there were warrants outstanding for the purchase of an aggregate of 1,268,574 ordinary shares at an exercise price of $6.61 per share. These warrants expire on the earlier of (i) October 9, 2006 or November 19, 2006, as the case may be, (ii) a sale or merger or any other transaction resulting in a change in control of the company, (iii) the closing of this offering or (iv) if the conversion price of the Series D redeemable preferred shares is reduced in connection with an IPO price per share of less than $16.53, unless such conversion price adjustment is waived by the holders of the Series D redeemable preferred shares.

Ordinary Shares

Transfer of Shares

Our ordinary shares will be issued in registered form and may be freely transferred under our amended and restated articles of association unless the transfer is restricted or prohibited by another instrument, Israeli law or the rules of a stock exchange on which the shares are traded.

Voting

Holders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote of shareholders at a shareholder meeting. Shareholders may vote at a shareholder meeting either in person or by proxy. In addition, shareholder voting rights may be affected by the grant of any special voting rights to the holders of a class of shares with preferential rights that may be authorized in the future.

The Companies Law imposes certain duties on our shareholders. A shareholder, in exercising his or her rights and performing his or her obligations to our other shareholders and us, must act in good faith and in an acceptable manner, and avoid abusing his or her powers. This duty is required when voting at general meetings on matters such as changes to our amended and restated articles of association, increasing our registered capital, mergers and related party transactions. A shareholder also has a general duty to refrain from depriving any other shareholder of his or her rights as a shareholder. In addition, any controlling shareholder, any shareholder who knows that his or her vote can determine the outcome of a shareholder vote and any shareholder who, under our amended and restated articles of association, can appoint or prevent the appointment of an office holder, is required to act fairly towards the company. The Companies Law does not specifically define the duty of fairness, but provides that the remedies generally available upon a breach of contract will apply also in the event of a breach of the duty to act with fairness. There is no binding case law that addresses this subject directly. Any voting agreement is also subject to observance of these duties.

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Election of Directors

Our directors are elected by the holders of a simple majority of our ordinary shares at a general shareholder meeting. Our ordinary shares do not have cumulative voting rights for this purpose. As a result, the holders of our ordinary shares that represent more than 50% of the voting power represented at a shareholder meeting at which a quorum is present have the power to elect any or all of our directors whose positions are being filled at that meeting, subject to the special approval requirements for outside directors described under “Management — Outside Directors.”

No Preemptive or Similar Rights

Our ordinary shares are not entitled to preemptive rights and are not subject to conversion or redemption.

Dividend and Liquidation Rights

Our board of directors may, in its discretion, declare that a dividend be paid pro rata to the holders of ordinary shares without the approval of our shareholders, in proportion to the paid up capital attributable to the shares that they hold. Dividends must be paid out of our profits and other surplus funds, as defined in the Companies Law, as of the end of the most recent year or as accrued over a period of two years, whichever is higher, provided that there is no reasonable concern that a payment of a dividend will prevent us from satisfying our existing and foreseeable obligations as they become due.

In the event of a liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of ordinary shares in proportion to the paid up capital attributable to the shares that they hold. This right may be affected by the grant of preferential dividend or distribution rights to the holders of a class of shares with preferential rights that may be authorized in the future.

Shareholder Meetings

We are required to convene an annual general meeting of our shareholders once every calendar year within a period of not more than 15 months following the preceding annual general meeting. Our board of directors is required to convene a special general meeting of our shareholders at the request of (i) two directors or one quarter of the members of our board of directors, or (ii) one or more holders of 5% or more of our share capital and 1% of our voting power or the holder or holders of 5% or more of our voting power. All shareholder meetings require prior notice of at least 21 days or up to 35 days if required by applicable law or regulation. The chairperson of our board of directors presides over our general meetings. Subject to the provisions of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at general meetings are the shareholders of record on a date to be decided by the board of directors, which may be between four and 40 days prior to the date of the meeting.

Quorum

In accordance with our amended and restated articles of association, the quorum required for an ordinary meeting of shareholders consists of at least two shareholders present, in person or by proxy, who hold or represent between them at least 331/3% of our issued share capital. A meeting adjourned for lack of a quorum generally is adjourned to the same day in the following week at the same time and place, or any time and place as the directors designate in a notice to the shareholders.

Resolutions

Under the Companies Law, unless otherwise provided in a company’s articles of association, an ordinary resolution requires approval by the holders of a simple majority of the voting rights represented at the meeting, in person, by proxy or by written ballot, and voting on the resolution. A resolution to voluntarily wind up the company requires the approval by holders of 75% of the voting rights represented at the meeting, in person, by proxy or by written ballot and voting on the resolution.

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Access to Corporate Records

Under the Companies Law, all shareholders generally have the right to review minutes of our general meetings, our shareholder register, our amended and restated articles of association and any document we are required by law to file publicly with the Israel Registrar of Companies. Any shareholder who specifies the purpose of its request may request to review any document in our possession that relates to any action or transaction with a related party which requires shareholder approval under the Companies Law. We may deny a request to review a document if we determine that the request was not made in good faith, that the document contains a commercial secret or a patent or that disclosing the document may otherwise harm our interests.

Modification of Class Rights

The rights attached to any class, such as voting and dividend rights, may be amended by written consent of holders of a majority of the issued shares of that class, or by adoption by the holders of a majority of the shares of that class present at a separate class meeting.

Acquisitions under Israeli Law

Tender Offer.  The Companies Law requires any person who wishes to acquire shares or any class of shares of a publicly traded Israeli company, and who would, as a result of this acquisition, hold over 90% of the company’s issued and outstanding share capital or of a class of shares which are listed, to make a tender offer to all of the company’s shareholders for the purchase of all of the issued and outstanding shares of the company. If holders of less than 5% of the outstanding shares do not respond to or accept the tender offer, all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation of law. However, the shareholders may petition the court, within three months after receipt of the tender offer, to alter the consideration for the acquisition. If the shareholders who do not accept the tender offer hold more than 5% of the issued and outstanding share capital of the company, the acquirer may not acquire additional shares of the company from shareholders who accepted the tender offer if following such acquisition the acquirer would then own over 90% of the company’s issued and outstanding share capital.

The Companies Law also provides that an acquisition of shares of a public company must be made by means of a special tender offer if, as a result of the acquisition, the purchaser would become a 25% or greater shareholder of the company, unless one of the exemptions described in the Companies Law is satisfied. This rule does not apply if there is already another 25% shareholder of the company. Similarly, the Companies Law provides that an acquisition of shares in a public company must be made by means of a special tender offer if, as a result of the acquisition, the purchaser would become a 45% or greater shareholder of the company, if there is not already another shareholder of the company who holds more than 45% of the voting rights in the company, unless one of the exemptions described in the Companies Law is satisfied.

Merger.  The Companies Law permits merger transactions if approved by each party’s board of directors and, unless certain requirements described under the Companies Law are met, the majority of each party’s shares voted on the proposed merger at a shareholders’ meeting called on at least 21 days’ prior notice. If the approval of a general meeting of the shareholders is required, merger transactions may be approved by holders of a simple majority of our shares present, in person or by proxy, at a general meeting and voting on the transaction. In determining whether the required majority has approved the merger, if shares of the company are held by the other party to the merger, or by any person holding at least 25% of the outstanding voting shares or 25% of the means of appointing directors of the other party to the merger, then a vote against the merger by holders of the majority of the shares present and voting, excluding shares held by the other party or by such person, or anyone acting on behalf of either of them, is sufficient to reject the merger transaction. If the transaction would have been approved but for the exclusion of the votes of certain shareholders as provided above, a court may still approve the merger upon the request of holders of at least 25% of the voting rights of a company, if the court holds that the merger is fair and reasonable, taking into account the value of the parties to the merger and the consideration offered to the shareholders. Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists a reasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of any of the parties to the merger, and the court may also provide

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instructions to assure the rights of creditors. In addition, a merger may not be completed unless at least 50 days have passed from the date that a proposal for approval of the merger was filed with the Israel Registrar of Companies and 30 days from the date that shareholder approval of both merging companies was obtained.

Israeli tax law treats some acquisitions, particularly stock-for-stock swaps between an Israeli company and a foreign company, less favorably than U.S. tax law. Israeli tax law generally provides that a shareholder who exchanges our shares for shares in a foreign corporation is treated as if he or she has sold the shares. In such a case, the shareholder will generally be subject to Israeli taxation on any capital gains from the sale of shares (after two years, with respect to one half of the shares, and after four years, with respect to the balance of the shares, in each case unless the shareholder sells such shares at an earlier date), unless a relevant tax treaty between Israel and the country of the shareholder’s residence exempts the shareholder from Israeli tax. However, it is possible in some cases to obtain a ruling from the Israeli tax authorities deferring the tax on certain share swaps until the shares received in consideration for the original shares are sold, subject to certain conditions. For further information, see “Israeli Tax Considerations and Government Programs.”

Anti-Takeover Measures under Israeli Law

The Companies Law allows us to create and issue shares having rights different from those attached to our ordinary shares, including shares providing certain preferred or additional rights to voting, distributions or other matters and shares having preemptive rights. Following the closing of this offering, we will not have any authorized or issued shares other than ordinary shares. In the future, if we do create and issue a class of shares other than ordinary shares, such class of shares, depending on the specific rights that may be attached to them, may delay or prevent a takeover or otherwise prevent our shareholders from realizing a potential premium over the market value of their ordinary shares. The authorization of a new class of shares will require an amendment to our amended and restated articles of association, which requires the prior approval of a the holders of a majority of our shares at a general meeting. Shareholders voting at such a meeting will be subject to the restrictions under the Companies Law described in “Ordinary Shares — Voting.”

Our amended and restated articles of association will provide for our board of directors to be divided into three classes, with staggered three-year terms. Only one class of directors will be elected at each annual meeting of our shareholders, with the other classes continuing for the remainder of their respective three-year terms. Because our shareholders do not have cumulative voting rights, our shareholders holding a majority of the ordinary shares outstanding will be able to elect all of our directors. Our amended and restated articles of association will provide that all shareholder action must be effected at a duly called meeting of shareholders.

The combination of the classification of our board of directors and the lack of cumulative voting will make it more difficult for our existing shareholders to replace our board of directors as well as for another party to obtain control of us by replacing our board of directors. Since our board of directors has the power to retain and discharge our officers, these provisions could also make it more difficult for existing shareholders or another party to effect a change in management.

The provisions discussed above under “Acquisitions under Israeli Law” and “Anti-Takeover Measures under Israeli Law” may have the effect of deterring hostile takeovers or delaying changes in our control or management.

Registration Rights

Demand Registration Rights

After the completion of this offering, the holders of approximately 20,376,003 ordinary shares will be entitled to certain demand registration rights. At any time beginning six months after the consummation of this offering, the holders of at least 30% of these shares, and the holders of at least 30% of the shares converted from our Series D redeemable preferred shares, can request that we register all or a portion of their shares. We will only be required to file two registration statements upon the shareholders’ exercise of these demand registration rights. Additionally, we will not be required to effect a demand registration during the period beginning 30 days prior and six months following any underwritten public offering of our ordinary shares or if our underwriters for such an offering

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determine in good faith that marketing factors require that such a demand registration not be effected. We are obligated to pay the registration expenses incurred in connection with any such demand registration.

Piggyback Registration Rights

After the completion of this offering, the holders of approximately 20,376,003 ordinary shares will be entitled to certain piggyback registration rights. As a result, whenever we propose to file a registration statement under the Securities Act, the holders of registrable securities are entitled to notice of the registration and have the right, subject to limitations that the underwriters may impose on the number of shares included in the registration, to include their registrable shares in the registration. We are obligated to pay the registration expenses incurred in connection with any such piggyback registration.

Form S-3 Registration Rights

After the completion of this offering, the holders of approximately 20,376,003 ordinary shares will be entitled to certain registration rights if we are eligible to file a registration statement on Form S-3 and if the aggregate price to the public of the shares offered is at least $1,000,000. The holders of at least 30% of these shares, and the holders of at least 30% of the shares converted from our Series D redeemable preferred shares, may make an unlimited number of requests for registration on Form S-3, provide that we do not have to file more than two such registration statements during any 12-month period. We are obligated to pay the expenses of any such registrations on Form S-3.

Transfer Agent and Registrar

The transfer agent and registrar for our ordinary shares is          .

Nasdaq Global Market Listing

We will apply for listing our ordinary shares for quotation on The Nasdaq Global Market under the symbol “MLNX.”

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ISRAELI TAX CONSIDERATIONS AND GOVERNMENT PROGRAMS

The following contains a description of material, relevant provisions of the current Israeli income tax structure applicable to companies in Israel, with special reference to its effect on us. To the extent that the discussion is based on new tax legislation that has not been subject to judicial or administrative interpretation, we cannot assure you that the views expressed in the discussion will be accepted by the appropriate tax authorities or the courts.

This discussion does not address all of the tax consequences that may be relevant to all purchasers of our ordinary shares in light of each purchaser’s particular circumstances and special tax treatment. For example, the discussion below does not cover the tax treatment of residents of Israel and traders in securities who are subject to special tax regimes. As individual circumstances may differ, you should consult your tax advisor to determine the applicability to you of the rules discussed below and the particular tax effects of the offer, including the application of Israeli or other tax laws. The discussion below is not intended, and should not be construed, as legal or professional tax advice and is not exhaustive of all possible tax considerations.

Taxation of Companies

General Corporate Tax Structure

Generally, Israeli companies are subject to corporate tax at a rate of 31% on taxable income and are subject to capital gains tax at a rate of 25% on capital gains derived after January 1, 2003 (other than capital gains from the sale of listed securities, which are subject to tax at the current rate of 31%). The effective tax rate payable by a company that derives income from an Approved Enterprise (as discussed below), however, may be considerably less. In July 2005, an amendment to the corporate tax rates was approved by the Israeli Knesset. The amendment provides that taxes paid by Israeli companies will be gradually reduced to a rate of 29% for the 2007 tax year, 27% for the 2008 tax year, 26% for the 2009 tax year and 25% for the 2010 tax year and thereafter.

Tax Benefits and Grants for Research and Development

Israeli tax law allows, under specified conditions, a tax deduction for research and development expenditures, including capital expenditures, for the year in which they are incurred. These expenses must relate to scientific research and development projects, and must be approved by the relevant Israeli government ministry, determined by the field of research. Furthermore, the research and development must be for the promotion of the company and carried out by or on behalf of the company seeking such tax deduction. The amount of such deductible expenses, however, is reduced by the sum of any funds received through government grants for the finance of such scientific research and development projects. Expenditures not approved by the relevant Israeli government ministry but otherwise qualifying for deduction are deductible over a three-year period.

Tax Benefits Under the Law for the Encouragement of Industry (Taxes), 1969

Under the Law for the Encouragement of Industry (Taxes), 1969, industrial companies, as defined under the law, are entitled to the following tax benefits, among others:

•  deductions over an eight-year period for purchases of know-how and patents;

•  expenses related to a public offering are deductible over a three-year period in equal amounts;

•  the right to elect, under specified conditions, to file a consolidated tax return with other related Israeli industrial companies; and

•  accelerated depreciation rates on equipment and buildings.

Eligibility for benefits under the Law for the Encouragement of Industry is not subject to receipt of prior approval from any governmental authority. Under the law, an industrial company is defined as a company resident in Israel, at least 90% of the income of which, in any tax year, determined in Israeli currency, exclusive of income from government loans, capital gains, interest and dividends, is derived from an industrial enterprise owned by it. An industrial enterprise is defined as an enterprise whose major activity in a given tax year is industrial production activity.

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We cannot be sure that we qualify or will qualify as an “industrial company,” or that the benefits described above will be available.

Special Provisions Relating to Taxation Under Inflationary Conditions

The Income Tax Law (Inflationary Adjustments), 1985, generally referred to as the Inflationary Adjustments Law, represents an attempt to overcome the problems presented to a traditional tax system by an economy undergoing rapid inflation. The Inflationary Adjustments Law is highly complex. The features that are material to us can be described as follows:

•  When the value of a company’s equity, as calculated under the Inflationary Adjustments Law, exceeds the depreciated cost of its fixed assets (as defined in the Inflationary Adjustments Law), a deduction from taxable income equal to the product of the excess multiplied by the applicable annual rate of inflation is permitted. The maximum deduction permitted in any single tax year is 70% of taxable income, with the unused portion permitted to be carried forward, linked to the increase in the consumer price index.

•  If the depreciated cost of a company’s fixed assets exceeds its equity, the product of the excess multiplied by the applicable annual rate of inflation is added to taxable income.

•  Subject to certain limitations, depreciation deductions on fixed assets and losses carried forward are adjusted for inflation based on the increase in the Israeli consumer price index.

•  In certain circumstances, in lieu of the mechanism contained in the Inflationary Adjustments Law, a company in which there is a sufficient level of foreign investment may elect to calculate its taxes on the basis of its operating results as reflected in its U.S. dollar financial statements or to adjust its tax return on the basis of changes in foreign exchange rates rather than changes in the Israeli consumer price index.

Tax Benefits Under the Law for the Encouragement of Capital Investments, 1959

The Law for the Encouragement of Capital Investment, 1959, or the Investment Law, provides that a proposed capital investment in production facilities or other eligible facilities may be designated as an Approved Enterprise. An application to the Investment Center of the Ministry of Industry and Trade must be submitted to obtain Approved Enterprise status. Each instrument of approval for an Approved Enterprise relates to a specific investment program that is defined both by the financial scope of the investment, including sources of funds, and by the physical characteristics of the facility or other assets. The extent of the tax benefits available under the Investment Law, including the recent amendment discussed below, are determined by the geographic location of the enterprise. The location will also determine the period for which tax benefits are available.

The tax benefits available under any instrument of approval relate only to taxable profits attributable to the specific program and are contingent upon meeting the criteria set out in the instrument of approval. If a company has more than one approval or only a portion of its capital investments are approved, its effective tax rate is the weighted average of the applicable rates. As explained below, following the amendment of the Investment Law which became effective on April, 1, 2005, companies may receive tax benefits under the law without applying for an Approved Enterprise status.

Tax benefits for income from Approved Enterprises approved before April 1, 2005

Before April 1, 2005, an Approved Enterprise was entitled to receive a grant from the Government of Israel or an alternative package of tax benefits, which we refer to as alternative benefits. We have elected to forego the entitlement to grants and have applied for the alternative benefits, under which undistributed income that we generate from our Approved Enterprises will be tax-exempt for certain periods.

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In 1999, our investment program in our facilities in Yokneam, Israel and in Tel Aviv, Israel was approved as an Approved Enterprise under the Investment Law. Our request for expansion of our Approved Enterprise was approved in 2004. Under the terms of our Approved Enterprise:

•  Once we begin generating taxable income (after setting off our losses from prior years) we will be entitled to a tax exemption with respect to the income derived from our Yokneam Approved Enterprise program for a period of ten years.

•  Once we begin generating taxable income (after setting off our losses from prior years) we will be entitled to a tax exemption with respect to the income derived from our Tel Aviv Approved Enterprise program for two years and will be subject to a reduced company tax rate of between 10% and 25% for the following five to eight years, depending on the extent of foreign (non-Israeli) investment in us during the relevant year. The tax rate will be 20% if the foreign investment level is more than 49% but less than 74%, 15% if the foreign investment level is more than 74% but less than 90%, and 10% if the foreign investment level is 90% or more. The lowest level of foreign investment during a particular year will be used to determine the relevant tax rate for that year. The period in which we receive these tax benefits may not extend beyond the earlier of 14 years from the year in which approval was granted or 12 years from the year in which operations or production by the enterprise began.

The majority of our taxable income is attributable to our Approved Enterprise program in Yokneam.

Dividends paid out of income generated by an Approved Enterprise (or out of dividends received from a company whose income is generated by an Approved Enterprise) are generally subject to withholding tax at the rate of 15% or such lower rate as may be provided in an applicable tax treaty. This withholding tax is deductible at source by the Approved Enterprise. The 15% tax rate is limited to dividends and distributions out of income derived during the benefits period and actually paid at any time up to 12 years thereafter, except with respect to a Foreign Investors Company, or FIC, in which case the 12-year limit does not apply. We elected the alternative benefits track, and will additionally be subject to pay corporate tax at the rate of 25% in respect of the gross amount of the dividend that we may distribute out of profits which were exempt from corporate tax in accordance with the provisions of the alternative benefits track. If we are also deemed to be a FIC, and if the FIC is at least 49% owned by non-Israeli residents, the corporate tax rate paid by us in respect of the dividend we may distribute from income derived by our Approved Enterprises during the tax exemption period may be taxed at a lower rate.

As we have elected the alternative benefits package, we are not obligated to attribute any part of dividends that we may distribute to exempt profits, and we may decide from which year’s profits to declare dividends. We currently intend to reinvest any income that we may in the future derive from our Approved Enterprise programs and not to distribute the income as a dividend.

If we qualify as a FIC, our Approved Enterprises will be entitled to additional tax benefits. Subject to certain conditions, a FIC is a company with a level of foreign investment of more than 25%. The level of foreign investment is measured as the percentage of rights in the company (in terms of shares, rights to profits, voting and appointment of directors), and of combined share and loan capital, that are owned, directly or indirectly, by persons who are not residents of Israel. Such a company will be eligible for an extension of the period during which it is entitled to tax benefits under its Approved Enterprise status (so that the benefit periods may be up to ten years) and for further tax benefits if the level of foreign investment exceeds 49%.

The benefits available to an Approved Enterprise are subject to the fulfillment of conditions stipulated in the Investment Law and its regulations and the criteria in the specific certificate of approval, as described above. If a company does not meet these conditions, it would be required to refund the amount of tax benefits, together with consumer price index linkage adjustment and interest, or other monetary penalty.

Tax benefits under an Amendment that became effective on April 1, 2005

On April 1, 2005, a significant amendment to the Investment Law became effective. The Investment Law provides that terms and benefits included in any certificate of approval that was granted before the amendment came into effect will remain subject to the provisions of the Investment Law as they were on the date of such approval. Pursuant to the amendment, the Investment Center will continue to grant Approved Enterprise status to qualifying

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investments. The amendment, however, limits the scope of enterprises that may be approved by the Investment Center by setting criteria for the approval of a facility as an Approved Enterprise, such as provisions generally requiring that at least 25% of the Approved Enterprise’s income will be derived from export. The amendment also authorizes the Investment Center, on an interim basis, to permit extensions and amendments of certificates of approval that were granted prior to the amendment coming into effect.

The amendment provides that Approved Enterprise status will only be necessary for receiving grants. As a result, it is no longer necessary for a company to acquire Approved Enterprise status in order to receive the tax benefits previously available under the alternative benefits provisions. Rather, a company may claim the tax benefits offered by the Investment Law directly in its tax returns, provided that its facilities meet the criteria for tax benefits set out by the amendment. Companies are entitled to approach the Israeli Tax Authority for a pre-ruling regarding their eligibility for benefits under the amendment.

Tax benefits are available under the amendment to production facilities (or other eligible facilities), which are generally required to derive more than 25% of their business income from export. In order to receive the tax benefits, the amendment states that the company must make an investment which meets all the conditions set out in the amendment for tax benefits and exceeds a minimum amount specified in the Investment Law. Such investment allows the company to receive a benefited enterprise status, and may be made over a period of no more than three years ending at the end of the year in which the company requested to have the tax benefits apply to the benefited enterprise. Where the company requests to have the tax benefits apply to an expansion of existing facilities, only the expansion will be considered to be a benefited enterprise and the company’s effective tax rate will be the weighted average of the applicable rates. In this case, the minimum investment required in order to qualify as a benefited enterprise is required to exceed a certain percentage of the value of the company’s production assets before the expansion.

Dividends paid out of income derived by a benefited enterprise will be treated similarly to payment of dividends by an Approved Enterprise under the alternative benefits track. Therefore, dividends paid out of income derived by a benefited enterprise (or out of dividends received from a company whose income is derived from a benefited enterprise) are generally subject to withholding tax at the rate of 15% or such lower rate as may be provided in an applicable tax treaty. The reduced rate of 15% is limited to dividends and distributions out of income derived from a benefited enterprise during the benefits period and actually paid at any time up to 12 years thereafter except with respect to a FIC, in which case the 12-year limit does not apply. A company qualifying for tax benefits under the amendment which pays a dividend out of income derived by its benefited enterprise during the tax exemption period will be subject to corporate tax in respect of the gross amount of the dividend at the otherwise applicable rate of 25%, or lower in the case of a qualified FIC which is at least 49% owned by non-Israeli residents. The dividend recipient would be subject to tax at the rate of 15% on the amount received which tax would be deducted at source.

As a result of the amendment, tax-exempt income generated under the provisions of the new law will subject us to taxes upon distribution of the tax-exempt income to shareholders, the repurchase by the company of its shares or liquidation of the company, and we may be required to record a deferred tax liability with respect to such tax-exempt income.

The amendment sets a minimal amount of foreign investment required for a company to be regarded as a FIC.

Taxation of our Shareholders

Israeli law generally imposes a capital gains tax on the sale of capital assets located in Israel, including shares in Israeli resident companies, unless a specific exemption is available or unless a treaty between Israel and the country of the non-resident provides otherwise. An individual is subject to a 20% tax rate on real capital gains derived from the sale of shares, as long as the individual has not demanded a deduction of interest and linkage differences in connection with the purchase and holding of the securities; and as long as the individual is not a substantial shareholder of the company issuing the shares, which is generally a shareholder with 10% or more of the right to profits, the right to nominate a director and voting rights. A substantial shareholder (or a shareholder who has demanded a deduction of interest and linkage differences) will be subject to tax at a rate of 25% on real capital gains derived from the sale of shares issued by the company. The determination of whether the individual is a

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substantial shareholder will be made on the date that the securities are sold. In addition, the individual will be deemed to be a substantial shareholder if at any time during the 12 months preceding this date he or she had been a substantial shareholder. The foregoing tax rates, however, will not apply to dealers in securities.

Corporations are subject to corporate tax rates in respect of capital gains from the sale of publicly-traded shares in Israeli companies. As described above in “— General Corporate Tax Structure,” recent changes in the law will reduce the corporate tax rate from 31% in 2006 to 29% in 2007, 27% in 2008, 26% in 2009 and 25% in 2010. Between 2006 and 2009, however, corporations whose taxable income was not determined immediately before the 2006 Tax Reform was published, pursuant to part B of the Israeli Income Tax Law (Inflationary Adjustments), 1985, or pursuant to the Income Tax Regulations (Rules on Bookkeeping by Foreign Invested Companies and Certain Partnership and Determination of their Chargeable Income), 1984, or the Dollar Regulations, will generally be taxed at a rate of 25% on their capital gains from the sale of their shares.

Non-residents of Israel, including corporations, will generally be exempt from any capital gains tax from the sale of shares so long as (i) the gains are not derived through a permanent establishment that the non-resident maintains in Israel, (ii) the shares remain listed for trading on a designated stock market and (iii) the shares were purchased after being listed on the designated stock market. These provisions dealing with capital gains are not applicable to a person whose gains from selling or otherwise disposing of the shares are deemed to be business income. In addition, pursuant to the Convention between the Government of the United States of America and the Government of Israel with Respect to Taxes on Income, as amended, which we refer to as the United States-Israel Tax Treaty, the sale, exchange or disposition of ordinary shares by a person who qualifies as a resident of the United States within the meaning of the United States-Israel Tax Treaty and who is entitled to claim the benefits afforded to such person by the United States-Israel Tax Treaty, which we refer to as a Treaty United States Resident, generally will not be subject to the Israeli capital gains tax unless such Treaty United States Resident holds, directly or indirectly, shares representing 10% or more of our voting power during any part of the 12-month period preceding such sale, exchange or disposition, subject to certain conditions. Under the United States-Israel Tax Treaty, such Treaty United States Resident would be permitted to claim a credit for such taxes against the U.S. federal income tax imposed with respect to such sale, exchange or disposition, subject to the limitations in U.S. laws applicable to foreign tax credits. The United States-Israel Tax Treaty does not relate to state or local taxes in the United States. In addition, a temporary provision of the Israeli tax laws exempts treaty country residents from capital gains tax on the sale of securities in Israeli companies purchased between July 1, 2005 and December 31, 2008, if certain conditions are met.

Non-residents of Israel are subject to income tax on income accrued or derived from sources in Israel. These sources of income include passive income, including dividends, royalties and interest, as well as non-passive income from services rendered in Israel. For so long the securities of the company are publicly traded, on distribution of dividends other than bonus shares or share dividends, income tax is withheld at the rate of 20% for dividends paid to individuals or foreign corporations and, upon application to the tax authorities, 15% for dividends generated by an Approved Enterprise, unless in each case a different rate is provided in a treaty between Israel and the shareholder’s country of residence. Under the United States-Israel Tax Treaty, the maximum tax on dividends paid to a holder of ordinary shares who is a U.S. resident will be 25%. The maximum tax rate on dividends not generated by an Approved Enterprise paid to a U.S. corporation holding at least 10% of our voting power is 12.5%.

A non-resident of Israel who receives dividends from which tax was withheld is generally exempt from the duty to file returns in Israel in respect of such income, provided such income was not derived from a business conducted in Israel by the taxpayer, and the taxpayer has no other taxable sources of income in Israel.

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U.S. FEDERAL INCOME TAXATION CONSIDERATIONS

The following is a summary of certain U.S. federal income tax consequences to U.S. Holders (defined below) under present law of an investment in our ordinary shares. This summary applies only to U.S. Holders that hold the ordinary shares as capital assets and that have the U.S. dollar as their functional currency. This discussion is based on the tax laws of the United States as in effect on the date of this Registration Statement and on U.S. Treasury regulations in effect or, in some cases, proposed, as of the date of this Registration Statement as well as judicial and administrative interpretations thereof available on or before such date. All of the foregoing authorities are subject to change, which change could apply retroactively and could affect the tax consequences described below.

The following discussion does not deal with the tax consequences to any particular investor or to persons in special tax situations such as:

•  banks;

•  certain financial institutions;

•  insurance companies;

•  broker-dealers;

•  traders that elect to mark to market;

•  tax-exempt entities;

•  persons liable for alternative minimum tax;

•  U.S. expatriates;

•  persons holding an ordinary share as part of a straddle, hedging, conversion or integrated transaction;

•  persons that actually or constructively own 10% or more of our voting shares;

•  persons who acquired ordinary shares pursuant to the exercise of any employee share option or otherwise as compensation; or

•  persons holding ordinary shares through partnerships or other pass-through entities.

PROSPECTIVE PURCHASERS ARE URGED TO CONSULT THEIR TAX ADVISORS ABOUT THE APPLICATION OF THE U.S. FEDERAL TAX RULES TO THEIR PARTICULAR CIRCUMSTANCES AS WELL AS THE STATE AND LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF ORDINARY SHARES.

The discussion below of the U.S. federal income tax consequences to U.S. Holders will apply if you are a beneficial owner of ordinary shares and you are, for U.S. federal income tax purposes:

•  an individual who is a citizen or resident of the United States;

•  a corporation (or other entity taxable as a corporation) organized under the laws of the United States, any State or the District of Columbia;

•  an estate whose income is subject to U.S. federal income taxation regardless of its source; or

•  a trust that (i) is subject to the supervision of a court within the United States and the control of one or more U.S. persons or (ii) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.

If you are a partner in a partnership or other entity taxable as a partnership that holds ordinary shares, your tax treatment generally will depend on your status and the activities of the partnership.

Dividends

Mellanox currently does not intend to pay cash dividends in the foreseeable future. Subject to the passive foreign investment company rules discussed below, the gross amount of distributions made by us with respect to the

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ordinary shares (including the amount of any Israeli taxes withheld therefrom) generally will be includable in your gross income in the year received as foreign source dividend income to the extent that such distributions are paid out of our current or accumulated earnings and profits as determined under U.S. federal income tax principles. To the extent, if any, that the amount of any such distribution exceeds our current or accumulated earnings and profits, it will be treated first as a tax-free return of your tax basis in the ordinary shares (thereby increasing the amount of any gain or decreasing the amount of any loss realized on the subsequent sale or disposition of such ordinary shares) and thereafter as capital gain. We do not intend to calculate our earnings and profits under U.S. federal income tax principles. Therefore, a U.S. Holder should expect that a distribution generally will be treated as a dividend even if that distribution would otherwise be treated as a non-taxable return of capital or as capital gain under the rules described above. The dividends will not be eligible for the dividends-received deduction allowed to corporations in respect of dividends received from other U.S. corporations. With respect to individual U.S. Holders for taxable years beginning before January 1, 2011, dividends may be “qualified dividend income” which is taxed at the lower applicable capital gains rate provided that (i) the ordinary shares are readily tradable on an established securities market in the United States, (ii) we are not a passive foreign investment company (as discussed below) for either our taxable year in which the dividend was paid or the preceding taxable year and (iii) certain holding period requirements are met. Under U.S. Internal Revenue Service authority, ordinary shares are considered for purpose of clause (i) above to be readily tradable on an established securities market in the United States if they are listed on The Nasdaq Global Market. You should consult your own tax advisors regarding the availability of the lower rate for dividends paid with respect to ordinary shares.

The amount of any distribution paid in NIS (including the amount of Israeli taxes withheld) will be equal to the U.S. dollar value of such NIS on the date such distribution is includable in your income, regardless of whether the payment is in fact converted into U.S. dollars at that time. Gain or loss, if any, realized on the sale or other disposition of such NIS generally will be U.S. source ordinary income or loss. The amount of any distribution of property other than cash will be the fair market value of such property on the date of distribution.

Subject to certain limitations, Israeli taxes withheld from a distribution will be eligible for credit against your U.S. federal income tax liability. If a refund of the tax withheld is available to you under the laws of Israel or under the United States-Israel Tax Treaty, the amount of tax withheld that is refundable will not be eligible for such credit against your U.S. federal income tax liability (and will not be eligible for the deduction against your U.S. federal taxable income). If the dividends are qualified dividend income (as discussed above), the amount of the dividend taken into account for purposes of calculating the foreign tax credit limitation will in general be limited to the gross amount of the dividend, multiplied by the reduced rate divided by the highest rate of tax normally applicable to dividends. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, dividends distributed by us with respect to ordinary shares generally will constitute “passive income” or, in the case of certain U.S. Holders, “financial services income.” For taxable years beginning after December 31, 2006, dividends distributed by us with respect to ordinary shares generally will constitute “passive category income” but could, in the case of certain U.S. Holders, constitute “general category income.” The rules relating to the determination of the U.S. foreign tax credit are complex and U.S. Holders should consult their tax advisors to determine whether and to what extent a credit would be available. If you do not elect to claim a foreign tax credit with respect to any foreign taxes for a given taxable year, you may instead claim an itemized deduction for all foreign taxes paid in that taxable year.

Sale or Other Disposition of Ordinary Shares

Subject to the passive foreign investment company rules discussed below, upon a sale or other disposition of ordinary shares, you will recognize a capital gain or loss for U.S. federal income tax purposes in an amount equal to the difference between the amount realized and your tax basis in such ordinary shares. If the consideration you receive for the ordinary share is not paid in U.S. dollars, the amount realized will be the U.S. dollar value of the payment received. In general, the U.S. dollar value of such a payment will be determined on the date of receipt of payment if you are a cash basis taxpayer and on the date of disposition if you are an accrual basis taxpayer. However, if the ordinary shares are treated as traded on an established securities market and you are either a cash basis taxpayer or an accrual basis taxpayer who has made a special election (which must be applied consistently from year to year and cannot be changed without the consent of the U.S. Internal Revenue Service), you will determine

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the U.S. dollar value of the amount realized in a foreign currency by translating the amount received at the spot rate of exchange on the settlement date of the sale. Your tax basis in your ordinary shares generally will equal the cost of such ordinary shares. If you use foreign currency to purchase ordinary shares, the cost of the ordinary shares will be the U.S. dollar value of the foreign currency purchase price on the date of purchase. However, if the ordinary shares are treated as traded on an established securities market and you are either a cash basis taxpayer or an accrual basis taxpayer who has made the special election described above, you will determine the U.S. dollar value of the cost of such ordinary shares by translating the amount paid at the spot rate of exchange on the settlement date of the purchase. Any such gain or loss generally will be U.S. source gain or loss (in the case of losses, subject to certain limitations) and will be treated as long-term capital gain or loss if your holding period in the ordinary shares exceeds one year. If you are an individual U.S. Holder, long-term capital gain generally will be subject to U.S. federal income tax at preferential rates. The deductibility of capital losses is subject to significant limitations.

In the event that you are subject to Israeli tax upon the gain from the disposition of ordinary shares, because it is likely that the source of any gain would be a U.S. source, you may not be able to credit such Israeli tax against your U.S. federal income tax liability with respect to the gain you realize on such disposition. You should consult your tax advisors regarding the creditability of any such tax.

Passive Foreign Investment Company

Based on our current and anticipated operations and composition of our assets, we do not expect to be a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for our current taxable year ending December 31, 2006. Our expectation for our current taxable year is based in part on our estimates of the value of our assets as determined based on the price of the ordinary shares in this offering and the expected price of the ordinary shares following the offering. Our actual PFIC status for the current taxable year will not be determinable until the close of such year, and, accordingly, there is no guarantee that we will not be a PFIC for the current taxable year or any future taxable year. A non-U.S. corporation is considered a PFIC for any taxable year if either:

•  at least 75% of its gross income is passive income (the income test); or

•  at least 50% of the value of its assets (determined on the basis of a quarterly average) is attributable to assets that produce or are held for the production of passive income (the asset test).

We will be treated as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation in which we own, directly or indirectly, more than 25% (by value) of the stock.

We must make a separate determination each year as to whether we are a PFIC. As a result, our PFIC status may change. In particular, because the total value of our assets for purposes of the asset test generally will be calculated using the market price of our ordinary shares, our PFIC status will depend in large part on the market price of our ordinary shares, which may fluctuate considerably. Accordingly, fluctuations in the market price of the ordinary shares may result in our being a PFIC. In addition, the composition of our income and assets will be affected by how, and how quickly, we spend the cash we raise in this offering. If we are a PFIC for any year during which you hold ordinary shares, we generally will continue to be treated as a PFIC for all succeeding years during which you own ordinary shares. However, if we cease to be a PFIC, you may avoid some of the adverse effects of the PFIC regime by making a deemed sale election with respect to the ordinary shares.

If we are a PFIC for any taxable year during which you hold ordinary shares, you will be subject to special tax rules with respect to any excess distribution that you receive and any gain you realize from a sale or other disposition (including a pledge) of the ordinary shares, unless you make a mark-to-market election as discussed below. Distributions you receive in a taxable year that are greater than 125% of the average annual distributions you received during the shorter of the three preceding taxable years or your holding period for the ordinary shares will be treated as an excess distribution. Under these special tax rules:

•  the excess distribution or gain will be allocated ratably over your holding period for the ordinary shares;

•  the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which we became a PFIC, will be treated as ordinary income; and

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•  the amount allocated to each other year will be subject to tax at the highest tax rate in effect for that year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year.

The tax liability for amounts allocated to years prior to the year of disposition or excess distribution cannot be offset by any net operating losses for such years, and gains (but not losses) realized on the sale of the ordinary shares cannot be treated as capital, even if you hold the ordinary shares as capital assets. In addition, holders of stock in a PFIC may not receive a step up in basis on shares acquired from a decedent.

The PFIC rules described above will not apply to a U.S. holder that makes an election to treat us as a qualified electing fund. We do not intend to prepare or provide the information that would enable you to make a qualified electing fund election.

Alternatively, a holder of marketable stock (as defined below) in a PFIC may make a mark-to-market election for such stock of a PFIC to elect out of the tax treatment discussed above. If you make a valid mark-to-market election for the ordinary shares, you will include in income each year an amount equal to the excess, if any, of the fair market value of the ordinary shares as of the close of your taxable year over your adjusted basis in such ordinary shares. You are allowed a deduction for the excess, if any, of the adjusted basis of the ordinary shares over their fair market value as of the close of the taxable year. Deductions are allowable, however, only to the extent of any net mark-to-market gains on the ordinary shares included in your income for prior taxable years. Amounts included in your income under a mark-to-market election, as well as gain on the actual sale or other disposition of the ordinary shares, are treated as ordinary income. Ordinary loss treatment also applies to the deductible portion of any mark-to-market loss on the ordinary shares, as well as to any loss realized on the actual sale or disposition of the ordinary shares, to the extent that the amount of such loss does not exceed the net mark-to-market gains previously included for such ordinary shares. Your basis in the ordinary shares will be adjusted to reflect any such income or loss amounts. If you make a valid mark-to-market election, the tax rules that apply to distributions by corporations which are not PFICs would apply to distributions by us to you except that the lower applicable capital gains rate discussed above under “— Dividends” would not apply.

The mark-to-market election is available only for marketable stock, which is stock that is traded in other than de minimis quantities on at least 15 days during each calendar quarter (regularly traded) on a qualified exchange or other market, as defined in applicable U.S. Treasury regulations. We expect that the ordinary shares will be listed on The Nasdaq Global Market and, consequently, we expect that, assuming that the ordinary shares are listed on The Nasdaq Global Market and that the ordinary shares are regularly traded, the mark-to-market election would be available to you were we to be a PFIC.

If you hold ordinary shares in any year in which we are a PFIC, you will be required to file U.S. Internal Revenue Service Form 8621 regarding distributions received on the ordinary shares and any gain realized on the disposition of the ordinary shares. You should consult your own tax advisors regarding the potential application of the PFIC rules to your ownership of ordinary shares.

U.S. Information Reporting and Backup Withholding

Dividend payments with respect to ordinary shares on proceeds from the sale, exchange or redemption of ordinary shares paid to you within the United States, and in some cases, outside of the United States unless you are an exempt recipient, such as a corporation, will be subject to information reporting to the U.S. Internal Revenue Service and possible U.S. backup withholding at a current rate of 28%. Backup withholding will not apply, however, to a U.S. Holder who furnishes a correct taxpayer identification number and makes any other required certification or who is otherwise exempt from backup withholding. U.S. Holders who are required to establish their exempt status generally must provide such certification on U.S. Internal Revenue Service Form W-9. U.S. Holders should consult their tax advisors regarding the application of the U.S. information reporting and backup withholding rules.

Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against your U.S. federal income tax liability, and you may obtain a refund of any excess amounts withheld under the backup withholding rules by timely filing the appropriate claim for refund with the U.S. Internal Revenue Service and furnishing any required information.

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SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, no public market existed for our ordinary shares. Market sales of our ordinary shares after this offering and from time to time, and the availability of shares for future sale, may reduce the market price of our ordinary shares. Sales of substantial amounts of our ordinary shares, or the perception that these sales could occur, could harm prevailing market prices for our ordinary shares and could impair our future ability to obtain capital, especially through an offering of equity securities.

Based on 33,841,652 shares outstanding on July 31, 2006, we will have           ordinary shares outstanding upon completion of this offering, assuming no outstanding options are exercised prior to the closing of this offering. Of those shares, the           ordinary shares sold in this offering will be freely transferable without restriction, unless purchased by our existing shareholders (substantially all of which have entered into lock-up agreements, described below) or persons deemed to be our “affiliates” as that term is defined in Rule 144 under the Securities Act. Any shares purchased by an affiliate may not be resold except pursuant to an effective registration statement or an applicable exemption from registration, including an exemption under Rule 144 promulgated under the Securities Act. The remaining           ordinary shares to be outstanding immediately following the completion of this offering are “restricted,” which means they were originally sold in offerings that were not registered under the Securities Act. These restricted shares may only be sold through registration under the Securities Act or under an available exemption from registration, such as provided through Rule 144, 144(k) or Rule 701.

Subject to the lock-up agreements described below, the number of shares that will be available for sale in the public market under the provisions of Rule 144, 144(k) and 701 will be as follows:

•            shares will be eligible for sale prior to 180 days after the date of this prospectus; and

•            shares will be eligible for sale upon the expiration of the lock-up agreements, described below, beginning 180 days after the date of this prospectus and when permitted under Rule 144, 144(k) or 701.

In addition, of the 5,824,430 shares issuable upon exercise of options to purchase our ordinary shares outstanding as of July 31, 2006, approximately 5,551,974 shares were vested and will be eligible for sale pursuant to Rule 701 180 days after the completion of this offering.

Rule 144

In general, under Rule 144, a person (or persons whose shares are aggregated), including an affiliate, who has beneficially owned our ordinary shares for one year or more, including the holding period of any prior owner other than one of our affiliates, is entitled to sell within any three-month period a number of shares that does not exceed the greater of:

•  one percent of the number of ordinary shares then outstanding, which will equal           shares; or

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

Sales of restricted shares under Rule 144 are also subject to requirements on the manner of sale, notice and the availability of our current public information. Rule 144 also provides that affiliates that sell our ordinary shares that are not restricted shares must nonetheless comply with the same restrictions applicable to restricted shares, other than the holding period requirement.

Rule 144(k)

Under Rule 144(k), a person (or persons whose shares are aggregated) who is deemed not to have been our affiliate at any time during the 90 days preceding a sale and who has beneficially owned the shares proposed to be sold for at least two years, including the holding period of any prior owner other than one of our affiliates, is entitled to sell restricted shares under Rule 144(k) without complying with the volume limitations, manner of sale provisions, notice requirements or the provisions relating to the availability of current public information.

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Rule 701

Under Rule 701, ordinary shares acquired upon the exercise of currently outstanding options or pursuant to other rights granted under our share plans may be resold, beginning 90 days after the date of this prospectus, to the extent not subject to lock-up agreements, by:

•  persons other than affiliates, subject only to the manner-of-sale provisions of Rule 144; and

•  our affiliates, subject to the manner-of-sale, current public information and filing requirements of Rule 144, in each case, without compliance with the one-year holding period requirement of Rule 144.

As of July 31, 2006, options to purchase a total of 7,453,890 ordinary shares were outstanding, of which approximately 5,551,974 were vested. All our ordinary shares issuable under these options are subject to contractual lock-up agreements with us or the underwriters.

Form S-8 Registration Statements

Upon completion of this offering, we intend to file one or more registration statements on Form S-8 under the Securities Act to register ordinary shares reserved for issuance under our 1999 United States Equity Incentive Plan, 1999 Israeli Share Option Plan and our 2003 Israeli Share Option Plan, thus permitting the resale of such shares by non-affiliates in the public market without restriction under the Securities Act. Such registration statements will become effective immediately upon filing.

Lock-Up Agreements

Each of our executive officers and directors and holders of 5% of our ordinary shares have entered into lock-up agreements pursuant to which they have agreed that they will not, for a period of 180 days after the date of this prospectus without the prior written consent of Credit Suisse Securities (USA) LLC and J.P. Morgan Securities Inc. and subject to other limited exceptions, offer, pledge, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase an option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of, directly or indirectly, any ordinary shares or securities convertible into or exchangeable or exercisable for ordinary shares, enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the ordinary shares, whether any such transaction is to be settled by delivery of ordinary shares or such other securities, in cash or otherwise, or publicly disclose the intention to make any such offer, pledge, sale, contract, grant, transfer or disposition, or enter into any such swap or other agreement. The lock-up agreements permit transfers of our ordinary shares subject to certain restrictions. Credit Suisse Securities (USA) LLC and J.P. Morgan Securities Inc. may, in their joint discretion, at any time and without notice, release for sale in the public market all or any portion of the shares subject to the lock-up agreements subject to certain limitations. Substantially all of the shares that are not subject to the underwriters’ lock-up agreements are subject to similar contractual lock-up restrictions with us. After the 180-day lock-up period, these shares may be sold, subject to applicable securities laws. However, in the event that either (i) during the last 17 days of the lock-up period, we issue an earnings release or material news or a material event relating to us occurs; or (ii) prior to the expiration of the lock-up period, we announce that we will release earnings results during the 16-day period beginning on the last day of the lock-up period, the lock-up period will be extended until 18 days following the date of the release of the earnings results or the occurrence of the material news or material event, unless Credit Suisse Securities (USA) LLC and J.P. Morgan Securities Inc. waive such extension in writing.

Registration Rights

After the offering, the holders of 20,376,003 ordinary shares will be entitled to registration rights. For more information on these registration rights, see “Description of Authorized Share Capital — Registration Rights.”

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UNDERWRITING

Under the terms and subject to the conditions contained in an underwriting agreement dated          , 2006, we have agreed to sell to the underwriters named below, for whom Credit Suisse Securities (USA) LLC and J.P. Morgan Securities Inc. are acting as representatives, the following respective numbers of our ordinary shares:

	Number of
Name	shares
Credit Suisse Securities (USA) LLC
J.P. Morgan Securities Inc.
Thomas Weisel Partners LLC
Jefferies & Company, Inc.
Total:

The underwriting agreement provides that the underwriters are obligated to purchase all of the ordinary shares in this offering if any are purchased, other than those shares covered by the over-allotment option described below. The underwriting agreement also provides that if an underwriter defaults, the purchase commitments of non-defaulting underwriters may be increased or the offering may be terminated.

The underwriters will offer ordinary shares in a public offering in the United States and to institutional investors elsewhere. Each underwriter may offer and sell ordinary shares anywhere in the world where it is legally permitted to do so. There are no minimum or maximum limits on how many ordinary shares may be offered or sold in any particular country or region. Some of the underwriters are expected to make offers and sales both inside and outside the United States through their respective selling agents. Any offers or sales in the United States will be conducted by broker-dealers registered with the SEC.

We have granted to the underwriters a 30-day option to purchase on a pro rata basis up to           additional shares at the initial public offering price listed on the cover page of this prospectus, less the underwriting discounts and commissions. The option may be exercised only to cover any over-allotments of ordinary shares.

The total underwriting discounts and commissions paid to the underwriters will be     % of the total offering price of the ordinary shares. The following table summarizes the compensation and estimated expenses we will pay:

		Total
		Without	With
	Per share	over-allotment	over-allotment
Underwriting discounts and commissions paid by us	$	$	$
Expenses payable by us

The underwriters propose to offer ordinary shares initially at the public offering price on the cover page of this prospectus. Any ordinary shares sold by the underwriters to securities dealers may be sold at a discount of up to $      per ordinary share from the initial public offering price. Any such securities dealers may resell any ordinary shares purchased from the underwriters to other brokers or dealers at a discount of up to $      per ordinary share from the initial public offering price. If all of the ordinary shares are not sold at the initial offering price, the representatives may change the offering price and the other selling terms.

See “Shares Eligible for Future Sale” for a discussion of certain transfer restrictions.

We will apply to have our ordinary shares approved for listing on The Nasdaq Global Market under the symbol “MLNX.”

Prior to this offering, there has been no public market for our ordinary shares. The initial public offering price will be determined by a negotiation between us and the underwriters and will not necessarily reflect the market price of the ordinary shares following the offering. The principal factors that will be considered in determining the public offering price will include:

•  the valuation multiples of publicly traded companies that we and the representatives believe to be comparable to us;

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•  the information in this prospectus and otherwise available to the underwriters;

•  market conditions for initial public offerings;

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

•  an assessment of our management, our past and present operations and the prospects for, and timing of, our future sales;

•  the present state of our development and our current financial condition;

•  the above factors in relation to market values and various valuation measures of other companies engaged in activities similar to ours; and

•  the general condition of the securities markets at the time of this offering.

Neither we nor the underwriters can assure you that the initial public offering price will correspond to the price at which the ordinary shares will trade in the public market subsequent to the offering or that an active trading market for the ordinary shares will develop and continue after the offering.

In connection with the offering, the underwriters may engage in stabilizing transactions, over-allotment transactions, syndicate covering transactions and penalty bids in accordance with Regulation M under the Securities Exchange Act of 1934, as amended, or the Securities Exchange Act, as follows:

•  Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.

•  Over-allotment involves sales by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase, which creates a syndicate short position. The short position may be either a covered short position or a naked short position. In a covered short position, the number of shares over-allotted by the underwriters is not greater than the number of shares that they may purchase in the over-allotment option. In a naked short position, the number of shares involved is greater than the number of shares in the over-allotment option. The underwriters may close out any covered short position by either exercising their over-allotment option and/or purchasing shares in the open market.

•  Syndicate covering transactions involve purchases of the ordinary shares in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option. If the underwriters sell more shares than could be covered by the over-allotment option, a naked short position, the position can only be closed out by buying shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering.

•  Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the ordinary shares originally sold by the syndicate member are purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.

These stabilizing transactions and syndicate covering transactions may have the effect of raising or maintaining the market price of our ordinary shares or preventing or retarding a decline in the market price of the ordinary shares. As a result, the price of our ordinary shares may be higher than the price that might otherwise exist in the open market. If these activities are commenced, they are required to be conducted in accordance with applicable laws and regulations, and they may be discontinued at any time. These transactions may be effected on The Nasdaq Global Market or otherwise and, if commenced, may be discontinued at any time.

The underwriters do not expect sales to discretionary accounts to exceed 5% of the total number of ordinary shares offered.

96

We have agreed that, for a period of 180 days after the date of this prospectus, we will not (i) offer, pledge, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of, directly or indirectly, our ordinary shares or any securities convertible into or exercisable or exchangeable for our ordinary shares or (ii) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of our ordinary shares, whether any such transaction described in (i) or (ii) above is to be settled by delivery of our ordinary shares or such other securities, in cash or otherwise, without the prior written consent of the Credit Suisse Securities (USA) LLC and J.P. Morgan Securities Inc., other than the ordinary shares to be sold in this initial public offering and any of our ordinary shares issued upon the exercise of options granted under our existing employee share option plans. However, in the event that either, (i) during the last 17 days of the lock-up period, we issue an earnings release or material news or a material event relating to us occurs or (ii) prior to the expiration of the lock-up period, we announce that we will release earnings results during the 16-day period beginning on the last day of the lock-up period, then, if we, Credit Suisse Securities (USA) LLC and J.P. Morgan Securities Inc. mutually agree, the expiration of the lock-up period will be extended until the expiration of the 18-day period beginning on the date of the release of the earnings results or the occurrence of the material news or event, as applicable.

Each of our executive officers and directors and holders of 5% of our ordinary shares have entered into lock-up agreements pursuant to which they have agreed that they will not, for a period of 180 days after the date of this prospectus without the prior written consent of Credit Suisse Securities (USA) LLC and J.P. Morgan Securities Inc. and subject to other limited exceptions, offer, pledge, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase an option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of, directly or indirectly, any ordinary shares or securities convertible into or exchangeable or exercisable for ordinary shares, enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the ordinary shares, whether any such transaction is to be settled by delivery of ordinary shares or such other securities, in cash or otherwise, or publicly disclose the intention to make any such offer, pledge, sale, contract, grant, transfer or disposition, or enter into any such swap or other agreement. The lock-up agreements permit transfers of our ordinary shares subject to certain restrictions. Credit Suisse Securities (USA) LLC and J.P. Morgan Securities Inc. may, in their joint discretion, at any time and without notice, release for sale in the public market all or any portion of the shares subject to the lock-up agreements subject to certain limitations. Substantially all of the shares that are not subject to the underwriters’ lock-up agreements are subject to similar contractual lock-up restrictions with us. After the 180-day lock-up period, these shares may be sold, subject to applicable securities laws. However, in the event that either (i) during the last 17 days of the lock-up period, we issue an earnings release or material news or a material event relating to us occurs; or (ii) prior to the expiration of the lock-up period, we announce that we will release earnings results during the 16-day period beginning on the last day of the lock-up period, the lock-up period will be extended until 18 days following the date of the release of the earnings results or the occurrence of the material news or material event, unless Credit Suisse Securities (USA) LLC and J.P. Morgan Securities Inc. waive such extension in writing.

We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, and to contribute to payments that the underwriters may be required to make in that respect.

A prospectus in electronic format may be made available on the web sites maintained by one or more of the underwriters, or selling group members, if any, participating in this offering, and one or more of the underwriters participating in this offering may distribute prospectuses electronically. The representatives may agree to allocate a number of shares to underwriters and selling group members for sale to their on-line brokerage account holders. Internet distributions will be allocated by the underwriters and selling group members that will make Internet distributions on the same basis as other allocations.

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NOTICE TO CANADIAN RESIDENTS

Resale Restrictions

The distribution of the ordinary shares in Canada is being made only on a private placement basis exempt from the requirement that we prepare and file a prospectus with the securities regulatory authorities in each province where trades of ordinary shares are made. Any resale of the ordinary shares in Canada must be made under applicable securities laws which will vary depending on the relevant jurisdiction, and which may require resales to be made under available statutory exemptions or under a discretionary exemption granted by the applicable Canadian securities regulatory authority. Purchasers are advised to seek legal advice prior to any resale of the ordinary shares.

Representations of Purchasers

By purchasing ordinary shares in Canada and accepting a purchase confirmation a purchaser is representing to us and the dealer from whom the purchase confirmation is received that:

•  the purchaser is entitled under applicable provincial securities laws to purchase the ordinary shares without the benefit of a prospectus qualified under those securities laws;

•  where required by law, that the purchaser is purchasing as principal and not as agent;

•  the purchaser acknowledges and consents to the provision of specified information concerning its purchase of the ordinary shares to the regulatory authority that by law is entitled to collect the information; and

•  the purchaser has reviewed the text above under Resale Restrictions.

Further details concerning the legend authority for this information is available upon request.

Rights of Action — Ontario Purchasers Only

Under Ontario securities legislation, certain purchasers who purchase a security offered by this prospectus during the period of distribution will have a statutory right of action for damages, or while still the owner of the ordinary shares, for rescission against us in the event that this prospectus contains a misrepresentation without regard to whether the purchaser relied on the misrepresentation. The right of action for damages is exercisable not later than the earlier of 180 days from the date the purchaser first had knowledge of the facts giving rise to the cause of action and three years from the date on which payment is made for the ordinary shares. The right of action for rescission is exercisable not later than 180 days from the date on which payment is made for the ordinary shares. If a purchaser elects to exercise the right of action for rescission, the purchaser will have no right of action for damages against us. In no case will the amount recoverable in any action exceed the price at which the ordinary shares were offered to the purchaser and if the purchaser is shown to have purchased the securities with knowledge of the misrepresentation, we will have no liability. In the case of an action for damages, we will not be liable for all or any portion of the damages that are proven to not represent the depreciation in value of the ordinary shares as a result of the misrepresentation relied upon. These rights are in addition to, and without derogation from, any other rights or remedies available at law to an Ontario purchaser. The foregoing is a summary of the rights available to an Ontario purchaser. Ontario purchasers should refer to the complete text of the relevant statutory provisions.

Enforcement of Legal Rights

All of our directors and officers as well as the experts named herein may be located outside of Canada and, as a result, it may not be possible for Canadian purchasers to effect service of process within Canada upon us or those persons. All or a substantial portion of our assets and the assets of those persons may be located outside of Canada and, as a result, it may not be possible to satisfy a judgment against us or those persons in Canada or to enforce a judgment obtained in Canadian courts against us or those persons outside of Canada.

Taxation and Eligibility for Investment

Canadian purchasers of ordinary shares should consult their own legal and tax advisors with respect to the tax consequences of an investment in the ordinary shares in their particular circumstances and about the eligibility of the ordinary shares for investment by the purchaser under relevant Canadian legislation.

98

LEGAL MATTERS

Certain legal matters with respect to the legality of the issuance of the ordinary shares offered by this prospectus will be passed upon for us, with respect to U.S. law, by Latham  & Watkins LLP, Menlo Park, California, and, with respect to Israeli law, by Yigal Arnon & Co., Jerusalem, Israel. Partners of Latham & Watkins LLP hold an aggregate of 11,044 Series D redeemable preferred shares (which will convert into an aggregate of           ordinary shares upon the consummation of this offering), 1,428 ordinary shares of the company and options to purchase 10,000 ordinary shares, and partners of Yigal Arnon & Co. hold an aggregate of 7,564 ordinary shares of the company. Certain legal matters in connection with the offering will be passed upon for the underwriters, with respect to U.S. law, by Morrison & Foerster LLP, San Francisco, California, and, with respect to Israeli law, by Meitar Liquornik Geva & Leshem Brandwein, Ramat Gan, Israel.

EXPERTS

The consolidated financial statements of Mellanox Technologies, Ltd. at December 31, 2004 and for each of the two years in the period ended December 31, 2004, included in this prospectus have been so included in reliance on the report of Kesselman & Kesselman, an independent registered public accounting firm given on the authority of said firm as experts in auditing and accounting.

The consolidated financial statements of Mellanox Technologies, Ltd. as of December 31, 2005 and for the year ended December 31, 2005, included in this prospectus have been so included in reliance on the report of PricewaterhouseCoopers LLP, an independent registered public accounting firm given on the authority of said firm as experts in auditing and accounting.

ENFORCEABILITY OF CIVIL LIABILITIES

We are incorporated under the laws of the State of Israel. Service of process upon us and our directors, officers and the Israeli experts named in this prospectus, several of whom reside outside the United States, may be difficult to obtain within the United States. Furthermore, because substantially all of our assets and certain of our directors and officers are located outside the United States, any judgment obtained in the United States against us or any of our directors and officers may not be collectible within the United States.

We have been informed by our legal counsel in Israel, Yigal Arnon & Co., that it may be difficult to assert U.S. securities law claims in original actions instituted in Israel. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws because Israel is not the most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law, and not U.S. law, is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved in court as a fact, which can be a time-consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above.

In accordance with the Israeli Law on Enforcement of Foreign Judgments, 5718-1958, and subject to specified time limitations and legal procedures, Israeli courts may enforce a U.S. judgment in a civil matter which, subject to certain exceptions, is non-appealable, including judgments based upon the civil liability provisions of the Securities Act and the Securities Exchange Act and including a monetary or compensatory judgment in a non-civil matter, only if they find that:

•  the judgment was rendered by a court which was, according to the laws of the state of the court, competent to render the judgment;

•  the obligation imposed by the judgment is enforceable according to the rules relating to the enforceability of judgments in Israel and the substance of the judgment is not contrary to public policy; and

•  the judgment is executory in the state in which it was given.

Even if these conditions are satisfied, an Israeli court will not enforce a foreign judgment if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject to exceptional cases) or if its enforcement is likely to prejudice the sovereignty or security of the State of Israel. The term “prejudice the

99

sovereignty or security of the State of Israel” as used in the Israeli Law on Enforcement of Foreign Judgments has not been interpreted by Israeli courts. Furthermore, other authority under Israeli law with respect to such term is very limited, and does not provide guidance as to what criteria will be considered by an Israeli court in determining whether the enforcement of a foreign judgment would prejudice the sovereignty or security of the State of Israel.

An Israeli court also will not declare a foreign judgment enforceable if:

•  the judgment was obtained by fraud;

•  there is a finding of lack of due process;

•  the judgment was rendered by a court not competent to render it according to the laws of private international law in Israel;

•  the judgment is in conflict with another judgment that was given in the same matter between the same parties and that is still valid; or

•  at the time the action was instituted in the foreign court, a suit in the same matter and between the same parties was pending before a court or tribunal in Israel.

We have irrevocably appointed Mellanox Technologies, Inc. as our agent to receive service of process in any action against us in any U.S. federal or state court arising out of this offering or any purchase or sale of securities in connection with this offering.

If a foreign judgment is enforced by an Israeli court, it generally will be payable in Israeli currency, which can then be converted into non-Israeli currency and transferred out of Israel. The usual practice in an action before an Israeli court to recover an amount in a non-Israeli currency is for the Israeli court to issue a judgment for the equivalent amount in Israeli currency at the rate of exchange in force on the date of the judgment, but the judgment debtor may make payment in foreign currency. Pending collection, the amount of the judgment of an Israeli court stated in Israeli currency ordinarily will be linked to the Israeli consumer price index plus interest at the annual statutory rate set by Israeli regulations prevailing at the time. Judgment creditors must bear the risk of unfavorable exchange rates.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to this offering of our ordinary shares. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement, some items of which are contained in exhibits to the registration statement as permitted by the rules and regulations of the SEC. For further information with respect to us and our ordinary shares, we refer you to the registration statement, including the exhibits and the financial statements and notes filed as a part of the registration statement. Statements contained in this prospectus concerning the contents of any contract or any other document are not necessarily complete. If a contract or document has been filed as an exhibit to the registration statement, please see the copy of the contract or document that has been filed. Each statement is this prospectus relating to a contract or document filed as an exhibit is qualified in all respects by the filed exhibit. The exhibits to the registration statement should be referenced for the complete contents of these contracts and documents. You may obtain copies of this information by mail from the Public Reference Section of the SEC, 100 F Street, N.E., Room 1580, Washington, D.C. 20549, at prescribed rates. You may obtain information on the operation of the public reference rooms by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website that contains reports, proxy statements and other information about issuers, like us, that file electronically with the SEC. The address of that website is www.sec.gov.

As a result of this offering, we will become subject to the information and reporting requirements of the Securities Exchange Act and, in accordance with this law, will file periodic reports, proxy statements and other information with the SEC. These periodic reports, proxy statements and other information will be available for inspection and copying at the SEC’s public reference facilities and the website of the SEC referred to above.

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MELLANOX TECHNOLOGIES, LTD.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Reports of Independent Registered Public Accounting Firms		F-2
Consolidated Balance Sheets		F-4
Consolidated Statements of Operations		F-5
Consolidated Statements of Convertible Preferred Shares and Shareholders’ Deficit		F-6
Consolidated Statements of Cash Flows		F-7
Notes to Consolidated Financial Statements		F-8

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Mellanox Technologies, Ltd.

In our opinion, the accompanying consolidated balance sheet and the related consolidated statement of operations, of convertible preferred shares and shareholders’ deficit and of cash flows present fairly, in all material respects, the financial position of Mellanox Technologies, Ltd. and its subsidiary at December 31, 2005, and the results of their operations and their cash flows for the year in the period ended December 31, 2005 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
San Jose, California
September 28, 2006

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Mellanox Technologies, Ltd.

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of convertible preferred shares and shareholders’ deficit and of cash flows present fairly, in all material respects, the financial position of Mellanox Technologies, Ltd. and its subsidiary at December 31, 2004, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2004 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

Kesselman & Kesselman
Haifa, Israel
June 29, 2006

F-3

MELLANOX TECHNOLOGIES, LTD.

CONSOLIDATED BALANCE SHEETS

(in thousands of dollars, except share and per share data)

										Pro forma
										shareholders’
	December 31,						June 30,			equity at
	2004			2005			2006			June 30, 2006
							(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	10,944		$	12,350		$	12,963
Restricted cash		1,232			1,266			1,294
Short-term investments		1,608			—			—
Accounts receivable, net of allowance for doubtful accounts of $50, $95, and $85 for December 31, 2004 and 2005, and June 30, 2006 (unaudited), respectively		4,751			7,943			8,014
Inventories		1,692			4,031			3,432
Prepaid expenses and other		473			531			549
Total current assets		20,700			26,121			26,252
Property and equipment, net		2,026			2,327			2,480
Severance assets		1,625			1,812			2,138
Intangible assets, net		1,333			667			320
Other long-term assets		138			227			223
Total assets	$	25,822		$	31,154		$	31,413
LIABILITIES, CONVERTIBLE PREFERRED SHARES AND SHAREHOLDERS’ DEFICIT
Current liabilities:
Accounts payable		3,636			4,011			2,922
Other accrued liabilities		3,673			4,654			4,526
Capital lease obligations, current		—			216			303
Other liabilities, current		—			—			1,413
Total current liabilities		7,309			8,881			9,164
Capital lease obligations		150			292			533
Other long-term obligations		4,014			4,097			3,001
Total liabilities		11,473			13,270			12,698
Commitments and contingencies (Note 8)
Mandatorily Redeemable Convertible Preferred Shares: Series D, NIS 0.01 par value, 11,346,500 shares authorized, 8,467,384 shares issued and outstanding; liquidation preference of $83,954, as of December 31, 2004 and 2005 and June 30, 2006 (unaudited). None issued and outstanding pro forma (unaudited)		55,417			55,583			55,671
Convertible Preferred Shares: Series A-1/2, NIS 0.01 par value, 8,000,000 shares authorized, 7,600,000 shares issued and outstanding, liquidation preference of $7,600; Series B-1/2, NIS 0.01 par value, 4,000,000 shares authorized, 3,893,650 shares issued and outstanding, liquidation preference of $25,737; Series C, NIS 0.01 par value, 405,000 shares authorized, 404,979 shares issued and outstanding, liquidation preference of $3,000, as of December 31, 2004 and 2005 and June 30, 2006 (unaudited). None issued and outstanding pro forma (unaudited)		36,338			36,338			36,338
Shareholders’ deficit
Ordinary shares: NIS 0.01 par value, 45,000,000 shares authorized, 12,780,830, 13,396,608 and 13,452,650 (unaudited) shares issued and outstanding as of December 31, 2004 and 2005 and June 30, 2006, respectively and      shares pro forma (unaudited)		29			30			30
Additional paid-in capital		2,246			2,452			2,637
Accumulated other comprehensive loss		(3	)		—			—
Accumulated deficit		(79,678	)		(76,519	)		(75,961	)
Total shareholders’ deficit		(77,406	)		(74,037	)		(73,294	)
Total liabilities, convertible preferred shares and shareholders’ deficit	$	25,822		$	31,154		$	31,413

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

F-4

MELLANOX TECHNOLOGIES, LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands of dollars, except share and per share data)

										Six months ended
	Year ended December 31,									June 30,
	2003			2004			2005			2005			2006
										(unaudited)
Total revenues	$	10,151		$	20,254		$	42,068		$	17,722		$	19,319
Cost of revenues		(4,535	)		(8,736	)		(15,203	)		(7,192	)		(5,950	)
Gross profit		5,616			11,518			26,865			10,530			13,369
Operating expenses:
Research and development		14,457			12,864			13,081			6,100			7,243
Sales and marketing		5,298			5,640			7,395			3,340			3,958
General and administrative		1,720			1,719			3,094			1,325			1,618
Total operating expenses		21,475			20,223			23,570			10,765			12,819
Income (loss) from operations		(15,859	)		(8,705	)		3,295			(235	)		550
Other income, net		308			123			326			218			131
Income (loss) before taxes on income		(15,551	)		(8,582	)		3,621			(17	)		681
Provision for taxes on income		(12	)		(306	)		(462	)		(240	)		(123	)
Net income (loss)	$	(15,563	)	$	(8,888	)	$	3,159		$	(257	)	$	558
Accretion of Series D mandatorily redeemable convertible preferred shares		(144	)		(155	)		(166	)		(83	)		(88	)
Income allocable to preferred shareholders		—			—			(2,993	)		—			(470	)
Net income (loss) attributable to ordinary shareholders		(15,707	)		(9,043	)		0			(340	)		0
Net income (loss) per share attributable to ordinary
shareholders — basic and diluted	$	(1.33	)	$	(0.73	)	$	0.00		$	(0.03	)	$	0.00
Shares used in computing income (loss) per share attributable to ordinary shareholders:
Basic		11,839			12,438			13,161			13,156			13,429
Diluted		11,839			12,438			15,913			13,156			16,727

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

F-5

MELLANOX TECHNOLOGIES, LTD.

CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED SHARES AND SHAREHOLDERS’ DEFICIT

(in thousands of dollars, except share data)

	Mandatorily																		Accumulated
	redeemable convertible				Convertible								Additional			Shareholders’			other						Total
	preferred shares				preferred shares				Ordinary shares				paid-in			note			comprehensive			Accumulated			shareholders’
	Shares		Amount		Shares		Amount		Shares		Amount		capital			receivable			income			deficit			deficit
	(in thousands of dollars)
Balance at December 31, 2002		8,467,384	$	55,118		11,898,629	$	36,338		11,876,017	$	28	$	494		$	(59	)	$	96		$	(55,227	)	$	(54,668	)
Comprehensive loss
Net loss		—		—		—		—		—		—		—			—			—			(15,563	)		(15,563	)
Unrealized loss on available-for-sale securities		—		—		—		—		—		—		—			—			(88	)		—			(88	)
Comprehensive net loss		—		—		—																				(15,651	)
Accretion of mandatorily redeemable convertible preferred shares		—		144		—		—		—		—		(144	)		—			—			—			(144	)
Amortization of deferred share-based compensation		—		—		—		—		—		—		420			—			—			—			420
Share-based compensation for non-employees		—		—		—		—		—		—		125			—			—			—			125
Exercise of share options		—		—		—		—		180,342		—		136			—			—			—			136
Increase in receivables from shareholders		—		—		—		—		—		—		—			(18	)		—			—			(18	)
Balance at December 31, 2003		8,467,384	$	55,262		11,898,629	$	36,338		12,056,359	$	28	$	1,031		$	(77	)	$	8		$	(70,790	)	$	(69,800	)
Comprehensive loss
Net loss		—		—		—		—		—		—		—			—			—			(8,888	)		(8,888	)
Unrealized loss on available-for-sale securities		—		—		—		—		—		—		—			—			(11	)		—			(11	)
Comprehensive net loss																										(8,899	)
Accretion of mandatorily redeemable convertible preferred shares		—		155		—		—		—		—		(155	)		—			—			—			(155	)
Amortization of deferred share-based compensation										—		—		790			—									790
Share-based compensation for non-employees										—		—		234			—			—			—			234
Exercise of share options		—		—		—		—		722,971		1		336			—			—			—			337
Exercise of warrants		—		—		—		—		1,500		—		10			—			—			—			10
Repayment of receivables from shareholders		—		—		—		—		—		—		—			77			—			—			77
Balance at December 31, 2004		8,467,384	$	55,417		11,898,629	$	36,338		12,780,830	$	29	$	2,246		$	—		$	(3	)	$	(79,678	)	$	(77,406	)
Comprehensive income
Net income		—		—		—		—		—		—		—			—			—			3,159			3,159
Unrealized gains on available-for-sale securities		—		—		—		—		—		—		—			—			3						3
Comprehensive net income																										3,162
Accretion of mandatorily redeemable convertible preferred shares		—		166		—		—		—		—		(166	)		—			—			—			(166	)
Share-based compensation for non-employees		—		—		—		—		—		—		31			—			—			—			31
Exercise of share options		—		—		—		—		615,778		1		341			—			—			—			342
Balance at December 31, 2005		8,467,384	$	55,583		11,898,629	$	36,338		13,396,608	$	30	$	2,452		$	—		$	—		$	(76,519	)	$	(74,037	)
Net income		—		—		—		—		—		—		—			—			—			558			558
Accretion of mandatorily redeemable convertible preferred shares		—		88		—		—		—		—		(88	)		—			—			—			(88	)
Share-based compensation for non-employees		—		—		—		—		—		—		93			—			—			—			93
Share-based compensation		—		—		—		—		—		—		17			—			—			—			17
Exercise of share options		—		—		—		—		56,042		—		138			—			—			—			138
Vesting of ordinary shares subject to repurchase		—		—		—		—		—		—		25			—			—			—			25
Balance at June 30, 2006 (unaudited)		8,467,384	$	55,671		11,898,629	$	36,338		13,452,650	$	30	$	2,637		$	—		$	—		$	(75,961	)	$	(73,294	)

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

F-6

MELLANOX TECHNOLOGIES, LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands of dollars)

										Six months ended
	Year ended December 31,									June 30,
	2003			2004			2005			2005			2006
										(unaudited)
Cash flows from operating activities:
Net income (loss)	$	(15,563	)	$	(8,888	)	$	3,159		$	(257	)	$	558
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Provision for doubtful accounts		—			50			45			77			(10	)
Depreciation and amortization		3,312			2,452			1,730			873			899
Deferred income taxes		—			(137	)		10			—			—
Realized loss on marketable securities		144			48			—			—			—
Share-based compensation expense		545			1,024			31			6			110
Accrued interest on restricted cash		(33	)		(60	)		(34	)		(15	)		(28	)
Changes in assets and liabilities:
Accounts receivable		(957	)		(2,942	)		(3,237	)		58			(61	)
Inventories		(1,130	)		2			(2,339	)		(2,251	)		599
Prepaid expenses and other assets		(362	)		1,342			(157	)		(114	)		(14	)
Accounts payable		1,702			1,423			543			(587	)		(993	)
Accrued liabilities and other payables		84			(51	)		1,019			379			118
Net cash provided by (used in) operating activities		(12,258	)		(5,737	)		770			(1,831	)		1,178
Cash flows from investing activities:
Purchase of short-term investments		(13,111	)		(1,729	)		—			—			—
Proceeds from sales and maturities of short-term investments		34,869			6,900			1,611			1,611			—
Purchase of severance-related insurance policies		(437	)		(248	)		(187	)		(20	)		(326	)
Purchase of property and equipment		(325	)		(1,060	)		(962	)		(296	)		(281	)
Net cash provided by (used in) investing activities		20,996			3,863			462			1,295			(607	)
Cash flows from financing activities:
Principal payments on capital lease obligations		(921	)		(489	)		(168	)		—			(96	)
Proceeds from exercise of share options and warrants		136			347			342			257			138
Proceeds from (issuances of) shareholder notes receivable		(15	)		77			—			—			—
Net cash provided by (used in) financing activities		(800	)		(65	)		174			257			42
Net increase (decrease) in cash and cash equivalents		7,938			(1,939	)		1,406			(279	)		613
Cash and cash equivalents at beginning of period		4,945			12,883			10,944			10,944			12,350
Cash and cash equivalents at end of period	$	12,883		$	10,944		$	12,350		$	10,665		$	12,963
Supplemental disclosures of cash flow information
Interest paid	$	20		$	17		$	21		$	—		$	1
Income taxes paid	$	—		$	25		$	460		$	—		$	—
Supplemental disclosure of noncash investing and financing activities
Receivable from shareholders in connection with issuance of ordinary shares and convertible preferred shares	$	77		$	—		$	—		$	—		$	—
Software acquired under capital leases	$	—		$	(151	)	$	(403	)	$	—		$	(424	)
Acquisition of intangible assets	$	(2,000	)	$	—		$	—		$	—		$	—
Accretion on mandatorily redeemable convertible preferred shares	$	144		$	155		$	166		$	83		$	88

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

F-7

MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

INFORMATION AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 2005 AND

JUNE 30, 2006 IS UNAUDITED

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

The Company

Mellanox Technologies, Ltd., an Israeli corporation, and its wholly-owned subsidiary in the United States (collectively referred to as the “Company” or “Mellanox”), were incorporated and commenced operations in March 1999. Mellanox is a supplier of high-performance semiconductor interconnect solutions for computing, storage and communications applications. The principal market for the Company’s products is the United States.

Principles of presentation

The consolidated financial statements include the accounts of the Company. All significant intercompany balances and transactions have been eliminated.

Unaudited interim consolidated financial information

The accompanying unaudited consolidated balance sheet as of June 30, 2006, the consolidated statements of operations and cash flows for the six months ended June 30, 2005 and 2006 and the consolidated statements of convertible preferred shares and shareholders’ deficit for the six months ended June 30, 2006 are unaudited. The unaudited consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. In the opinion of the Company’s management, the unaudited consolidated interim financial statements have been prepared on the same basis as the audited financial statements and include all adjustments, consisting only of normal recurring adjustments, necessary for the fair statement of the Company’s results of operations and its cash flows for the six months ended June 30, 2005 and 2006. The results for the six months ended June 30, 2006 are not necessarily indicative of the results to be expected for the year ending December 31, 2006.

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; 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 our 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; and the timing of announcements or introductions of new products by the Company’s competitors.

Additionally, the Company has a significant presence in Israel, including research and development activities, corporate facilities and sales support operations. Uncertainty surrounding the political, economic and military conditions in Israel may directly impact the Company’s financial results.

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

F-8

MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Cash and cash equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Balances in individual bank accounts in excess of $100,000 are not insured. To mitigate risks, the Company deposits cash and cash equivalents with high credit quality financial institutions.

Restricted cash and deposits

The Company maintains certain cash amounts restricted as to withdrawal or use. The Company maintains a balance of approximately $1,244,000 that represents tenants’ security deposits in Israel that are restricted due to the tenancy agreement. The restricted deposits in Israel are recorded in U.S. dollars and presented at their cost, including accrued interest at rates of approximately 5% per annum. The Company also maintains a $50,000 special purpose certificate of deposit required by the California Board of Equalization as a security deposit against future sales and use tax remittance in the United States.

Fair value of financial instruments

The Company’s financial instruments, including cash, cash equivalents, accounts receivable and accounts payable are carried at cost, which approximates their fair value because of the short-term maturity of these instruments.

Short-term investments

The Company classifies all short-term investments as available-for-sale in accordance with Statement of Financial Accounting Standards (SFAS) No. 115, “Accounting for Certain Investments in Debt and Equity Securities.” The Company places its short-term investments primarily in marketable government agency obligations and commercial paper. The Company had no short-term investments as of December 31, 2005 and June 30, 2006.

Concentration of credit risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash, cash equivalents, short-term investments and accounts receivable. The Company’s accounts receivable are derived from revenue earned from customers located in North America, Europe and Asia. The Company performs ongoing credit evaluations of its customers’ financial condition and, generally, requires no collateral from its customers. The Company maintains an allowance for doubtful accounts receivable based upon the expected collectibility of accounts receivable. The Company reviews its allowance for doubtful accounts quarterly by assessing individual accounts receivable over a specific aging and amount, and all other balances based on historical collection experience and an economic risk assessment. If the Company determines that a specific customer is unable to meet its financial obligations to the Company, the Company provides an allowance for credit losses to reduce the receivable to the amount management reasonably believes will be collected.

The following table summarizes the revenues from customers in excess of 10% of the total revenues:

							Six months
							ended
	Year ended December 31,						June 30,
	2003		2004		2005		2006
Cisco		23%		34%		44%		10%
Voltaire		13%		18%		12%		15%
SilverStorm		2%		6%		9%		11%
Network Appliance		4%		4%		7%		11%

F-9

MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

At December 31, 2005, Cisco, Voltaire, SilverStorm and Network Appliance accounted for 40%, 12%, 14% and 8% of total accounts receivable, respectively. At June 30, 2006, Cisco, Voltaire, SilverStorm and Network Appliance accounted for 6%, 22%, 12% and 9% of total accounts receivable, respectively.

Inventory

Inventory includes finished goods, work-in-process and raw materials. Inventory is stated at the lower of cost (principally standard cost which approximates actual cost on a first-in, first-out basis) or market value. Reserves for potentially excess and obsolete inventory are made based on management’s analysis of inventory levels and future sales forecasts. Once established, the original cost of the Company’s inventory less the related inventory reserve represents the new cost basis of such products.

Property and equipment

Property and equipment are stated at cost, net of accumulated depreciation. Depreciation and amortization is generally calculated using the straight-line method over the estimated useful lives of the related assets over three years for computers, software license rights and other electronic equipment, and seven to 15 years for office furniture and equipment. Leasehold improvements and assets acquired under capital leases are amortized on a straight-line basis over the term of the lease, or the useful life of the assets, whichever is shorter. Maintenance and repairs are charged to expense as incurred, and improvements are capitalized. When assets are retired or otherwise disposed of, the cost and accumulated depreciation or amortization are removed from the accounts and any resulting gain or loss is reflected in the results of operations in the period realized.

Intangible assets

Intangible assets consist of license rights that represent technology which the Company has a right to use. They are amortized over an estimated useful life of three years using the straight-line method (see also Note 4).

Impairment of long-lived assets

In 2002, the Company adopted SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS No. 144 requires that long-lived assets held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Under SFAS No. 144, if the sum of the expected future cash flows (undiscounted and without interest charges) of the long-lived assets is less than the carrying amount of such assets, an impairment loss would be recognized, and the assets would be written down to their estimated fair values. To date, the Company has not recorded any impairment charges relating to its long-lived assets.

Revenue recognition

The Company accounts for its revenue under the provisions of Staff Accounting Bulletin (SAB) No. 104, “Revenue Recognition in Financial Statements.” Under SAB No. 104, revenues from sales of products are recognized when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable and collection is reasonably assured. The Company’s standard arrangement with its customers includes freight-on-board shipping point, 30-day payment terms, no right of return and no customer acceptance provisions. The Company generally relies upon a purchase order as persuasive evidence of an arrangement.

Probability of collection is assessed on a customer-by-customer basis. Customers are subject to a credit review process that evaluates the customers’ financial position and ultimately their ability to pay. If it is determined at the outset of an arrangement that collection is not probable, no product is shipped and no revenue is recognized unless cash is received in advance.

F-10

MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In accordance with SFAS No. 5, “Accounting for Contingencies,” the Company provides for potential warranty liability costs in the same period as the related revenues are recorded. This estimate is based on past experience of historical warranty claims and other known factors. The Company’s warranty period for its products is generally one year. In cases where the customer wishes to extend the warranty for more than one year, the Company charges an additional fee. This amount is recorded as deferred revenue and recognized over the period that the extended warranty is provided and the related performance obligation is satisfied. To date, amounts received relating to extended warranty revenue have not been significant.

In accordance with Emerging Issuers Task Force (EITF) Issue No. 00-10, “Accounting for Shipping and Handling Fees and Costs,” costs incurred for shipping and handling expenses to customers are recorded as cost of revenues. To the extent these amounts are billed to the customer in a sales transaction, the Company records the shipping and handling fees as revenue.

Product warranty

The Company typically offers a one-year limited warranty period for its products. The Company accrues for estimated returns of defective products at the time revenue is recognized based on prior historical activity. The determination of these accruals requires the Company to make estimates of the frequency and extent of warranty activity and estimated future costs to either replace or repair the products under warranty. If the actual warranty activity and/or repair and replacement costs differ significantly from these estimates, adjustments to record additional cost of revenues may be required in future periods. Changes in the Company’s liability for product warranty during the years ended December 31, 2004 and December 31, 2005, and the six-month period ended June 30, 2006, are as follows:

	December 31,						June 30,
	2004			2005			2006
	(in thousands of dollars)
							(unaudited)
Balance, beginning of the period	$	0		$	250		$	517
New warranties issued during the period		337			817			236
Adjustments due to changes in estimates during the period		0			0			(14	)
Settlements during the period		(87	)		(550	)		(165	)
Balance, end of the period	$	250		$	517		$	574

Research and development

Research and development expenses are charged to operations as incurred. Funds received from the Office of the Chief Scientist of Israel’s Ministry of Industry (the “OCS”) relating to the development of approved projects are recognized as a reduction of expenses when the company is entitled to receive those funds. Research and development expenses included in the statements of operations were reduced by grants from the OCS in the amount of $1,434,000, $1,326,000, $43,000, $43,000 and $0 for the years ended December 31, 2003, 2004 and 2005, and for the six-month periods ended June 30, 2005 and June 30, 2006, respectively.

Advertising

Cost related to advertising and promotion of products is charged to sales and marketing expense as incurred. Advertising expense was approximately $12,000, $7,000 and $49,000 for the years ended December 31, 2003 and 2005 and the six-month period ended June 30, 2006, respectively. No advertising expenses were incurred during the year ended December 31, 2004.

F-11

MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Share-based compensation

The Company maintains performance incentive plans under which incentive and non-qualified share options are granted primarily to employees and non-employee consultants. Prior to January 1, 2006, the Company accounted for share-based compensation for non-employee consultants in accordance with SFAS No. 123, “Accounting for Stock-Based Compensation,” and for employees in accordance with Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. Under APB No. 25, share-based compensation expense is recognized over the vesting period of the option to the extent that the fair value of the share exceeds the exercise price of the share option at the date of the grant.

In December 2004, the Financial Accounting Standards Board (FASB) issued a revision of SFAS No. 123. The revision is referred to as SFAS No. 123(R), “Share-based Payment,” which supersedes APB No. 25 and requires companies to expense share-based compensation using a fair-value based method for costs related to share-based payments, including share options and shares issued under the Company’s employee share option plans. The deferred compensation amount calculated under the fair-value method will then be recognized over the respective requisite period of the share option, which is generally the vesting period.

Effective January 1, 2006, the Company adopted SFAS No. 123(R), requiring measurement of the cost of employee services received in exchange for all equity awards granted based on the fair market value of the award on the grant date. Under this standard, the fair value of each employee share option is estimated on the date of grant using an options pricing model. The Company currently uses the Black-Scholes valuation model to estimate the fair value of its share-based payments.

Share-based compensation expense recognized in the Company’s financial statements starting on January 1, 2006 and thereafter is based on awards that are expected to vest. These amounts have been reduced by using an estimated forfeiture rate. Forfeitures are required to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company will evaluate the assumptions used to value share awards on a quarterly basis.

To the extent that the Company grants additional equity securities to employees, share-based compensation expense will be increased by the additional compensation resulting from those additional grants.

Comprehensive income

Comprehensive income, as defined in SFAS No. 130, “Reporting Comprehensive Income,” includes all changes in shareholders’ deficit during a period from non-owner sources. The Company had unrealized losses of $88,000 and $11,000, and an unrealized gain of $3,000 during the years ended December 31, 2003, 2004 and 2005, respectively, as a result of changes in value of marketable securities that were categorized as available-for-sale. The Company had an unrealized gain of $3,000 during the six-month period ended June 30, 2005 and no unrealized gains or losses during the six-month period ended June 30, 2006. At December 31, 2004, the $3,000 accumulated other comprehensive loss consisted of accumulated gross unrealized losses on available-for-sale securities.

Foreign currency translation

The Company uses the U.S. dollar as its functional currency. Foreign currency assets and liabilities are remeasured into U.S. dollars at the end-of-period exchange rates except for non-monetary assets and liabilities, which are remeasured at historical exchange rates. Revenue and expenses are remeasured each day at the exchange rate in effect on the day the transaction occurred, except for those expenses related to balance sheet amounts, which are remeasured at historical exchange rates. Gains or losses from foreign currency transactions are included in net income (loss) as part of “Other income, net.”

F-12

MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Net income (loss) per share attributable to ordinary shareholders

Basic and diluted net income (loss) per share is computed by dividing the net income (loss) for the period by the weighted average number of ordinary shares outstanding during the period. The calculation of diluted net income (loss) per share excludes potential ordinary shares if the effect is antidilutive. Potential ordinary shares are comprised of ordinary shares subject to repurchase rights, incremental ordinary shares issuable upon the exercise of share options or warrants and shares issuable upon conversion of convertible preferred shares.

In accordance with Emerging Issue Task Force (EITF) Issue 03-6, “Participating Securities and the Two-Class Method under FASB Statement No. 128”, earnings are allocated between the common shareholders and other security holders based on their respective rights to receive dividends. When determining basic earnings per share under EITF 03-6, undistributed earnings for a period are allocated to a participating security based on the contractual participation rights of the security to share in those earnings as if all of the earnings for the period had been distributed. The form of such participation does not have to be a dividend. Any form of participation in undistributed earnings would constitute participation by that security, regardless of whether the payment to the security holder was referred to as a dividend.

The following table sets forth the computation of basic and diluted net income (loss) per share for the periods indicated (in thousands, except per share amounts):

										Six months ended
	Years ended December 31,									June 30,			June 30,
	2003			2004			2005			2005			2006
	(in thousands of dollars)
										(unaudited)
Net income (loss)	$	(15,563	)	$	(8,888	)	$	3,159		$	(257	)	$	558
Accretion of Series D mandatorily redeemable convertible preferred shares		(144	)		(155	)		(166	)		(83	)		(88	)
Income allocable to preferred shareholders		—			—			(2,993	)		—			(470	)
Net income (loss) attributable to ordinary shareholders		(15,707	)		(9,043	)		0			(340	)		0
Basic and diluted shares:
Weighted average ordinary shares outstanding		11,897			12,456			13,176			13,161			13,433
Weighted average unvested ordinary shares subject to repurchase		(58	)		(18	)		(15	)		(5	)		(4	)
Shares used to compute basic net income (loss) per share		11,839			12,438			13,161			13,156			13,429
Effect of dilutive securities
Ordinary share options		—			—			2,752			—			3,298
Dilutive potential ordinary shares		—			—			2,752			—			3,298
Shares used to compute diluted net income (loss) per share		11,839			12,438			15,913			13,156			16,727
Net income (loss) per share attributable to ordinary shareholders — basic and diluted	$	(1.33	)	$	(0.73	)	$	0.00		$	(0.03	)	$	0.00

F-13

MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table sets forth potential ordinary shares that are not included in the diluted net income (loss) per share attributable to ordinary shareholders above because to do so would be antidilutive for the periods indicated (in thousands):

										Six Months ended
	December 31,									June 30,			June 30,
	2003			2004			2005			2005			2006
	(in thousands of dollars)
													(unaudited)
Convertible preferred shares (Series A, B and C) upon conversion to ordinary shares		11,899			11,899			11,899			11,899			11,899
Convertible preferred shares (Series D) upon conversion to ordinary shares		8,467			8,467			8,467			8,467			8,467
Warrants to purchase ordinary shares		1,270			1,268			1,268			1,268			1,268
Unvested ordinary shares subject to repurchase		(58	)		(18	)		(15	)		(5	)		(4	)
Options to purchase ordinary shares		156			295			327			236			1,349
		21,734			21,911			21,946			21,865			22,979

Segment reporting

SFAS No. 131, “Disclosure about Segments of an Enterprise and Related Information,” requires that companies report separately in the financial statements certain financial and descriptive information about operating segments profit or loss, certain specific revenue and expense items and segment assets. Additionally, companies are required to report information about the revenues derived from their products and service groups, about geographic areas in which the Company earns revenues and holds assets and about major customers. The Company has one reportable segment.

Income taxes

Income taxes are accounted for using an asset and liability approach, which requires the recognition of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. The measurement of current and deferred tax liabilities and assets are based on the provisions of enacted tax law; the effects of future changes in tax laws or rates are not anticipated. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realized.

Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are provided if, based upon the weight of available evidence, it is considered more likely than not that some or all of the deferred tax assets will not be realized.

Recent accounting pronouncements

In November 2004, the FASB issued SFAS No. 151, “Inventory Cost.” SFAS No. 151 amends the guidance in Accounting Research Bulletin (ARB) No. 43, Chapter 4, “Inventory Pricing,” to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs and wasted material (spoilage). Paragraph 5 of ARB No.  43, Chapter 4, previously stated that “under some circumstances, items such as idle facility expense, excessive spoilage, double freight, and rehandling costs may be so abnormal as to require treatment as current period charges.” SFAS No. 151 requires that those items be recognized as current-period charges regardless of whether they meet the criterion of “so abnormal.” In addition, this statement requires that allocation of fixed production overhead to the costs of conversion be based on the normal capacity of the production facilities. The

F-14

MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

provisions of SFAS No. 151 were effective for fiscal years beginning after June 15, 2005. The adoption of SFAS No. 151 did not have an impact on the Company’s consolidated results of operations or financial condition.

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections,” which replaces APB Opinion No. 20, “Accounting Changes,” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements — An Amendment of APB Opinion No. 28.” SFAS No. 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes retrospective application, or the latest practicable date, as the required method for reporting a change in accounting principle and the reporting of a correction of an error. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005 and is required to be adopted by the Company in the first quarter of 2006. The adoption of SFAS No. 154 did not have an impact on the Company’s consolidated results of operations or financial condition.

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

In June 2006, the FASB ratified Emerging Issues Task Force (EITF) Issue 06-3, “How Sales Taxes Collected From Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement.” EITF 06-3 requires a company to disclose its accounting policy (i.e., gross or net presentation) regarding the presentation of taxes within the scope of EITF 06-3. If taxes are significant, a company should disclose the amount of such taxes for each period for which an income statement is presented. The guidance is effective for periods beginning after December 15, 2006. We are currently evaluating the effect that the adoption of EITF 06-3 will have on our financial position and results of operations.

NOTE 2 — BALANCE SHEET COMPONENTS:

	December 31,						June 30,
	2004			2005			2006
	(in thousands of dollars)
							(unaudited)
Cash and cash equivalents:
Cash	$	6,936		$	3,284		$	5,859
Money market funds		49			9,066			0
Commercial paper		249			0			2,504
Repurchase agreements		3,710			0			4,600
		10,944			12,350			12,963
Accounts receivable, net:
Accounts receivable	$	4,801		$	8,038		$	8,099
Less: Allowance for doubtful accounts		(50	)		(95	)		(85	)
	$	4,751		$	7,943		$	8,014

F-15

MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	December 31,						June 30,
	2004			2005			2006
	(in thousands of dollars)
							(unaudited)
Inventories:
Raw materials	$	69		$	187		$	230
Work-in-process		892			1,655			1,338
Finished goods		731			2,189			1,864
	$	1,692		$	4,031		$	3,432
Prepaid expense and other:
Prepaid expenses	$	158		$	335		$	276
Initial public offering costs		0			0			114
Deferred tax assets, current		137			87			87
Grants receivable		72			0			0
Other		106			109			72
	$	473		$	531		$	549
Property and equipment, net:
Computer equipment and software	$	13,763		$	15,125		$	15,813
Furniture and fixtures		760			762			778
Leasehold improvements		549			549			549
		15,072			16,436			17,140
Less: Accumulated depreciation and amortization		(13,046	)		(14,109	)		(14,660	)
	$	2,026		$	2,327		$	2,480

Depreciation expense totaled approximately $3,312,000, $1,785,000, $1,064,000, $540,000 and $566,000 for the years ended December 31, 2003, 2004 and 2005, and for the six-month periods ended June 30, 2005 and June 30, 2006, respectively. Amortization of intangible assets totaled approximately $0, $667,000, $667,000, $333,000 and $333,000 for the years ended December 31, 2003, 2004 and 2005, and for the six-month periods ended June 30, 2005 and June 30, 2006, respectively.

	December 31,				June 30,
	2004		2005		2006
	(in thousands of dollars)
					(unaudited)
Other accrued liabilities:
Payroll and related expenses	$	1,374	$	1,819	$	1,886
Professional services		910		900		955
Royalties		291		566		398
Warranty		250		517		574
Restructuring, current		530		344		166
Sales commissions		204		408		334
Other		114		100		213
	$	3,673	$	4,654	$	4,526

F-16

MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	December 31,				June 30,
	2004		2005		2006
	(in thousands of dollars)
					(unaudited)
Other long-term obligations:
Accrued severance pay	$	1,818	$	2,189	$	2,660
Amount owed for intangible assets		1,915		0		0
Restructuring, noncurrent		281		0		0
Federal income tax payable		0		93		93
Other		0		223		248
	$	4,014	$	2,505	$	3,001

NOTE 3 — SHORT-TERM INVESTMENTS:

As of December 31, 2004, the Company had available-for-sale debt securities of $1,608,000, consisting of U.S. Treasury notes with an unamortized cost of $1,362,000 and gross unrealized losses of $3,000, and corporate bonds with an unamortized cost of $249,000 and no unrealized losses or gains. These securities all matured in 2005 and were converted into cash. As of December 31, 2005 and June 30, 2006, the Company had no marketable securities.

NOTE 4 — INTANGIBLE ASSETS:

In 2003, the Company licensed technology from a third party to be incorporated in some of the Company’s products. These license rights have been capitalized and are being amortized using the straight-line method over a three-year period. According to the agreement, the Company is committed to pay royalties based on revenue from certain products to be sold through 2006. The agreement has a contractual obligation for a total of $2,000,000 to be paid either: a) through royalties; or b) through a combination of royalties and a final payment at the end of the contract. At December 31, 2005 and June 30, 2006, approximately $1,600,000 and $1,400,000, respectively, was still remaining to be paid. This amount, reduced by on-going royalty payments, must be paid by January 31, 2007.

NOTE 5 — SEVERANCE:

Israeli law generally requires the payment of severance pay upon dismissal of an employee or upon termination of employment in certain other circumstances. The severance pay liability of the Company to its Israeli employees is based upon the number of years of service and the latest monthly salary. The Company partially funds this liability through the purchase of insurance policies. Once an amount is contributed, the Company generally does not have access to those assets except for use in fulfillment of its severance obligation.

The deposited funds include profits accumulated through the balance sheet date. The deposited funds may be withdrawn only upon the fulfillment of the obligation pursuant to Israeli severance pay law or labor agreements. The carrying value of the deposited funds is based on the cash surrender value of these policies. The Company records the obligation as if it were payable at each balance sheet date on an undiscounted basis.

As of December 31, 2005, the severance liability and severance assets totaled approximately $2,189,000 and $1,812,000, respectively. As of June 30, 2006, the severance liability and severance assets totaled approximately $2,660,000 and $2,138,000, respectively.

F-17

MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 6 — BORROWINGS:

Line of credit

The Company entered into a two-year agreement with a financial institution on August 16, 2005 for a credit facility, pursuant to which it may, from time to time, borrow an aggregate principal amount up to $5,000,000. Borrowings are unlimited up to $2,000,000, after which they are not to exceed 80% of the Company’s eligible outstanding accounts receivable. The Company may select the interest rate for any borrowings, based on either a fluctuating rate determined by the lender of prime less 0.75% or a fixed rate equal to LIBOR plus 2.1%. As security for all indebtedness under the facility, the Company grants collateral in the form of security interests of first priority in all accounts receivable and other rights to payment, general intangibles and inventory. The Company entered into an amendment to the credit facility on June 30, 2006. Pursuant to the terms of the credit facility, as amended, the Company must maintain a minimum balance of cash and cash equivalents and be profitable before taxes on an annual basis. The Company has never borrowed any amounts under the line of credit as of June 30, 2006.

NOTE 7 — RESTRUCTURING LIABILITY

During the year ended December 31, 2002, the Company restructured its operations, including a significant reduction in the research and development staff in Israel. As a result, a portion of the Company’s leased facilities were no longer occupied, and the Company incurred restructuring costs for the remaining lease payments. The changes in the restructuring liability are as follows:

	December 31,						June 30,
	2004			2005			2006
	(in thousands of dollars)
							(unaudited)
Restructuring liability at the beginning of the period	$	1,426		$	811		$	344
Restructuring costs paid in the year		(615	)		(467	)		(178	)
Restructuring liability at the end of the period	$	811		$	344		$	166

The Company expects to fully pay the remaining restructuring liability before the end of December 31, 2006.

NOTE 8 — COMMITMENTS AND CONTINGENCIES:

Leases

The Company leases office space and motor vehicles under operating leases with various expiration dates through 2009. Rent expense was $769,000, $918,000, $1,130,000, $531,000 and $469,000 for the years ended December 31, 2003, 2004 and 2005, and the six-month periods ended June 30, 2005 and 2006, respectively. The terms of the facility lease provide for rental payments on a graduated scale. The Company recognizes rent expense on a straight-line basis over the lease period, and has accrued for rent expense incurred but not paid.

F-18

MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company has entered into capital lease agreements for the electronic design automation software used by the research and development department. The total amount of assets under capital lease agreements within “Property and equipment, net” was approximately $374,000, $777,000 and $1,201,000 for the years ended December 31, 2004 and 2005, and for the six-month period ended June 30, 2006, respectively. As of December 31, 2005, future minimum lease payments under non-cancelable operating and capital leases, and future minimum sublease rental receipts under non-cancelable operating leases are as follows:

	Capital			Operating		Sublease
Year ended December 31,	leases			leases		income
	(in thousands of dollars)
2006	$	219,322		$	1,767	$	134
2007		219,318			696		74
2008		80,586			465		0
2009		0			104		0
2010		0			0		0
Total minimum lease payments and sublease income		519,226		$	3,032	$	208
Less: Amount representing interest		(10,938	)
Present value of capital lease obligations		508,288
Less: Current portion		(216,554	)
Long-term portion of capital lease obligations	$	291,734

Purchase commitments

At December 30, 2005, the Company had no non-cancelable purchase commitments with suppliers beyond one year. At June 30, 2006, the Company had approximately $252,000 in non-cancelable purchase commitments with suppliers beyond one year.

Royalty obligations

Through 2003, the Company received funds totaling $600,000 from the Binational Industrial Research and Development Foundation (the “BIRD Foundation”). As a result, the Company is obligated to pay the BIRD Foundation royalties from sales of products in the research and development of which the BIRD Foundation participated by way of grants. Royalty rates range from 1.45% to 2.95% of “qualifying” product revenue. If the length of time of repayment exceeds four years, the grant amount to be repaid increases to 150% of the original amount. Should the Company decide to discontinue sales of the “qualifying” products, no additional amounts are required to be paid. At December 31, 2005 and June 30, 2006, the contingent liability in respect of royalties payable to the BIRD Foundation totaled $476,000 and $550,000, respectively.

The Company is also committed to pay royalties to the OCS on proceeds from sales of products based on research and development activities partially funded by the OCS. Since 2003, the Company has received approximately $2,800,000 in OCS funding. Royalty payments are made every six months. Should the Company decide to discontinue sales of products that were partially funded by the OCS, the Company would not be obligated to pay any additional royalties. The Company is required to pay royalties of 4% on products partially funded by the OCS. At December 31, 2005, the Company had repaid $686,000, and the maximum amount of the contingent liability in respect of royalties payable to the OCS totaled $2,700,000. At June 30, 2006, the Company had repaid $857,000, and the maximum amount of the contingent liability in respect of royalties payable to the OCS totaled approximately $2,529,000.

F-19

MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Contingencies

The Company is not currently subject to any material legal proceedings. The Company may, from time to time, become a party to various legal proceedings arising in the ordinary course of business. The Company may also be indirectly affected by administrative or court proceedings or actions in which the Company is not involved but which have general applicability to the semiconductor industry.

NOTE 9 — MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED SHARES AND CONVERTIBLE PREFERRED SHARES:

Convertible preferred shares at December 31, 2004 and 2005, and June 30, 2006 consists of the following:

							Proceeds
							net of
	Shares				Liquidation		issuance
	Authorized		Outstanding		amount		costs
Series A-1 Convertible Preferred Shares		5,000,000		4,800,000	$	4,800,000	$	4,800,000
Series A-2 Convertible Preferred Shares		3,000,000		2,800,000		2,800,000		2,800,000
Series B-1 Convertible Preferred Shares		3,000,000		2,993,698		19,788,344		19,788,344
Series B-2 Convertible Preferred Shares		1,000,000		899,952		5,948,683		5,948,683
Series C Convertible Preferred Shares(1)		405,000		404,979		3,000,894		3,000,897
Series D Mandatorily Redeemable Convertible Preferred Shares		11,346,500		8,467,384		83,954,112		54,983,000
		23,751,500		20,366,013	$	120,292,033	$	91,320,924

(1) The Series C convertible preferred shares were issued in exchange for software.

The holders of preferred shares have various rights and preferences as follows:

Voting

The holders of Series A-1 convertible preferred shares (“Series A-1”), Series B-1 convertible preferred shares (“Series B-1”), Series C convertible preferred shares (“Series C”) and Series D mandatorily redeemable convertible preferred shares (“Series D”) have voting rights based on the number of ordinary shares into which the Series A-1, Series B-1, Series C and Series D shares are convertible. The holders of Series A-2 convertible preferred shares (“Series A-2” and together with Series A-1, “Series A”) and Series B-2 convertible preferred shares (“Series B-2” and together with Series B-1, “Series B”) have no voting rights. Certain voting rights of the holders of the preferred shares apply with respect to certain matters, as specified in the Company’s amended and restated articles of association. The Company must obtain approval from the holders of a majority of the Series A-1, Series B-1, Series C and Series D shares, voting together as a single class, to increase the authorized number of directors (unless such increase is approved by at least 75% of the board of directors) or effect a merger, consolidation or sale of assets where the existing shareholders retain less than 50% of the voting power of the surviving entity. The Company must obtain approval from the holders of 67% of the Series A-1, Series B-1 and Series C, voting together as a single class, to: increase the number of authorized preferred shares; authorize, create or issue any securities senior to the preferred shares; alter the amended and restated articles of association in a manner that adversely affects the preferred shares; repurchase or redeem any ordinary shares other than in connection with termination of employment; or pay any dividends on the ordinary shares. The Company must obtain approval from the

F-20

MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

holders of a majority of the Series D shares to: change the authorized number of directors; increase or decrease the number of authorized ordinary shares or preferred shares; authorize, create or issue any securities on parity with or senior to the Series D shares; alter the amended and restated articles of association; alter the rights, preferences, privileges or restrictions of the Series D shares in a manner that adversely affects such shares; repurchase or redeem any ordinary shares or preferred shares other than in connection with termination of employment or the redemption of the Series D shares in accordance with the amended and restated articles of association; pay any dividends on the ordinary shares or preferred shares; or effect a merger, consolidation or sale of assets where the existing shareholders retain less than 50% of the voting power of the surviving entity.

Dividends

The holders of Series D shares are entitled to receive dividends in preference to any dividend on the Series A, Series B, and Series C and ordinary shares at an annual rate equal to 7% of their original issue price. Thereafter, holders of Series A, Series B and Series C shares are entitled to receive dividends in preference to any dividend on the ordinary shares at an annual rate equal to 7% of their respective original issue prices. Such dividends on the Series A, Series B, Series C and Series D shares will be non-cumulative and will be paid only when and if declared. After payment of such dividends to the holders of Series A, Series B and Series C shares, any additional dividends declared shall be distributed among all holders of Series D and ordinary shares in proportion to the number of ordinary shares that would be held by each such holder if the Series D shares were converted into ordinary shares. No dividends on Series A, Series B, Series C or Series D or ordinary shares have been declared by the board from inception through June 30, 2006.

Liquidation

Upon liquidation or dissolution of the Company, the holders of the Series D shares shall be entitled to receive, prior and in preference to any other holders of shares of the Company, an amount per share equal to one and a half times their original issue price (subject to adjustment in respect of share splits, share dividends and like events), plus all declared but unpaid dividends. Then, the holders of the Series A, Series B, Series C and Series D shares shall be entitled to receive an amount per share equal to one time their respective original issue price (subject to adjustment in respect of share splits, share dividends and like events), plus all declared but unpaid dividends. The remaining assets and funds legally available for distribution, if any, will be distributed equally to the holders of the Series A, Series B and Series C shares (on an as-converted basis) and ordinary shares until such time as the holders of the Series A, Series B and Series C shares receive an amount per share equal to two times their respective original issue prices (subject to adjustment in respect of share splits, share dividends and like events).

Conversion

Each share of Series A, Series B, Series C and Series D is, at the option of the holder of such share, at any time, convertible into one ordinary share, subject to certain adjustments. The outstanding Series A, Series B, Series C and Series D shares automatically convert into ordinary shares upon the closing of an underwritten public offering with at least $15 million (in the case of the Series A) and $50 million (in the case of the Series B, Series C and Series D) in net proceeds to the Company, and an offering price per share of at least $3.00 (in the case of the Series A) and $16.53 (in the case of the Series B, Series C and Series D), subject in each case to adjustments for share splits, dividends, reclassifications and the like (a “Qualified IPO”). In addition, the Series A, Series B, Series C and Series D will be automatically converted into ordinary shares upon the affirmative vote of the holders of the majority of the issued and outstanding Series D shares (including the vote of Bessemer Venture Partners for so long as Bessemer Venture Partners continues to hold at least 567,500 Series D shares) in connection with the consummation of an underwritten public offering in which the offering price per share is less than $16.53 (subject to adjustments for share splits, dividends, reclassifications and the like) or in connection with a liquidation transaction, as described in the Company’s amended and restated articles of association. In addition, the Series A-2

F-21

MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

and Series B-2 shares may be converted to Series A-1 and Series B-1 shares upon the transfer of such shares to a bona fide purchaser unaffiliated with the transferor or immediately prior to the consummation of a Qualified IPO.

Anti-dilution adjustments

The Series D will be protected against dilution if the Company issues any capital shares or securities convertible into or exchangeable for capital shares at a price per share less than the price per share paid by the holders of the Series D, in which case such adjustment shall be on a full-ratchet basis. In addition, the per share conversion rate of the Series D will be determined by multiplying $6.612, as adjusted for stock splits, by 2.5, and dividing by the price per share paid in this offering. Therefore, depending on the price of the shares sold in this offering, the holders of the Series D may receive more than one ordinary share for each share of Series D converted in connection with this offering. Under the provisions of our amended and restated articles of association, we will not know the conversion rate of the Series D until the public offering price is determined. No such adjustment to the Series D conversion price will trigger any other antidilution adjustments, nor will it trigger any rights of first offer or other preemptive rights.

Redemption

The Company’s Series A-1, Series A-2, Series B-1, Series B-2 and Series C preferred shares are considered redeemable for accounting purposes. The Company initially recorded the Series A-1, Series A-2, Series B-1, Series B-2 and Series C preferred shares at their fair values on the dates of issuance, net of issuance costs. A deemed liquidation event could occur as a result of the sale of all or substantially all of the assets of the Company or any acquisition of the Company by another entity by means of a merger or consolidation in which the shareholders of the Company do not hold at least 50% of the voting power of the surviving entity or its parent. Because the deemed redemption event is outside the control of the Company, all preferred shares have been presented outside of permanent equity in accordance with EITF Topic D-98, “Classification and Measurement of Redeemable Securities.” Further, the Company has not adjusted the carrying values of the Series A-1, Series A-2, Series B-1, Series B-2 and Series C preferred shares to the redemption value of such shares, because it is uncertain whether or when a redemption event will occur. Subsequent adjustments to increase the carrying values to the redemption values will be made when it becomes probable that such redemption will occur.

The Series D shares must be redeemed by the Company upon the request of holders of a majority of the outstanding Series D shares at any time after September 30, 2007. The shares must be redeemed by the Company at a price equal to the original issue price and declared but unpaid dividends. The difference between the carrying value of the Series D shares and their redemption value is being accreted using the effective interest method through September 2007.

Warrants

In conjunction with the issuance of the Series D shares, the holders of Series D shares received warrants to purchase an aggregate of 1,270,074 ordinary shares at an exercise price of $6.61 per share. The warrants were recorded as a component of the shareholders’ deficit at a fair value of approximately $54,000 on the date of issuance. The fair value was estimated by using the Black-Scholes option-pricing model. Assumptions used in the model included a risk-free interest rate of 4.02%, term to maturity of 5 years, 50% volatility and 0% dividend yield. The warrants are exercisable for a period ending at the earlier of an IPO, a merger or liquidation or October 2006 or November 2006, as the case may be. At December 31, 2005 and June 30, 2006, warrants had been exercised for 1,500 ordinary shares.

NOTE 10 — ORDINARY SHARES:

The Company’s amended and restated articles of association, authorize the Company to issue 45,000,000 ordinary shares of nominal value new Israeli shekels (NIS) 0.01 each. A portion of the shares sold are subject to a right of repurchase by the Company subject to vesting, which is generally over a four-year period from the earlier of

F-22

MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

issuance date or employee hire date, as applicable, until vesting is complete. As of December 31, 2004 and 2005 and June 30, 2006, 13,626, 15,000 and 7,500 ordinary shares, respectively, were subject to repurchase.

NOTE 11 — SHARE OPTION PLANS:

In 1999, the Company’s board of directors approved share option plans for U.S. and Israeli optionees (together, the “1999 Plan”), pursuant to which options may be granted to directors, employees and consultants of the Company. In 2003, the Company’s board of directors approved an additional share option plan for Israeli optionees (the “2003 Plan” and together with the 1999 Plan, the “Plans”), pursuant to which options may be granted to directors, employees and consultants of the Company.

Options granted under the Plans may be either incentive share options or nonqualified share options. Incentive share options (“ISO”) may be granted only to Company employees (including officers and directors who are also employees). Nonqualified share options (“NSO”) may be granted to Company employees and consultants.

The Company has reserved 11,407,542 ordinary shares for issuance under the Plans. Each option granted under the Plans is exercisable until the earlier of ten years from the date of the grant of the option or the expiration date of the respective option. The exercise price of the options granted under the Plans may not be less than the nominal value of the shares for which such options are exercised. The options vest primarily over a period of four years. Any options which are forfeited or not exercised before expiration become available for future grants.

Share options granted to U.S. employees under the 1999 Plan include an early exercise option, pursuant to which unvested options can be exercised and the related shares received are subject to a repurchase right held by the Company. The related shares are considered issued and outstanding for accounting purposes but are not deemed exercised until the Company’s repurchase right expires. Accordingly, the Company accounts for the cash received in consideration for the early exercised options as a liability. The purchase price of the early exercised shares subject to the Company’s repurchase right is equal to the original exercise price of the share options. The Company’s repurchase right lapses as the early exercised shares vest. As of December 31, 2004 and 2005 and June 30, 2006, 13,626, 15,000 and 7,500 ordinary shares, respectively, were subject to repurchase.

	Options outstanding
							Weighted
	Shares			Number			average
	available			of			exercise
	for grant			shares			price
Outstanding at December 31, 2003		2,953,095			7,258,026		$	0.73
Options granted		(1,142,500	)		1,142,500			2.07
Options exercised		—			(742,908	)		0.47
Options forfeited/expired		1,068,419			(1,068,419	)		0.86
Outstanding at December 31, 2004		2,879,014			6,589,199			0.96
Options granted		(2,448,653	)		2,448,653			3.37
Options exercised		—			(620,378	)		0.56
Options repurchased		4,600			—			1.35
Options forfeited/expired		388,076			(388,076	)		0.88
Outstanding at December 31, 2005		823,037			8,029,398			1.74
Options granted (unaudited)		(177,500	)		177,500			4.80
Options exercised (unaudited)		—			(56,042	)		2.47
Options forfeited/expired (unaudited)		532,226			(532,226	)		2.86
Outstanding at June 30, 2006 (unaudited)		1,177,763			7,618,630		$	1.72

F-23

MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The weighted average fair value of options granted was approximately $0.16, $0.27, $0.49, $0.36 and $3.71 for the years ended December 31, 2003, 2004 and 2005, and for the six-month periods ended June 30, 2005 and 2006, respectively.

The following tables provide additional information about all options outstanding and exercisable under the Plans at December 31, 2005 and June 30, 2006:

At December 31, 2005:

	Options outstanding at						Options exercisable at
	December 31, 2005						December 31, 2005
			Weighted
			average		Weighted				Weighted
			remaining		average				average
	Number		contractual		exercise		Number		exercise
Range of exercise price	outstanding		life (years)		price		outstanding		price
$0.10 - $0.66		1,200,200		4.12	$	0.40		1,200,200	$	0.40
0.74 - 0.74		1,934,877		5.31		0.74		1,934,815		0.74
0.84 - 0.84		804,803		6.44		0.84		722,025		0.84
1.50 - 2.00		1,268,241		8.37		1.79		976,611		1.81
2.20 - 2.60		878,424		9.14		2.42		617,434		2.50
2.90 - 2.90		211,600		9.42		2.90		55,500		2.90
3.00 - 3.00		59,000		9.53		3.00		51,600		3.00
3.10 - 3.10		74,850		9.67		3.10		—		—
3.15 - 3.15		214,200		9.90		3.15		4,166		3.15
3.80 - 3.80		1,383,203		9.93		3.80		488,203		3.80
$0.10 - $3.80		8,029,398		7.25	$	1.74		6,050,554	$	1.32

Of the 6,050,554 options exercisable as of December 31, 2005, 4,524,270 options were fully vested and 1,526,284 were unvested but exercisable by U.S. employees under the 1999 Plan.

At June 30, 2006 (unaudited):

	Options outstanding at						Options exercisable at
	June 30, 2006						June 30, 2006
			Weighted
			average		Weighted				Weighted
			remaining		average				average
	Number		contractual		exercise		Number		exercise
Range of exercise price	outstanding		life (years)		price		outstanding		price
$0.10 - $0.66		1,200,200		3.63	$	0.40		1,200,200	$	0.40
0.74 - 0.74		1,924,877		4.82		0.74		1,924,877		0.74
0.84 - 0.84		801,865		5.95		0.84		795,637		0.84
1.50 - 2.00		1,247,613		7.86		1.79		1,038,968		1.80
2.20 - 3.00		736,722		8.66		1.88		403,608		2.21
3.10 - 3.15		289,050		9.34		3.14		29,166		3.15
3.80 - 3.80		1,240,803		9.44		3.80		525,703		3.80
4.25 - 4.25		41,000		9.62		4.25		—		—
4.90 - 4.90		90,500		9.90		4.90		31,500		4.90
5.10 - 5.10		46,000		9.99		5.10		—		—
$0.10 - $5.10		7,618,630		6.66	$	1.72		5,949,659	$	1.29

Of the 5,949,659 options exercisable as of June 30, 2006, 4,845,977 options were fully vested and 1,103,682 were unvested but exercisable by U.S. employees under the 1999 Plan.

F-24

MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Share-based compensation

As discussed in Note 1, the Company adopted SFAS No. 123(R) as of January 1, 2006 using the prospective transition method. Under this method, SFAS No. 123(R) is applied to new awards and to awards modified, repurchased or cancelled after the adoption date of January 1, 2006. Compensation cost that was previously recorded under APB No. 25 for employee awards outstanding at the adoption date, such as unvested options, will continue to be recognized as the options vest. Compensation cost for non-employees that was recorded under FAS No. 123 will also continue to be recognized as the options vest. Accordingly, for the six-month period ended June 30, 2006, share-based compensation expense includes compensation cost related to estimated fair values of awards granted after the adoption of SFAS No. 123(R), compensation costs related to unvested awards at the date of adoption based on the intrinsic values as previously recorded under APB No. 25, and compensation costs for share-based awards granted to non-employees prior and subsequent to January 1, 2006 recorded under FAS No. 123.

The fair value of options granted after January 1, 2006 is estimated on the grant date using the Black-Scholes option valuation model. This valuation model requires the Company to make assumptions and judgments about the variables used in the calculation including the expected term the options granted are expected to be outstanding, the volatility of the Company’s ordinary shares, an assumed risk-free interest rate and the estimated forfeitures of unvested share options. To the extent actual forfeitures differ from the estimates, the difference will be recorded as an adjustment in the period estimates are revised. No compensation cost is recorded for options that do not vest. Since the Company’s shares have not been actively traded in the past, volatility is based on an average of the historical volatilities of the Company’s peer group in the industry in which it does business. The expected term is calculated using the simplified method described in Question 6 of SEC Staff Accounting Bulletin (SAB) No. 107. The risk-free rate is based on the five-year Treasury bond yield as of the last day of the quarter. Expected forfeitures are based on the Company’s historical experience.

The following assumptions are used to value share options granted in the six months ended June 30, 2006: volatility of 89%, an average risk free rate is 4.94%, an expected term of 6.25 years, a dividend rate of zero and an estimated annual forfeiture rate of 13%.

Had compensation cost for the Company’s share-based compensation plan been determined prior to January 1, 2006 based on the fair value at the grant dates for the awards under the minimum-value method prescribed by SFAS No. 123, the Company’s net income (loss) would have been decreased (increased) to the pro forma amounts indicated below:

										Six months ended
	Year ended December 31,									June 30,
	2003			2004			2005			2005
	(in thousands of dollars)
										(unaudited)
Net income (loss) as reported:	$	(15,563	)	$	(8,888	)	$	3,159		$	(257	)
Add total employee share-based compensation included in the determination of net income (loss)		420			790			17			0
Deduct total employee share-based compensation determined under minimum-value method		(202	)		(412	)		(192	)		(79	)
Net income (loss) pro forma:	$	(15,345	)	$	(8,510	)	$	2,984		$	(336	)

Pro forma disclosures for the six months ended June 30, 2006 are not presented because share-based compensation was accounted for under SFAS No. 123(R)’s fair-value method during this period.

The exercise price for options granted to employees generally equals the fair value of the Company’s ordinary shares at the date of grant. However, for certain options, the exercise prices were paid with funds received pursuant to loans granted by the Company during the years 1999 and 2000, and accordingly were subject to variable

F-25

MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

accounting until the repayment of the loans. Therefore, in 2003 and 2004, the Company charged to the statements of operations compensation expense of $420,000 and $395,000 relating to these options. All loans were fully repaid as of December 31, 2004.

In 2004, the Company modified several employee share option agreements to allow terminating employees to exercise their options and purchase vested shares beyond the standard time period allowed under the plans. The Company charged to the statements of operations compensation expense of $395,000 in respect of these options in 2004. In 2005, one option holder’s option was modified to accelerate the vesting of a portion of the shares subject to the option. The expense associated with this modification was $16,500.

For share options granted since January 1, 2006, the Company estimates the fair value of the options as of the date of grant using the Black-Scholes valuation model and applies the straight-line method to attribute share-based compensation expense. For the six-month period ended June 30, 2006, the Company recorded share-based compensation expense for employees totaling $16,900.

In connection with the grant of share options to non-employees, the Company recorded share-based compensation expense under FAS No. 123 of $125,000, $234,000, $14,600, $5,800 and $93,000 for the years ended December 31, 2003, 2004 and 2005, and for the six-month periods ended June 30, 2005 and June 30, 2006, respectively.

The following table sets forth the assumptions that were used in determining the fair value of options granted to non-employees for the years ended December 31, 2004 and 2005, and the six month period ended June 30, 2006:

	December 31,				June 30,
	2004		2005		2006
	(in thousands of dollars)
					(unaudited)
Contractual life		10 years		10 years		10 years
Risk-free interest rates		3.46%		4.38%		4.94%
Volatility		75%		75%		89%
Dividend yield		0%		0%		0%

The following table summarizes the distribution of total share-based compensation expense in the Consolidated Statements of Operations:

							Six Months Ended
	Year Ended December 31,						June 30,
	2003		2004		2005		2005		2006
	(in thousands of dollars)
							(unaudited)
Research and development	$	0	$	329	$	0	$	0	$	12
Sales and marketing		512		504		16		5		88
General and administrative		33		191		15		1		10
Total share-based compensation expense	$	545	$	1,024	$	31	$	6	$	110

F-26

MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 12 — INCOME TAXES:

The components of income (loss) before income taxes are as follows:

	Year ended December 31,
	2003			2004			2005
	(in thousands of dollars)
United States	$	247		$	493		$	498
Israel		(15,798	)		(9,075	)		3,123
Income (loss) before income taxes	$	(15,551	)	$	(8,582	)	$	3,621

The components of the provision for income taxes are as follows:

	Year ended December 31,
	2003		2004			2005
	(in thousands of dollars)
Current:
U.S. federal	$	12	$	396		$	394
State and local		0		47			26
Foreign		0		0			0
		12		443			420
Deferred:
U.S. federal	$	0	$	(116	)	$	36
Other		0		(21	)		6
Provision for taxes on income	$	12	$	306		$	462

At December 31, 2004 and 2005, temporary differences which gave rise to significant deferred tax assets and liabilities are as follows:

	Year ended December 31,
	2004			2005
	(in thousands of dollars)
Deferred tax assets:
Depreciation and amortization	$	37		$	7
Reserves and accruals		100			87
Net operating loss carryforwards		201			161
Total deferred tax assets		338			255
Valuation allowance		(201	)		(161	)
Deferred tax assets	$	137		$	94

The reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows:

	Year ended December 31,
	2003			2004			2005
Tax at statutory rate		(35.00	)%		(35.00	)%		34.00	%
State, net of federal benefit		(0.04	)		0.05			1.38
Meals and entertainment		0.03			0.06			0.30
Tax at rates other than the statutory rate		35.70	%		38.74	%		(20.58	)%
Provision for taxes		0.69	%		3.85	%		15.10	%

F-27

MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In accordance with generally accepted accounting principles, a valuation allowance must be established for a deferred tax asset if it is more likely than not that a tax benefit will not be realized from the asset in the future. The Company has a net operating loss of $70 million as of December 31, 2005. This loss carryforward will be offset against future income in Israel that is subject to the Approved Enterprise Tax Holiday. The Company will begin to enjoy the full benefit of the Approved Tax Holiday once the net operating losses are fully realized.

The Company’s operations in Israel have been granted “Approved Enterprise” status by the Investment Center in the Israeli Ministry of Industry Trade and Labor, which makes the Company eligible for tax benefits under the Israeli Law for Encouragement of Capital Investments, 1959. Under the terms of the Approved Enterprise program, income that is attributable to the Company’s operations in Yokneam, Israel will be exempt from income tax for a period of ten years commencing when the Company first generates taxable income (after setting off its losses from prior years). Income that is attributable to the Company’s operations in Tel Aviv, Israel will be exempt from income tax for a period of two years commencing when the Company first generates taxable income (after setting off its losses from prior years), and will be subject to a reduced income tax rate (generally 10-25%, depending on the percentage of foreign investment in the Company) for the following five to eight years.

As a multinational corporation, the Company conducts business in many countries and is subject to taxation in many jurisdictions. The taxation of the Company’s business is subject to the application of multiple and sometimes conflicting tax laws and regulations as well as multinational tax conventions. The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty. Tax laws themselves are subject to change as a result of changes in fiscal policy, changes in legislation and the evolution of regulations and court rulings. Consequently, taxing authorities may impose tax assessments or judgments against the Company that could materially impact its tax liability and/or its effective income tax rate.

NOTE 13 — EMPLOYEE BENEFIT PLANS:

The Company adopted a 401(k) Profit Sharing Plan and Trust (the “401(k) Plan”) effective January 2000, which is intended to qualify under Section 401(k) of the Internal Revenue Code. The 401(k) Plan allows eligible employees to voluntarily contribute a portion of their pre-tax salary, subject to a maximum limit of $15,000 for the year ended December 31, 2006, subject to certain limitations. The Company does not make discretionary matching contributions to the 401(k) Plan on behalf of employees.

NOTE 14 — SEGMENT INFORMATION:

The Company operates in one reportable segment, the development, manufacture, marketing and sales of InfiniBand semiconductor products. The Company’s chief operating decision maker is the CEO.

Revenues by geographic region are as follows:

	Year ended December 31,						Six months Ended June 30,
	2003		2004		2005		2005		2006
	(in thousands of dollars)
	(unaudited)
North America	$	8,848	$	15,320	$	30,436	$	14,164	$	11,418
Israel		731		2,451		5,586		1,344		3,630
Europe		467		2,070		4,060		1,597		1,917
Asia		105		413		1,986		617		2,354
Total revenue	$	10,151	$	20,254	$	42,068	$	17,722	$	19,319

F-28

MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Revenues by product group are as follows:

							Six Months Ended
	Year Ended December 31,						June 30,		June 30,
	2003		2004		2005		2005		2006
	(in thousands of dollars)
	(unaudited)
Semiconductors	$	3,087	$	7,894	$	17,548	$	6,344	$	7,424
Cards		2,977		8,842		20,542		9,190		10,883
Switches		3,026		2,881		2,614		1,609		41
Options and miscellaneous other		1,061		637		1,364		579		971
Total revenue	$	10,151	$	20,254	$	42,068	$	17,722	$	19,319

Tangible long-lived assets by geographic location are as follows:

	December 31,				June 30,
	2004		2005		2006
	(in thousands of dollars)
	(unaudited)
Israel	$	1,918	$	2,250	$	2,426
United States		108		77		54
Total tangible long-lived assets	$	2,026	$	2,327	$	2,480

NOTE 15 — SUBSEQUENT EVENTS (UNAUDITED):

On September   , 2006 our board of directors authorized management to file a registration statement on Form S-1 to register           ordinary shares. We will agree to indemnify the underwriters against liabilities relating to our initial public offering, including liabilities under the Securities Act of 1933, as amended, and liabilities arising from breaches of the representations and warranties contained in the underwriting agreement, and to contribute to payments that the underwriters may be required to make for these liabilities.

F-29

END USER MARKETS Enterprise Data Centers Clustered Database Customer Relationship Management eCommerce and Retail Financial Web Services High Performance Computing Biosciences and Geosciences Computer Automated Engineering Digital Content Creation Electronic Design Automation Government and Defense Embedded Communications Computing and Storage Aggregation Industrial Medical Military

           Ordinary Shares

Mellanox Technologies, Ltd.

$      per Ordinary Share

Prospectus

          , 2006

Credit Suisse JPMorgan

Thomas Weisel Partners LLC Jefferies & Company, Inc.

Through and including          , 2006 (the 25th day after the date of this prospectus), U.S. federal securities laws may require all dealers that effect transactions in our ordinary shares, whether or not participating in this offering, to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

PART II

Item 13.   Other Expenses of Issuance and Distribution

The following table sets forth the costs and expenses, other than underwriting discounts and commissions, payable in connection with the sale and distribution of the securities being registered. All amounts are estimated except the SEC registration fee and the NASD filing fee. All the expenses below will be paid by Mellanox.

Item	Amount
SEC Registration fee	$	9,229
NASD filing fee
Initial Nasdaq Global Market listing fee
Legal fees and expenses		*
Accounting fees and expenses		*
Printing and engraving expenses		*
Transfer Agent and Registrar fees		*
Blue Sky fees and expenses		*
Miscellaneous fees and expenses		*
Total	$

* To be provided by amendment.

Item 14.   Indemnification of Directors and Officers

Pursuant to the Companies Law, we can only indemnify an office holder for judgments, settlements or arbitrators’ awards approved by a court that were rendered in connection with events that our board of directors deemed foreseeable based on the company’s actual activities at the time of the approval by the board of the indemnification, provided that such indemnification is limited to an amount, or criteria determined by our board of directors as reasonable under the circumstances and that the indemnification undertaking states the foreseeable activities and such amount and/or criteria. In addition, we may indemnify an office holder against the following liabilities incurred for acts performed as an office holder:

•  reasonable litigation expenses, including attorneys’ fees, incurred by the office holder as a result of an investigation or proceeding instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided that (i) no indictment was filed against such office holder as a result of such investigation or proceeding; and (ii) either (A) no financial liability was imposed upon him or her as a substitute for the criminal proceeding as a result of such investigation or proceeding or (B) if such financial liability was imposed, it was imposed with respect to an offense that does not require proof of criminal intent; and

•  reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against him or her by the company, on its behalf or by a third party or in connection with criminal proceedings in which the office holder was acquitted or in which the office holder was convicted of an offense that does not require proof of criminal intent.

Under the Companies Law, exculpation, indemnification and insurance of office holders must be approved by our audit committee and our board of directors and, in respect of our directors, by our shareholders.

We also insure our office holders against the following liabilities incurred for acts performed as an office holder:

•  a breach of duty of loyalty to the company, 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;

•  a breach of duty of care to the company or to a third party; and

II-1

•  a financial liability imposed on or incurred by the office holder in favor of a third party.

An Israeli company may not indemnify or insure an office holder against any of the following:

•  a breach of duty of loyalty, except 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;

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

•  an act or omission committed with intent to derive illegal personal benefit; or

•  a fine levied against the office holder.

Our amended and restated articles of association allow us to indemnify and insure our office holders to the fullest extent permitted by the Companies Law. We are not aware of any pending or threatened litigation or proceeding involving any of our directors or officers in which indemnification is sought. In addition, we have entered into agreements with each of our office holders undertaking to indemnify them to the fullest extent permitted by law, including with respect to liabilities resulting from this offering. This indemnification is limited to events determined as foreseeable by the board of directors based on the company’s actual activities at the time of the approval by the board of the indemnification, and to an amount or criteria determined by the board of directors as reasonable under the circumstances, and the insurance is subject to our discretion depending on its availability, effectiveness and cost.

The limitation of liability and indemnification provisions in our amended and restated articles of association may discourage shareholders from bringing a lawsuit against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might benefit us and our shareholders. A shareholder’s investment may be harmed to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, or the Securities Act, may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. There is no pending litigation or proceeding naming any of our directors or officers as to which indemnification is being sought, nor are we aware of any pending or threatened litigation that may result in claims for indemnification by any director or officer.

Item 15.   Recent Sales of Unregistered Securities

Mellanox was incorporated in Israel in March 1999.

Set forth below are the sales of all securities of the registrant sold by the registrant within the past three years which were not registered under the Securities Act.:

•  Mellanox sold an aggregate of 1,646,803 ordinary shares to employees, directors and consultants for cash consideration in the aggregate amount of $942,901 upon the exercise of share options and share awards, 4,600 shares of which have been repurchased.

•  Mellanox granted share options and share awards to employees, directors and consultants under its 1999 United States Equity Incentive Plan and 2003 Israeli Share Option Plan covering an aggregate of 2,475,128 and 1,843,925 ordinary shares, respectively, with exercise prices ranging from $1.50 to $5.25 per share. Of these, options covering an aggregate of 662,054 were cancelled without being exercised.

Mellanox claimed exemption from registration under the Securities Act for the sales and issuances of securities in the transactions described above under Section 4(2) of the Securities Act and Rule 701 thereunder as transactions pursuant to written compensatory plans or pursuant to a written contract relating to compensation.

There were no underwriters employed in connection with any of the transactions set forth in this Item 15.

II-2

Item 16.   Exhibits and Financial Statements

(a) Exhibits

Exhibit
No.			Description of Exhibit
	1	.1*	Form of Underwriting Agreement.
	3	.1	Articles of Association of Mellanox Technologies, Ltd.
	3	.2*	Amended and Restated Articles of Association of Mellanox Technologies, Ltd. to be effective upon completion of this offering.
	4	.4	Amended and Restated Investor Rights Agreement dated as of October 9, 2001, by and among Mellanox Technologies, Ltd., purchasers of Series A Preferred Shares, Series B Preferred Shares and Series D Redeemable Preferred Shares who are signatories to such agreement and certain holders of Ordinary Shares who are signatories to such agreement, and for purposes of certain sections thereof, the holder of Series C Preferred Shares issued or issuable pursuant to the Series C Preferred Share Purchase Agreement dated November 5, 2000.
	5	.1*	Opinion of Yigal Arnon & Co., Israeli counsel to Mellanox Technologies, Ltd.
	5	.2*	Opinion of Latham & Watkins LLP, U.S. counsel to Mellanox Technologies, Inc.
	10	.1	Mellanox Technologies, Ltd. 1999 United States Equity Incentive Plan and forms of agreements relating thereto.
	10	.2	Mellanox Technologies, Ltd. 1999 Israeli Share Option Plan and forms of agreements relating thereto.
	10	.3	Mellanox Technologies, Ltd. 2003 Israeli Share Option Plan and forms of agreements relating thereto.
	10	.4	Form of Indemnification undertaking made by and between Mellanox Technologies, Ltd. and each of its directors and executive officers.
	10	.5†	License Agreement between Vitesse Semiconductor Corporation and the Company, dated September 10, 2001.
	10	.6†	License Agreement between Vitesse Semiconductor Corporation and the Company, dated December 16, 2002.
	10	.7	Net Lease Agreement between S.I. Hahn, LLC and Mellanox Technologies, Inc., dated January 1, 2002.
	10	.8	Credit Agreement between Wells Fargo Bank, National Association and Mellanox Technologies, Inc., dated August 16, 2005, and the first amendment thereto and Promissory Note, and addendum thereto.
	21	.1	List of subsidiaries.
	23	.1*	Consent of Yigal Arnon & Co. (included in Exhibits 5.1).
	23	.2*	Consent of Latham & Watkins LLP (included in Exhibits 5.2).
	23	.3	Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm.
	23	.4	Consent of Kesselman & Kesselman.
	24	.1	Power of Attorney (see page II-5)).

*	To be filed by amendment. All other exhibits are filed herewith.
†	Confidential treatment requested for certain portions.

(b) Financial Statement Schedules

Schedules have been omitted because the activity and balances have not been significant to be set forth therein.

Item 17.   Undertakings

Insofar as indemnification for liabilities arising under the Securities Act may be permitted as to directors, officers and controlling persons of Mellanox pursuant to the provisions described in Item 14, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by Mellanox of expenses incurred or paid by a director, officer or controlling person of Mellanox in the successful defense of any action, suit or proceeding) is asserted by such director, officer or

II-3

controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus as filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by Mellanox pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

The undersigned registrant hereby undertakes to provide the underwriter at the closing specified in the underwriting agreements, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

II-4

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, we have duly caused this Registration Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in on the 28^th day of September, 2006.

MELLANOX TECHNOLOGIES, LTD.

By:  /s/  Eyal Waldman

Eyal Waldman

President and Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Eyal Waldman and Michael Gray, and each of them, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement (including any registration statement filed by a corporation that is a successor to Mellanox Technologies, Ltd. by merger) and to sign any registration statement for the same offering covered by the Registration Statement that is to be effective upon filing pursuant to Rule 462 promulgated under the Securities Act of 1933, as amended, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  Eyal Waldman Eyal Waldman	Chief Executive Officer and Director (principal executive officer)	September 28, 2006
/s/  Michael Gray Michael Gray	Chief Financial Officer (principal financial and accounting officer)	September 28, 2006
/s/  H. Raymond Bingham H. Raymond Bingham	Director	September 28, 2006
/s/  Rob S. Chandra Rob S. Chandra	Director	September 28, 2006
/s/  Irwin Federman Irwin Federman	Director	September 28, 2006
/s/  S. Atiq Raza S. Atiq Raza	Director	September 28, 2006
/s/  C. Thomas Weatherford C. Thomas Weatherford	Director	September 28, 2006

II-5

INDEX TO EXHIBITS

Exhibit
No.			Description of Exhibit
	1	.1*	Form of Underwriting Agreement.
	3	.1	Articles of Association of Mellanox Technologies, Ltd.
	3	.2*	Amended and Restated Articles of Association of Mellanox Technologies, Ltd. to be effective upon completion of this offering.
	4	.4	Amended and Restated Investor Rights Agreement dated as of October 9, 2001, by and among Mellanox Technologies, Ltd., purchasers of Series A Preferred Shares, Series B Preferred Shares and Series D Redeemable Preferred Shares who are signatories to such agreement and certain holders of Ordinary Shares who are signatories to such agreement, and for purposes of certain sections thereof, the holder of Series C Preferred Shares issued or issuable pursuant to the Series C Preferred Share Purchase Agreement dated November 5, 2000.
	5	.1*	Opinion of Yigal Arnon & Co., Israeli counsel to Mellanox Technologies, Ltd.
	5	.2*	Opinion of Latham & Watkins LLP, U.S. counsel to Mellanox Technologies, Inc.
	10	.1	Mellanox Technologies, Ltd. 1999 United States Equity Incentive Plan and forms of agreements relating thereto.
	10	.2	Mellanox Technologies, Ltd. 1999 Israeli Share Option Plan and forms of agreements relating thereto.
	10	.3	Mellanox Technologies, Ltd. 2003 Israeli Share Option Plan and forms of agreements relating thereto.
	10	.4	Form of Indemnification undertaking made by and between Mellanox Technologies, Ltd. and each of its directors and executive officers.
	10	.5†	License Agreement between Vitesse Semiconductor Corporation and the Company, dated September 10, 2001.
	10	.6†	License Agreement between Vitesse Semiconductor Corporation and the Company, dated December 16, 2002.
	10	.7	Net Lease Agreement between S.I. Hahn, LLC and Mellanox Technologies, Inc., dated January 1, 2002.
	10	.8	Credit Agreement between Wells Fargo Bank, National Association and Mellanox Technologies, Inc., dated August 16, 2005, and the first amendment thereto, and Promissory Note, and addendum thereto.
	21	.1	List of subsidiaries.
	23	.1*	Consent of Yigal Arnon & Co. (included in Exhibits 5.1).
	23	.2*	Consent of Latham & Watkins LLP (included in Exhibits 5.2).
	23	.3	Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm.
	23	.4	Consent of Kesselman & Kesselman.
	24	.1	Power of Attorney (see page II-5)).

*	To be filed by amendment. All other exhibits are filed herewith.
†	Confidential treatment requested for certain portions.

EX-3.1

Exhibit 3.1

THE COMPANIES LAW

A PRIVATE COMPANY LIMITED BY SHARES

ARTICLES OF ASSOCIATION

OF

MELLANOX TECHNOLOGIES, LTD.

* * * *

PRELIMINARY

1. Company Name.

     The name of the Company is “Mellanox Technologies, Ltd.” (the “Company”).

2. Definitions.

     2.1 In these Articles, each of the following terms shall have the respective meaning appearing next to it, if not inconsistent with the subject or context.

“Articles” -	These Articles of Association, as amended from time to time.
“BVP”	Bessemer Venture Partners, and its affiliates.
“Companies Law” -	The Israeli Companies Law 5759 — 1999.
“Founders” -	Eyal Waldman, Roni Ashuri, Shai Cohen, Michael Kagan, Evelyn Landsman, Shimon Rotenberg, Eitan Zehavi, Udi Katz and Alon Webman.
“Original Issue Date” -	With respect to Series A Preferred, the first date on which Series A Preferred Shares were issued; with respect to Series B Preferred, the first date on which Series B Preferred Shares were issued; with respect to Series C Preferred, the first date on which Series C Preferred Shares were issued; and with respect to Series D Redeemable Preferred, the first date on which Series D Redeemable Preferred Shares were issued.
“Original Issue Price” -	With respect to Series A Preferred, an amount equal to US$1.00 per share (as adjusted to reflect the 2-for-1 share distribution as of May 17, 2000); with respect to Series B Preferred, an amount equal to US$6.61 per share (as adjusted to reflect the 2-for-1 share distribution as of May 17, 2000); with respect to Series C Preferred, an amount equal to US$7.41

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	per share; and with respect to Series D Redeemable Preferred, an amount equal to US$6.61 per share.
“Preferred Shares” or “Preferred” -	The Company’s Series A Preferred Shares, Series B Preferred Shares, Series C Preferred Shares and Series D Redeemable Preferred Shares.
“Shareholders Register” -	The Shareholders Register that must be maintained pursuant to Section 127 of the Companies Law and, if the Company maintains one or more branch registers, refers also to all such branch registers.
“Year” and “Month” -	A Gregorian month or year.

          2.2 Any capitalized term used but not otherwise defined in these Articles shall have the meaning ascribed to it in the Companies Law.

     3. Private Company.

          3.1 The Company is a private company, and accordingly:

               3.1.1 The number of shareholders of the Company at any time (other than employees or former employees of the Company) shall not exceed 50; provided, however, that if two or more individuals hold a share or shares of the Company jointly, they shall be deemed to be one shareholder for purposes of this Article.

               3.1.2 The Company may not offer its securities to the public.

               3.1.3 The right to transfer shares of the Company is restricted as provided in these Articles.

     3A. Limited Liability

     The liability of the Shareholders for the indebtedness of the Company shall be limited as follows:

     (a) If the shares of the Company have a nominal value, the liability of each Shareholder for the indebtedness of the Company is limited to payment of the nominal value of the shares of that shareholder.

     (b) If at any time the Company shall issue shares with no nominal value, the liability of the shareholders shall be limited to payment of the amount which the Shareholders should have paid to the Company in the respect of each share according to the conditions of issue.

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SHARE CAPITAL

     4. Share Capital.

          4.1 The authorized share capital of the Company is NIS 687,515 divided into two classes of shares:

               (a) 23,751,500 Preferred Shares of nominal value NIS 0.01 each; consisting of (i) 8,000,000 Series A Preferred Shares (“Series A Preferred”), of which 5,000,000 shares shall be Series A-1 Preferred (“Series A-1 Preferred”) and 3,000,000 of which shall be Series A-2 Preferred (“Series A-2 Preferred”); (ii) 4,000,000 Series B Preferred Shares (“Series B Preferred”), of which 3,000,000 shares shall be Series B-1 Preferred (“Series B-1 Preferred”) and 1,000,000 of which shall be Series B-2 Preferred (“Series B-2 Preferred”); (iii) 405,000 Series C Preferred Shares (“Series C Preferred”); and (iv) 11,346,500 Series D Redeemable Preferred Shares (“Series D Redeemable Preferred”).

               (b) 45,000,000 Ordinary Shares of nominal value NIS 0.01 each; (“Ordinary Shares”).

          4.2 The Preferred Shares shall have the rights, preference, privileges and restrictions granted to and imposed on Preferred Shares as may be specifically indicated herein and/or as the context may so reasonably require. The Ordinary Shares shall have all residual rights not specifically associated with the Preferred Shares.

     5. The Preferred Shares.

          5.1 Dividend Provisions

               5.1.1 The holders of Series D Redeemable Preferred shall be entitled to receive dividends in preference to any dividend on the Series A Preferred, Series B Preferred, Series C Preferred and Ordinary Shares at an annual rate equal to 7% of their Original Issue Price. Thereafter, holders of Series A Preferred, Series B Preferred and Series C Preferred shall be entitled to receive dividends in preference to any dividend on the Ordinary Shares at an annual rate equal to 7% of their respective Original Issue Prices. Such dividends on the Preferred Shares will be non-cumulative and will be paid only when and if declared by the Board of Directors, or the shareholders of the Company in its General Meeting as the case may be, out of any assets legally available. After payment of such dividends to the holders of Preferred Shares, any additional dividends declared shall be distributed among all holders of Series D Redeemable Preferred and Ordinary Shares in proportion to the number of Ordinary Shares that would be held by each such holder if Series D Redeemable Preferred was converted into Ordinary Shares at the then effective Conversion Price (as defined in subarticles 5.3.3 and 5.3.4 below).

          5.2 Liquidation Preference

               5.2.1 In the event of (i) any dissolution of the Company, followed by the liquidation and winding up of the Company, (ii) any liquidation or winding up of the company as a result of any bankruptcy, reorganization or similar proceedings, (iii) any foreclosure by creditors of substantially all of the assets of, or equity interests in the Company, or (iv) any deemed liquidation,

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dissolution or winding up of the Company pursuant to subarticle 5.2.4 (each a “Liquidation Transaction”), (a) the holders of Series D Redeemable Preferred shall be entitled to receive, prior and in preference to any distribution of any of the assets of the Company to the holders of Series A Preferred, Series B Preferred, Series C Preferred and Ordinary Shares, by reason of their ownership thereof, an amount per share equal to the equivalent in U.S. dollars of one and one half (1.5) times the Original Issue Price of the Series D Redeemable Preferred (subject to adjustment for stock splits, stock dividends, reclassifications and like events), plus all declared but unpaid dividends; then (b) the holders of Series A Preferred, Series B Preferred, Series C Preferred and Series D Redeemable Preferred, shall be entitled to receive, prior and in preference to any distribution of any of the assets of the Company to the holders of Ordinary Shares by reason of their ownership thereof, an amount per share equal to the equivalent in U.S. dollars of their respective Original Issue Prices (subject to adjustment for stock splits, stock dividends, reclassifications and like events), plus all declared but unpaid dividends; then (c) the amounts remaining shall be distributed to the holders of Series A Preferred, Series B Preferred, Series C Preferred and Ordinary Shares, in proportion to the number of Ordinary Shares that would be held by each such holder if the Preferred Shares were converted into Ordinary Shares at the then effective Conversion Prices, until such time as the holders of Series A Preferred, Series B Preferred and Series C Preferred have received (including all distributions described in subarticle 5.2.1(b) above) an amount per share equal to the equivalent in U.S. dollars of two (2) times their respective Original Issue Prices (subject to adjustment for stock splits, stock dividends, reclassifications and like events), plus all declared but unpaid dividends (all such payments to holders of Preferred Shares and Ordinary Shares hereinafter defined as “Liquidation Preferences”).

               5.2.2 Insufficient Funds and Assets.

                    5.2.2.1 If the assets and funds distributed to the holders of the Series D Redeemable Preferred shall be insufficient to permit payment to such holders of the amount per share equal to the amount set forth in subarticle 5.2.1(a), then the entire assets or property of the Company legally available for distribution shall be distributed ratably to the holders of the Series D Redeemable Preferred.

                    5.2.2.2 After the distribution of the full amount described in subarticle 5.2.1(a), if the assets and funds distributed to the holders of Series A Preferred, Series B Preferred, Series C Preferred and Series D Redeemable Preferred, shall be insufficient to permit payment to such holders of the amount per share equal to the amounts set forth in subarticle 5.2.1(b), then the remaining assets or property of the Company legally available for distribution shall be distributed ratably to the holders of the Series A Preferred, Series B Preferred, Series C Preferred and Series D Redeemable Preferred, in the same proportion to the preferential amount each such holder is otherwise entitled to receive pursuant to subarticle 5.2.1(b).

               5.2.3 After payment to the holders of the Preferred Shares in the full amounts set forth in subarticle 5.2.1, the entire remaining assets and funds of the Company legally available for distribution, if any, shall be distributed among the holders of Ordinary Shares in proportion to the Ordinary Shares then held by them. Nothing in this Article 5.2 shall prevent any holder of Preferred Shares from converting such shares into Ordinary Shares pursuant to the rights described in Article 5.3.

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               5.2.4 For purposes of Article 5.2, a liquidation, dissolution or winding up of the Company shall be deemed to be occasioned by, or to include, (i) the sale of all or substantially all of the assets of the Company or (ii) the acquisition of the Company by another entity by means of merger or consolidation resulting in the exchange of the outstanding shares of the Company for securities or consideration issued, or caused to be issued, by the acquiring corporation, or its subsidiary, unless the shareholders of the Company immediately prior to such transaction hold at least 50% of voting power of the surviving corporation or its parent in such a transaction.

          5.3 Conversion

     The holders of the Preferred Shares shall have conversion rights as follows (the “Conversion Rights”):

               5.3.1 Right to Convert; Automatic Conversion

                    5.3.1.1 Subject to subarticle 5.3.3, each Preferred Share shall be convertible, at the option of the holder of such share, at any time after the date of issuance of such share, into such number of fully paid and nonassessable Ordinary Shares of the Company as is determined by dividing the applicable Original Issue Price for such share by the Conversion Price at the time in effect for such share. The initial Conversion Price per Series A Preferred Share shall be the Original Issue Price of such Series A Preferred Share, the initial Conversion Price per Series B Preferred Share shall be the Original Issue Price of such Series B Preferred Share, the initial Conversion Price per Series C Preferred Share shall be the Original Issue Price of such Series C Preferred Share, and the initial Conversion Price per Series D Redeemable Preferred Share shall be the Original Issue Price of such Series D Redeemable Preferred Share. The Conversion Prices for the Preferred Shares shall be subject to adjustment as set forth in subarticles 5.3.3 and 5.3.4.

                    5.3.1.2 Each series of Preferred Shares shall automatically be converted into Ordinary Shares at the Conversion Price at the time in effect for such series of Preferred Shares (i) immediately prior to the consummation of the Company’s sale of its Ordinary Shares to the public in an underwritten public offering in which (A) in the case of Series A Preferred, the proceeds to the Company are not less than US$15 million and the offering price to the public per Ordinary Share (prior to underwriting commissions and expenses) is at least three times the Original Issue Price of a Series A Preferred Share (subject to adjustment for share splits, share dividends, reclassifications and like events) (a “Qualified IPO”); and (B) in the case of Series B Preferred, Series C Preferred and Series D Redeemable Preferred, the proceeds to the Company are not less than US$50 million and the offering price to the public per Ordinary Share (prior to underwriting commissions and expenses) is at least $16.53 (subject to adjustment for share splits, share dividends, reclassifications and like events) or (ii) upon the affirmative vote of a majority of the outstanding Series D Redeemable Preferred (including the affirmative vote of BVP, for such time as BVP continues to hold at least 567,500 Series D Redeemable Preferred Shares, as adjusted for stock splits, stock dividends, recapitalizations and the like) in connection with the consummation of (A) the Company’s sale of its Ordinary Shares to the public in an underwritten public offering in which the offering price to the public per Ordinary Share (prior to underwriting commissions and expenses) is less than $16.53 (subject to adjustment for share splits, share dividends, reclassifications and like events), in which case all other classes of Preferred Shares shall also automatically be converted into Ordinary Shares at the Conversion Price at the time in effect for such series of

5

Preferred Shares (the “Series D Elected IPO Conversion”) or (B) a Liquidation Transaction in which the holders of the Series D Redeemable Preferred receive an amount per share less than the total Liquidation Preference to which the holders of Series D Redeemable Preferred are entitled pursuant to subarticle 5.2.1. Notwithstanding the foregoing, the Conversion Price of the Series D Redeemable Preferred shall be adjusted pursuant to Section 5.3.3.6 in connection with a Series D Elected IPO Conversion.

                    5.3.1.3 In addition to any other provision of these Articles governing the conversion of Preferred Shares, each Series A-2 Preferred Share, as the case may be, shall, upon (a) the transfer of such share to a bona fide purchaser unaffiliated with the transferor or (b) immediately prior to the consummation of a Qualified IPO, in each case, unless within 30 days following such event written notice to the contrary is given from the purchaser or holder to the Company, be converted into one fully-paid and nonassessable Series A-1 Preferred Share.

                    5.3.1.4 In addition to any other provision of these Articles governing the conversion of Preferred Shares, each Series B-2 Preferred Share, as the case may be, shall, upon (a) the transfer of such share to a bona fide purchaser unaffiliated with the transferor or (b) immediately prior to the consummation of a Qualified IPO, in each case, unless within 30 days following such event written notice to the contrary is given from the purchaser or holder to the Company, be converted into one fully-paid and nonassessable Series B-1 Preferred Share.

               5.3.2 Mechanics of Conversion

     Before any holder of Preferred Shares shall be entitled to convert the same into Ordinary Shares pursuant to subarticle 5.3.1.1, the holder shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Company or of any transfer agent for the Preferred Shares, and shall give written notice by registered mail, postage prepaid, to the Company at its principal corporate office, of the election to convert the same and shall state therein the name or names of any nominee for such holder in which the certificate or certificates for shares of Ordinary Shares are to be issued. The Company shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Preferred Shares, or to the nominee or nominees of such holder, a certificate or certificates for the number of Ordinary Shares to which such holder shall be entitled as aforesaid. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the Preferred Shares to be converted, and the person or persons entitled to receive the Ordinary Shares issuable upon such conversion shall be treated for all purposes as the record holder or holders of such Ordinary Shares as of such date. If the conversion is in connection with an underwritten public offering of securities, the conversion may, at the option of any holder tendering Preferred Shares for conversion, be conditioned upon the closing of the sale of securities pursuant to such offering, in which event the person(s) entitled to receive the Ordinary Shares issuable upon such conversion of the Preferred Shares shall not be deemed to have converted such Preferred Shares until immediately prior to the closing of such sale of securities.

               5.3.3 Conversion Price Adjustments of Preferred Shares

     The Conversion Prices of the Preferred Shares shall be subject to adjustment from time to time as follows:

6

                         5.3.3.1.1 Adjustment of the Conversion Prices for Series A Preferred Shares, Series B Preferred Shares and Series C Preferred Shares Upon Issuance of Additional Ordinary Shares. In the event that the Company shall issue Additional Ordinary Shares (including Additional Ordinary Shares deemed to be issued pursuant to subarticle 5.3.3.1.6) without consideration or for a consideration per share less than the Conversion Price of Series A Preferred Shares, Series B Preferred Shares or Series C Preferred Shares, as the case may be, in effect on the date of and immediately prior to such issue, then and in such event such Conversion Price shall be reduced, concurrently with such issue, to a price (calculated to the nearest cent) determined by multiplying such Conversion Price theretofore in effect by a fraction, the numerator of which shall be the number of Ordinary Shares outstanding immediately prior to such issue plus the number of Ordinary Shares which the aggregate consideration received by the Company for the total number of Additional Ordinary Shares so issued would purchase at such Conversion Price in effect immediately prior to such issue, and the denominator of which shall be the number of Ordinary Shares outstanding immediately prior to such issue plus the number of such Additional Ordinary Shares so issued; provided however, that, for the purposes of this subarticle 5.3.3.1.1 all Ordinary Shares issuable upon exercise, conversion or exchange of outstanding Options or Convertible Securities, as the case may be, shall be deemed to be outstanding. “Options” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire either Ordinary Shares or Convertible Securities. “Convertible Securities” shall mean any evidences of indebtedness, shares (other than Ordinary Shares or Preferred Shares) or other securities convertible into or exchangeable for Ordinary Shares.

                         5.3.3.1.2 Adjustment of the Conversion Price for Series D Redeemable Preferred Shares Upon Issuance of Additional Ordinary Shares. In the event that the Company shall issue Additional Ordinary Shares (including Additional Ordinary Shares deemed to be issued pursuant to subarticle 5.3.3.1.6) without consideration or for a consideration per share less than the Conversion Price of Series D Redeemable Preferred Shares in effect on the date of and immediately prior to such issue, then and in such event the Conversion Price of such Series D Redeemable Preferred Shares shall be reduced, concurrently with such issue, to the consideration per share at which such Additional Ordinary Shares are issued.

                         5.3.3.1.3 No adjustments of the Conversion Prices for the Preferred Shares shall be made in an amount less than one cent per share provided that any adjustments which are not required to be made by reason of this sentence shall be carried forward and shall be either taken into account in any subsequent adjustment made prior to 3 years from the date of the event giving rise to the adjustment being carried forward, or shall be made at the end of 3 years from the date of the event giving rise to the adjustment being carried forward. Other than as provided in subarticle 5.3.3.1.6, no adjustment of such Conversion Price pursuant to subarticles 5.3.3.1.1 through 5.3.3.1.7 and 5.3.3.6 shall be made if it has the effect of increasing the Conversion Price above the Conversion Price in effect immediately prior to such adjustment.

                         5.3.3.1.4 In the case of the issuance of Additional Ordinary Shares for cash, the consideration shall be deemed to be the amount of cash received therefor after giving effect to any discounts or commissions, paid or incurred by the Company for any underwriting or otherwise in connection with the issuance and sale thereof.

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                         5.3.3.1.5 In the case of the issuance of Additional Ordinary Shares for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair value thereof as determined (in good faith) by the Board of Directors.

                         5.3.3.1.6 In the case of the issuance of options to purchase or rights to subscribe for Additional Ordinary Shares, or securities by their terms convertible into or exchangeable for Additional Ordinary Shares or options to purchase or rights to subscribe for such convertible or exchangeable securities, the aggregate maximum number of Additional Ordinary Shares deliverable upon exercise (assuming the satisfaction of any conditions to exercisability, including without limitation the passage of time, but without taking into account potential antidilution adjustments) of such options to purchase or rights to subscribe for Additional Ordinary Shares or upon conversion or an exchange of such convertible or exchangeable securities shall be deemed to have been issued at the time full consideration for such options to purchase or securities by their terms convertible into or exchangeable for or rights to subscribe for Additional Ordinary Shares have been paid for at a consideration equal to the consideration (determined in the manner provided in subarticles 5.3.3.1.4 and 5.3.3.1.5), if any, received by the Company upon the issuance of such options or rights or securities plus any additional consideration payable to the Company pursuant to the term of such options or rights or securities (without taking into account potential antidilution adjustments) for the Additional Ordinary Shares covered thereby. In the event of any change in the number of shares of Ordinary Shares deliverable or any increase in the consideration payable to the Company upon exercise of such options or rights or upon conversion of or in exchange for such convertible or exchangeable securities, including, but not limited to, a change resulting from the antidilution provisions thereof, the Conversion Price in effect at the time for Preferred Shares obtained with respect to the adjustment which was made upon the issuance of such options, rights or securities, and any subsequent adjustments based thereon, shall be recomputed to reflect such change, but no further adjustment shall be made for the actual issuance of Ordinary Shares or any payment of such consideration upon the exercise of any such options or rights or the conversion or exchange of such securities. Upon the expiration of any such options or rights, the termination of any such rights to convert or exchange or the expiration of any options or rights related to such convertible or exchangeable securities, each Conversion Price in effect at the time for Series A Preferred Shares, Series B Preferred Shares, Series C Preferred Shares and Series D Redeemable Preferred Shares, as the case may be, obtained with respect to the adjustment which was made upon the issuance of such options, rights or securities or options or rights related to such securities, and any subsequent adjustments based thereon, shall be recomputed to reflect the issuance of only the number of Ordinary Shares actually issued upon the exercise of such options or rights, upon the conversion or exchange of such securities or upon the exercise of the options or rights related to such securities. Upon the expiration of any such options or rights, the termination of any such rights to convert or exchange or the expiration of any options or rights related to such convertible or exchangeable securities, only the number of shares of Ordinary Shares actually issued upon the exercise of such options or rights, upon the conversion or exchange of such securities or upon the exercise of the options or rights related to such securities shall continue to be deemed to be issued.

                         5.3.3.1.7 For purposes of subarticle 5.3.3.1 hereof, the consideration for any Additional Ordinary Shares shall be taken into account at the U.S. dollar equivalent thereof, on the day such Additional Ordinary Shares are issued or deemed to be issued pursuant to subarticle 5.3.3.1.6.

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                    5.3.3.2 “Additional Ordinary Shares” shall mean shares of any class issued (or deemed to have been issued pursuant to subarticle 5.3.3.1.6) by the Company after the Original Issue Date other than:

                         5.3.3.2.1 Ordinary Shares issued pursuant to a transaction described in subarticles 5.3.3.3, 5.3.3.4, 5.3.3.5, 5.3.3.6, 5.3.4 or 5.3.5 hereof;

                         5.3.3.2.2 Up to 9,187,972 Ordinary Shares (subject to adjustment for stock splits, stock dividends, reclassifications and like events) or any other securities, in the aggregate, issued pursuant to a share option or other incentive plan or as part of a compensation arrangement to an officer, employee, director or consultant approved by the Board of Directors including, without limitation, the exercise of options outstanding as of the Original Issue Date;

                         5.3.3.2.3 Ordinary Shares issued on conversion of Preferred Shares;

                         5.3.3.2.4 Ordinary Shares issued in the Company’s Qualified IPO;

                         5.3.3.2.5 Ordinary Shares issued to equipment lessors, banks, financial institutions or similar entities, or to strategic partners of the Company, in a transaction approved by a vote of a majority of the directors elected pursuant to Article 39.2.2, 39.2.3 and 39.2.4, the principal purpose of which is other than raising of capital through the sale of equity to securities of the Company.

                    5.3.3.3 Adjustment of Conversion Prices Upon Subdivision or Combination of Ordinary Shares.

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

                    5.3.3.4 Adjustment of Conversion Prices Upon Share Dividend Declaration.

     If the Company at any time shall pay a dividend payable in additional Ordinary Shares or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional Ordinary Shares (hereinafter referred to as “Ordinary Share Equivalents”), then the Conversion Prices shall be adjusted as at the date the Company shall fix as the record date for the purpose of receiving such dividend (or if no such record date is fixed, as at the date of such payment), to that price determined by multiplying each Conversion Price in effect immediately prior to such record date (or if no such record date is fixed then immediately prior to such payment) by a fraction, (a) the numerator of which shall be the total number of Ordinary Shares outstanding and those issuable with respect to such Ordinary Share Equivalents being determined from time to time

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in the manner provided for deemed issuance in subarticle 5.3.3.1.6) immediately prior to such dividend, and (b) the denominator of which shall be the total number of Ordinary Shares outstanding and those issuable with respect to such Ordinary Share Equivalents (determined as aforesaid) immediately after such dividend (plus, in the event that the Company paid cash for fractional shares, the number of additional shares which would have been outstanding had the Company issued fractional shares in connection with such dividend).

                    5.3.3.5 If the Company at any time shall make a distribution of its assets to the holders of its Ordinary Shares as a dividend in liquidation or partial liquidation or by way of return of capital or other than as a dividend payable out of earnings or surplus legally available for dividends, the holders of Preferred Shares shall, upon exercise of the Conversion Rights, be entitled to receive, in addition to the number of Ordinary Shares receivable thereupon, and without payment of any additional consideration therefor, a sum equal to the amount of such assets as would have been payable to such holder as owner of that number of Ordinary Shares of the Company receivable by exercise of the Conversion Rights had such holder been the holder of record of such Ordinary Shares on the record date for such distribution; and an appropriate provision therefor shall be made a part of any such distribution. Notwithstanding the foregoing, this subarticle 5.3.3.5 shall not apply where an equivalent distribution is declared for the benefit of the Preferred Shares (calculated on the basis of the number of Ordinary Shares into which such Preferred Shares could then be converted) at the same time as the dividend is declared for the Ordinary Shares.

                    5.3.3.6 If the Company at any time shall sell its Ordinary Shares to the public in an underwritten public offering in which the price to the public per Ordinary Share (prior to underwriting commissions and expenses) is less than $16.53 (subject to adjustment for share splits, share dividends, reclassifications and like events) (an “Adjustment IPO”) then the Conversion Price of the Series D Redeemable Preferred in effect immediately prior to such Adjustment IPO shall be adjusted as at the date such Adjustment IPO shall be declared effective to that price determined by multiplying the Conversion Price then in effect by a fraction (i) the numerator of which is the quotient obtained by dividing (a) the price to the public per Ordinary Share sold by the Company in the Adjustment IPO, by (b) two and one half (2.5); and (ii) the denominator of which is the Conversion Price in effect prior to the adjustment.

               5.3.4 Other Distributions

     In the event the Company shall declare a distribution payable in securities of other persons, evidences of indebtedness issued by the Company or other persons, assets (excluding cash dividends) or options or rights not referred to in subarticles 5.3.3.3, 5.3.3.4 or 5.3.3.5 then, in each such case for the purpose of this subarticle 5.3.4, the holders of the Preferred Shares shall be entitled to receive such distribution in respect of their holdings, on an as-converted basis as of the record date for such distribution.

               5.3.5 Recapitalizations

     If at any time or from time to time there shall be a recapitalization of the Ordinary Shares (other than a subdivision, combination or merger or sale of assets transaction provided for elsewhere in this Article or Article 5.4), provision shall be made so that the holders of the Preferred Shares

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shall thereafter be entitled to receive upon conversion of the Preferred Shares the number of Ordinary Shares or other securities or property of the Company or otherwise, to which a holder of Ordinary Shares deliverable upon conversion would have been entitled immediately prior to such recapitalization. In any such case, appropriate adjustment shall be made in the application of the provisions of this Article with respect to the rights of the holders of the Preferred Shares after the recapitalization to the end that the provisions of this Article (including adjustment of the Conversion Prices then in effect and the number of shares issuable upon conversion of the Preferred Shares) shall be applicable after that event as nearly equivalent as may be practicable.

               5.3.6 No Impairment

     The Company will not, by amendment of its Articles of Association or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Article 5 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of the Preferred Shares against impairment.

               5.3.7 No Fractional Shares and Certificate as to Adjustments

                    5.3.7.1 No fractional shares shall be issued upon conversion of the Preferred Shares, and the aggregate number of Ordinary Shares to be issued to each converting holder shall be rounded to the nearest whole share.

                    5.3.7.2 Upon the occurrence of each adjustment or readjustment of the Conversion Prices of Preferred Shares pursuant to this Article 5, the Company, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of Preferred Shares a certificate setting forth each adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall furnish or cause to be furnished to such holder a like certificate setting forth (A) such adjustment and readjustment, (B) the Conversion Price at the time in effect, and (C) the number of Ordinary Shares and the amount, if any, of other property which at the time would be received upon the conversion of a Preferred Share.

               5.3.8 Notices of Record Date

     In the event of any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (including a cash dividend) or other distribution, any right to subscribe for, purchase or otherwise acquire any shares of any class or any other securities or property, or to receive any other right, the Company shall mail to each holder of Preferred Shares, at least 15 days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right.

          5.4 Reclassification

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               5.4.1 In case of any reclassification or change of outstanding securities issuable upon exercise of the Conversion Rights (other than a change in nominal value, or as a result of a subdivision or combination) including a merger or sale of assets transaction, the Company shall, without payment of any additional consideration therefor, issue to the holders of Preferred Shares new Preferred Shares, as applicable, with the same respective rights, preferences, privileges and restrictions granted to and imposed on the Preferred Shares in these Articles but providing that the holder of the new Preferred Shares shall have the right to exercise the conversion rights granted by such new Preferred Shares and procure upon such exercise of such conversion rights, in lieu of each Ordinary Share theretofore issuable upon exercise of the Conversion Rights of the Preferred Shares, the kind and amount of shares of stock, other securities, money and assets receivable upon such reclassification or change by a holder of one Ordinary Share issuable upon exercise of the Conversion Rights had they been exercised immediately prior to such reclassification or change. The provisions of this subarticle 5.4.1 shall similarly apply to successive reclassifications and changes.

               5.4.2 The Company shall give each holder of record of Preferred Shares written notice of such impending transaction not later than thirty (30) days prior to the shareholders’ meeting called to approve such transaction, or thirty (30) days prior to the closing of such transaction, whichever is earlier, and shall also notify such holders in writing of the final approval of such transaction. The first of such notices shall describe the material terms and conditions of the impending transaction and the provisions of this Article 5.4, and the Company shall thereafter give such holders prompt notice of any material changes. The transaction shall in no event take place sooner than twenty (20) business days after the Company has given the first notice provided for herein or sooner than ten (10) business days after the Company has given notice of any material changes provided for herein; provided, however, that such periods may be shortened upon the written consent of the holders of Preferred Shares which are entitled to such notice rights or similar notice rights and which represent at least a majority of the voting power of all then outstanding Preferred Shares. The notice required by this subarticle 5.4.2 shall be delivered pursuant to the method set forth in Article 73 hereof.

               5.4.3 The provisions of this Article 5.4 are in addition to the provisions of Article 5.3 and the protective provisions of Article 5.6 hereof.

     Nothing in this Article 5.4 shall prevent the holders of the Preferred Shares from exercising the rights to convert the Preferred Shares into Ordinary Shares prior to the conclusion of a transaction contemplated herein.

          5.5 Voting Rights

     The holder of each share of the Preferred Shares (with the exception of the Series A-2 Preferred Shares and Series B-2 Preferred Shares) shall have the right to one vote for each share of Ordinary Shares into which such Preferred Shares could then be converted (with any fractional share determined on an aggregate conversion basis being rounded to the nearest whole share), and with respect to such vote, such holder shall have full voting rights and powers equal to the voting rights and powers of the holders of Ordinary Shares, and shall be entitled, notwithstanding any provision hereof, to notice of any shareholders’ meeting in accordance with the Articles of Association of the Company, and shall be entitled to vote, together with holders of Ordinary Shares, with respect to any question upon which holders of Ordinary Shares have the right to vote. Any provision of these

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Articles to the contrary notwithstanding, neither the Series A-2 Preferred Shares nor the Series B-2 Preferred Shares will have any voting rights unless, as to a given Series A-2 Preferred Share or Series B-2 Preferred Share, as the case may be, such share is converted in accordance with subarticle 5.3.1.3 or subarticle 5.3.1.4 of these Articles.

          5.6 Specific Voting Provisions

               5.6.1 Notwithstanding any other provision of these Articles to the contrary, prior to the Qualified IPO, the Company shall not, without first obtaining the approval (by vote or written consent, as provided by law) which approval shall not be unreasonably withheld, of the holders of 67% of the Series A-1 Preferred Shares, Series B-1 Preferred Shares, and Series C Preferred Shares, voting together as a single class:

                    5.6.1.1 increase the number of authorized shares of Preferred Shares;

                    5.6.1.2 authorize, create or issue any shares of any class or series of shares or any other securities convertible into equity securities of the Company, or reclassify any existing shares to equity securities or any of the securities convertible into equity securities, having rights, preferences or privileges senior to the Preferred Shares;

                    5.6.1.3 amend or repeal any provision of, or add any provision to, these Articles, if such action should alter or change the rights, preferences, privileges or restrictions of the Preferred Shares so as to adversely affect such shares (it being understood that the special voting provisions of this subarticle 5.6.1.3 are in lieu of a separate class vote by each of the Series A-1 Preferred Shares, Series B-1 Preferred Shares and Series C Preferred Shares with respect to matters addressed in this subarticle 5.6.1.3);

                    5.6.1.4 except upon termination of employment, take any action resulting in the repurchase or redemption of shares of Ordinary Shares;

                    5.6.1.5 pay any dividends on its Ordinary Shares.

               5.6.2 Notwithstanding any other provision of these Articles to the contrary, prior to the Qualified IPO, the Company shall not, without first obtaining the approval (by vote or written consent, as provided by law) of the holders of a majority of the Preferred Shares, voting together as a single class:

                    5.6.2.1 increase the size of the Board of Directors, unless such increase was approved by at least seventy-five percent (75%) of the members of the Board of Directors;

                    5.6.2.2 enter into a transaction that would occasion the sale of all or substantially all of the Company’s assets or the acquisition of this Company by another entity by means of merger or consolidation resulting in the exchange of the outstanding shares of this Company for securities or consideration issued, or caused to be issued, by the acquiring corporation or its subsidiary, unless the shareholders of the Company hold at least 50% of the voting power of the surviving corporation in such a transaction, unless such transaction was approved by at least seventy-five percent (75%) of the members of the Board of Directors.

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               5.6.3 Notwithstanding any other provision of these Articles to the contrary, prior to the Company’s initial public offering meeting the requirements of subarticle 5.3.1.2(i)(B), the Company shall not, without first obtaining the approval (by vote or written consent, as provided by law) of the holders of a majority of the Series D Redeemable Preferred Shares, voting together as a separate class (including the affirmative vote of BVP, for such time as BVP continues to hold at least 567,500 Series D Redeemable Preferred Shares, as adjusted for stock splits, stock dividends, recapitalizations and the like, (i) with respect to subarticle 5.6.3.4; and (ii) with respect to subarticle 5.6.3.8 only if the Company enters into a transaction described in subarticle 5.6.3.8 where holders of Series D Redeemable Preferred shall not receive at least two and one half (2.5) times their investment in Series D Redeemable Preferred):

                    5.6.3.1 increase or decrease the size of the Board of Directors.

                    5.6.3.2 increase or decrease of the number of authorized Ordinary Shares or Preferred Shares;

                    5.6.3.3 authorize, create or issue any shares of any class or series of shares or any other securities convertible into equity securities of the Company, or reclassify any existing shares to equity securities or any of the securities convertible into equity securities, having rights, preferences or privileges senior to or on parity with the Series D Redeemable Preferred Shares;

                    5.6.3.4 amend or repeal any provision of, or add any provision to, these Articles;

                    5.6.3.5 alter or change the rights, preferences, privileges or restrictions of the Series D Redeemable Preferred Shares so as to adversely affect such shares;

                    5.6.3.6 except upon termination of employment, take any action resulting in the repurchase or redemption of shares of Ordinary Shares or Preferred Shares, except as set forth in Article 5.7;

                    5.6.3.7 pay any dividends on its Ordinary Shares or Preferred Shares; or

                    5.6.3.8 enter into a transaction that would occasion the sale of all or substantially all of the Company’s assets or the acquisition of this Company by another entity by means of merger or consolidation resulting in the exchange of the outstanding shares of this Company for securities or consideration issued, or caused to be issued, by the acquiring corporation or its subsidiary, unless the shareholders of the Company hold at least 50% of the voting power of the surviving corporation in such a transaction.

          5.7 Redemption of Series D Redeemable Preferred Shares.

               5.7.1 On or at any time after September 30, 2007 this Company shall, at any time it may lawfully do so, upon receipt of written notice from the holders of a majority of the then outstanding Series D Redeemable Preferred Shares (the “Redemption Call”), redeem in whole and not in part the Series D Redeemable Preferred Stock by paying in cash therefor a sum per share (the

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“Redemption Price”) equal to (i) the Original Purchase Price of the Series D Redeemable Preferred Shares, plus (ii) any declared but unpaid dividends upon any date fixed by this Company for redemption of such share (which date shall be no later than one hundred twenty (120) days following receipt of the Redemption Call and shall be referred to herein as a “Redemption Date”). Although such notice may be given by fewer than all of the holders of the outstanding Series D Redeemable Preferred Shares, it shall be binding on all such holders. The Redemption Price shall be paid to the holders of the Series D Redeemable Preferred Shares to be redeemed, and the Series D Redeemable Preferred Shares subject to the Redemption Call shall be redeemed, at the Company’s option, in whole on the Redemption Date or in three equal annual installments (each, a “Redemption Payment”) with the first such Redemption Payment being paid no later than one hundred twenty (120) days following receipt of the Redemption Call and the second and third such Redemption Payments being paid on the first and second anniversaries of the date the first Redemption Payment is paid. Should the Company choose to redeem the Series D Redeemable Preferred Shares in equal annual installments as described above, there shall be a separate Redemption Date for each portion of the Series D Redeemable Preferred Shares redeemed and each such Redemption Date shall coincide with the respective payment date for that portion of the Series D Redeemable Preferred Stock redeemed. Notwithstanding any other provision in this subarticle 5.7.1, Series D Redeemable Preferred Shares not redeemed on any Redemption Date (due to the redemption being accomplished in annual installments, a default in payment of the Redemption Price, or for any other reason) shall remain outstanding for all purposes until duly redeemed and paid for.

               5.7.2 At least thirty (30) but no more than sixty (60) days prior to the date fixed for the first Redemption Payment by this Company relating to the redemption of Series D Redeemable Preferred Shares, written notice shall be mailed, first class, postage prepaid, to each holder of Series D Redeemable Preferred Shares of record at the close of business on the business day next preceding the day on which notice is given at the address last shown on the records of this Company for such holder or given by the holder to this Company for the purpose of notice or, if no such address appears or is given, at the place where the principal executive office of this Company is located, notifying such holder of the redemption to be effected, specifying the number of shares to be redeemed from such holder, the schedule of annual Redemption Payments including all Redemption Dates, the Redemption Price to be paid in respect of Series D Redeemable Preferred Shares as of each Redemption Date, the date on which such holder’s rights to convert such shares into Ordinary Shares terminate and calling upon such holder to surrender to this Company, in the manner and at the place designated, the certificate(s) representing the shares to be redeemed (the “Redemption Notice”). Except as provided in subarticle 5.7.3, on or after each Redemption Date, each holder of Series D Redeemable Preferred Shares to be redeemed shall surrender to this Company the certificate or certificates representing the shares to be redeemed on such Redemption Date, in the manner and at the place designated in the Redemption Notice, and thereupon the Redemption Price in respect of each such share shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof and each surrendered certificate shall be canceled. In the event less than all the shares represented by any such certificate are redeemed on a particular Redemption Date, a new certificate shall be issued to the holder representing the unredeemed shares.

               5.7.3 From and after each Redemption Date, unless there shall have been a default in payment of the Redemption Price or there has been nonpayment for any other reason, all rights of the holders of Series D Redeemable Preferred Shares designated for redemption on such Redemption Date as holders of Series D Redeemable Preferred Shares (except the right to receive

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the Redemption Price without interest upon surrender of their certificate or certificates) shall cease with respect to such shares, and such shares shall not thereafter be transferred on the books of this Company or be deemed to be outstanding for any purpose whatsoever. If the funds of this Company legally available for redemption of Series D Redeemable Preferred Shares on any Redemption Date are insufficient to redeem the total number of Series D Redeemable Preferred Shares to be redeemed on such date, those funds which are legally available will be used to redeem the maximum possible number of such shares ratably among the holders of such shares to be redeemed based upon their holdings of Series D Redeemable Preferred Shares. The shares of Series D Redeemable Preferred Shares not redeemed shall remain outstanding and entitled to all the rights and preferences provided herein. At any time thereafter when additional funds of this Company are legally available for the redemption of Series D Redeemable Preferred Shares, such funds will immediately be used to redeem the balance of the shares which this Company has become obligated to redeem on any Redemption Date but which it has not redeemed.

               5.7.4 Three (3) days prior to any Redemption Date, this Company shall deposit the Redemption Price of all outstanding shares of Series D Redeemable Preferred Shares designated for redemption on such Redemption Date, and not yet redeemed or converted, with a bank or trust company having aggregate capital and surplus in excess of $50,000,000 as a trust fund for the benefit of the respective holders of the shares designated for redemption and not yet redeemed. Simultaneously, this Company shall deposit irrevocable instruction and authority to such bank or trust company to publish the notice of redemption thereof (or to complete such publication if theretofore commenced) and to pay, on and after the date fixed for redemption or prior thereto, the Redemption Price of the Series D Redeemable Preferred Shares to the holders thereof upon surrender of their certificates. Any moneys deposited by this Company pursuant to this subarticle for the redemption of shares which are thereafter converted into Ordinary Shares no later than the close of business on the Redemption Date shall be returned to this Company forthwith upon such conversion. The balance of any moneys deposited by this Company pursuant to this paragraph remaining unclaimed at the expiration of three (3) months following the Redemption Date shall thereafter be returned to this Company, provided that the shareholder to which such moneys would be payable hereunder shall be entitled, upon proof of its ownership of the Series D Redeemable Preferred Shares and payment of any bond requested by this Company, to receive such moneys but without interest from the Redemption Date.

     6. Increase of Authorized Share Capital.

          6.1 Subject to Article 5.6 the Company may, from time to time, by a resolution of the Company’s shareholders, whether or not all the shares then authorized have been issued, and whether or not all the shares issued have been called up for payment, increase its authorized share capital. Any such increase shall be in such amount and shall be divided into shares of such nominal amounts, with such rights and preferences and subject to such restrictions, as such shareholders’ resolution shall provide.

          6.2 Subject to Article 5.6 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 included in the existing share capital, without regard to class (and, if such new shares are of the same class as a class of shares included in

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the existing share capital, to all of the provisions that are applicable to shares of such class included in the existing share capital).

     7. Special Rights: Modification of Rights.

          7.1 Subject to Article 5.6 and subject to the provisions of the Memorandum of Association of the Company, 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 the Company’s shareholders, provide for shares with such preferred or deferred rights or rights of redemption or other special rights or restrictions, whether in regard to dividends, voting, repayment of share capital or otherwise, as may be stipulated in such resolution.

               7.1.1 If at any time the share capital is divided into different classes of shares, the rights attached to any class, subject to Article 5.6 and unless otherwise provided by these Articles, may be modified or abrogated by the Company, subject to the consent in writing of the holders of a majority of the issued shares of such class or the sanction of a resolution passed at a separate General Meeting of the holders of the shares of such class.

               7.1.2 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 one or more shareholders present in person or by proxy and holding not less than 50% of the issued shares of such class.

               7.1.3 Unless otherwise provided by these Articles, the enlargement of an authorized class of shares, or the issuance of additional shares of such a class out of the authorized and unissued share capital, shall not be deemed, for purposes of these Articles 7.1.1-7.1.3 to modify or abrogate the rights attached to previously issued shares of such class or of any other class.

     8. Consolidation, Subdivision, Cancellation and Reduction of Share Capital.

          8.1 The Company may, from time to time, by resolution of the shareholders (subject, however, to the provisions of Articles 5.3, 5.4, 5.6 and 7.1.1-7.1.3 of these Articles and to applicable law):

               8.1.1 consolidate and divide all or any part of its issued or unissued authorized share capital into shares of a per share nominal value that is greater than the per share nominal value of its existing shares;

               8.1.2 subdivide its shares (issued or unissued) or any of them into shares of lesser nominal value than is fixed by these Articles (subject, however, to the provisions of the Companies Law);

               8.1.3 cancel any shares that, at the date of the adoption of such resolution, have not been purchased or subscribed for, and decrease the amount of its share capital by the amount of the shares so canceled; or

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               8.1.4 reduce its share capital in any manner, and with and subject to any incident authorized, and consent required, by law.

          8.2 With respect to any consolidation of issued shares into shares of a greater nominal value per share, and with respect to any other action that may result in fractional shares, the Board of Directors may settle any dispute that may arise with regard thereto as it deems fit, and in connection with any such consolidation or other action that may result in fractional shares may, without limitation:

               8.2.1 determine, as to any holder of shares so consolidated, which issued shares shall be consolidated into a share of a greater nominal value per share;

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

               8.2.3 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; or

               8.2.4 cause the transfer of fractional shares by certain shareholders of the Company to other shareholders of the Company so as most expediently to preclude or remove any fractional share holdings, and cause the transferees of such fractional shares to pay the transferors of such fractional shares 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 purpose of implementing the provisions of this Article 8.2.4.

SHARES

9. Issuance of Share Certificates: Replacement Certificates; Replacement of Lost Certificates.

          9.1 Share certificates shall be issued under the corporate seal of the Company (or facsimile thereof) and shall bear the signature (or facsimile thereof) of one Director or of any other person or persons authorized by the Board of Directors.

          9.2 Each shareholder shall be entitled to one numbered certificate for all the shares of any class registered in his name, and if the Board of Directors so approves, to several certificates, 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.

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

          9.4 A share certificate that 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.

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

     11. Allotment of Shares.

          11.1 The unissued shares from time to time shall be under the control of the Board of Directors.

          11.2 Subject to Article 5.6, the Board of Directors shall have the power to allot, issue or otherwise dispose of shares to such persons, at such times, on such terms and conditions (including inter alia terms relating to calls as set forth in Article 13 hereof), and either at par, at a premium or, subject to the provisions of the Companies Law, at a discount or with payment of commission, all as the Board of Directors deems fit. Subject to Article 5.6, the Board of Directors shall also have the power to give any person the option to acquire from the Company any shares, either at nominal value, at a premium or, subject to the provisions of the Companies Law, at a discount or with payment of commission, for such period and for such consideration as the Board of Directors deems fit.

     12. Payment in Installments.

     If, pursuant to the terms of allotment or issuance 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.

     13. Calls on Shares.

          13.1 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 that has not been paid up in respect of shares held by such shareholders and which is not, pursuant to the terms of allotment or issuance of such shares or otherwise, payable at a fixed time. Each shareholder shall pay the amount of every call so made upon him (and of each installment thereof if the same is payable in installments), to the person(s) and at the time(s) and place(s) designated by the Board of Directors, as any such time(s) may subsequently be extended or such person(s) or place(s) changed. Unless otherwise stipulated in the resolution of the Board of Directors (and in the notice referred to below), each payment in response to a call shall be deemed to constitute a pro rata payment on account of all the shares of the shareholder making payment in respect of which such call was made.

          13.2 Notice of any call for payment by a shareholder shall be given in writing to such shareholder not less than 14 days prior to the time of payment fixed in such notice, and shall specify the time and place of payment, and the person to whom such payment is to be made. 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 shareholder, revoke such call in whole or in part, extend the time fixed for payment of such call or designate a different place of

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payment or person to whom payment is to be made. In the event of a call payable in installments, only one notice thereof need be given.

          13.3 If pursuant to the terms of allotment or issuance 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 subarticles 13.1 and 13.2 of this Article 13, 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).

          13.4 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.

          13.5 Any amount called for payment that is not paid when due shall bear interest from the date fixed for payment until actual payment, 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.

          13.6 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 and of calls for payment in respect of such shares.

     14. Prepayment.

     With the consent 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 14 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.

     15. Forfeiture and Surrender.

          15.1 If any shareholder fails to pay an amount payable by virtue of a call, or interest thereon as provided for in accordance with these Articles, 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 remains unpaid, 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 attorneys’ 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.

          15.2 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 14 days after the date such notice is given and which may be extended by the Board of Directors), such shares shall ipso facto be forfeited; provided, however,

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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.

          15.3 Without derogating from Articles 55 and 60 of these Articles, 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.

          15.4 The Company, by resolution of the Board of Directors, may accept the voluntary surrender of any share.

          15.5 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.

          15.6 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 nonetheless be liable to pay and shall promptly 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 13.5 above, and the Board of Directors, in its discretion, may 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.

          15.7 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 15.

     16. Lien.

          16.1 Except to the extent that 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 obligations 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 obligation 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 any lien existing on such shares immediately prior to such transfer.

          16.2 The Board of Directors may cause the Company to sell a share subject to such a lien when the debt, liability or obligation 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 obligation has not been satisfied within 14 days after written notice of the intention to sell shall have been served on such shareholder, his executors or administrators.

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          16.3 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 obligations of such shareholder in respect of such share (whether or not the same have matured), and any residue shall be paid to the shareholder, his executors, administrators or assigns.

     17. 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 Shareholders 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 Shareholders 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.

     18. Redeemable Shares.

          18.1 The Company may, subject to applicable law, issue redeemable shares and redeem the same on such terms and conditions as it shall determine.

          18.2 The Series D Redeemable Preferred Shares shall be redeemable under the terms and conditions provided in Article 5.7 above.

TRANSFER OF SHARES

     19. [Reserved.]

     20. Registration of Transfer.

          20.1 No transfer of shares shall be registered unless there has been compliance with the procedures set forth in any agreement regarding the transfer of shares to which the Company is party, and a proper writing or instrument of transfer (in any customary form or any other form reasonably satisfactory to the Board of Directors) has been submitted to the Company or its transfer agent, together with 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 Shareholders Register in respect of the shares so transferred, the Company may continue to regard the transferor as the owner thereof.

          20.2 The Board of Directors may, to the extent it deems necessary in its discretion, close the Shareholders Register for registrations of transfers of shares during any year for one period, not to exceed two weeks, 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 Shareholders Register is so closed.

     21. Record Date for Notices of General Meetings. Despite any contrary provision of these Articles but subject to the provisions of Article 5.3.8, the Board of Directors may fix a date, not exceeding 90 days prior to the date of any General Meeting, as the date as of which shareholders

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entitled to notice of and to vote at such meeting shall be determined, and only those persons who were holders of record of voting shares on such date shall be entitled to notice of and to vote at such meeting.

TRANSMISSION OF SHARES

     22. Decedent’s Shares.

          22.1 In case 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 22.2 of these Articles have been effectively invoked.

          22.2 Any person becoming entitled to a share in consequence of the death of any person, 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.

     23. Receivers and Liquidators.

          23.1 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 shareholder.

          23.2 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 proceeding 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 contained in these Articles, transfer such shares.

GENERAL MEETINGS

     24. Annual General Meeting.

          24.1 An Annual General Meeting shall be held once in every calendar year at such time (within a period of not more than 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.

     25. Extraordinary General Meeting.

     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

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General Meeting, at such time and place, within or without the State of Israel, as may be determined by the Board of Directors, and shall be obligated to do so upon a request in writing in accordance with Sections 63 or 64 of the Companies Law.

     26. Notice of General Meetings; Omission to Give Notice.

          26.1 Not less than ten (10) days prior notice shall be given of every General Meeting; provided. Each such notice shall specify the place and the date and hour of the meeting and the general nature of each item to be acted upon at the meeting, said notice to be given to all shareholders who are entitled to attend and vote at such meeting.

          26.2 A resolution may be proposed and adopted at a meeting even though the notice prescribed in this Article has not been given, subject to the consent of all of the shareholders entitled to vote thereon.

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

PROCEEDINGS AT GENERAL MEETINGS

     27. Quorum.

          27.1 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.

          27.2 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 33.1 of these Articles), present in person or by proxy and holding in the aggregate at least 50% of the outstanding voting power of the Company shall constitute a quorum of General Meetings.

          27.3 If within half an hour from the time appointed for the meeting a quorum is not present, the meeting, if convened upon request under Sections 63 or 64 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 with the consent of the holders of a majority of the voting power represented at the meeting in person or by proxy and voting on the question of adjournment. No business shall be transacted at any adjourned meeting except business that might lawfully have been transacted at the meeting as originally called. At such adjourned meeting (other than an adjourned separate meeting of a particular class of shares as referred to in Article 7 of these Articles), any two shareholders (not in default as aforesaid) present in person or by proxy shall constitute a quorum.

     28. Chairman.

     The Chairman, if any, of the Board of Directors shall preside at every General Meeting of the Company. If at any meeting the Chairman is not present within 15 minutes after the time fixed for holding the meeting or is unwilling to take the chair, the Co-Chairman shall preside at the meeting. If at any such meeting both the Chairman and Co-Chairman are not present or are not willing to take

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the chair, the shareholders present shall choose someone of their number to be the chairman of such meeting. 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, except as provided in Article 49 hereof (without derogating, however, from the right of such Chairman to vote as a shareholder or proxy of a shareholder if, in fact, he is also a shareholder or such proxy).

     29. Adoption of Resolutions at General Meetings.

          29.1 Unless otherwise specifically provided in these Articles or under the Companies Law, all resolutions submitted to the shareholders 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 and voting thereon.

          29.2 Every question submitted to a General Meeting shall be decided by a show of hands, but if a written ballot is demanded by any shareholder present in person or by proxy and entitled to vote at the meeting, the same shall be decided by such ballot. A written ballot may be demanded before the vote on a proposed resolution 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. The demand of a written ballot may be withdrawn at any time before the same is conducted, in which event another shareholder may then demand such written ballot. The demand for a written ballot shall not prevent the continuation of the meeting for the transaction of business other than the question on which the written ballot has been demanded.

          29.3 A declaration by the Chairman of the meeting that a resolution has been carried unanimously, or carried by a particular majority, or defeated, 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.

          29.4 Shareholders may participate in a general meeting by means of a conference telephone call or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Article shall constitute presence in person at such meeting.

     30. 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, email or otherwise) shall be deemed to have been unanimously adopted by a General Meeting duly convened and held.

     31. Power to Adjourn.

     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 that might lawfully have been transacted at the meeting as originally called. It shall not be

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necessary to give any notice of an adjournment, whether pursuant to Article 27.3 or this Article 31, unless the meeting is adjourned for thirty (30) days or more in which event notice thereof shall be given in the manner required for the meeting as originally called.

     32. Voting Power.

     Subject to the provisions of Article 33.1 and Article 5.5 and subject to any provisions of these Articles 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. Any provision of these Articles to the contrary not withstanding, each Ordinary Share resulting from the conversion of a Series A-2 Preferred Share or Series B-2 Preferred will not have any voting rights in the Company until (a) the transfer of such share to a bona fide purchaser unaffiliated with the transferor or (b) the Company’s initial public offering, in each case unless within 30 days following such event, written notice to the contrary is given from the purchaser or holder to the Company.

     33. Voting Rights.

          33.1 No shareholders shall be entitled to vote at any General Meeting (or be counted as part of the quorum) unless all calls then payable by him in respect of his shares in the Company have been paid, but this Article 33.1 shall not apply to separate General Meetings of the holders of a particular class of shares pursuant to Articles 7.1.1, 7.1.2 and 7.1.3.

          33.2 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 authorize or deliver a proxy on its behalf. Any person so authorized shall be entitled to exercise on behalf of such shareholder all the power that the latter could have exercised if it were a natural person. 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.

          33.3 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 33.2.

          33.4 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 purposes of this Article 33.4, seniority shall be determined by the order of registration of the joint holders in the Shareholders Register.

PROXIES

     34. Instrument of Appointment.

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

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“I [Name of Shareholder] of [Address of Shareholder] being a shareholder of Mellanox Technologies, Ltd. hereby appoint [Name of Proxy] of [Address of Proxy] as my proxy to vote for me and on my behalf at the General Meeting of the Company to be held on the ___ day of ___ and at any adjournment(s) thereof.

Signed this ___ day of ___,

[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).

          34.2 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 delivered to the Company (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 24 hours before the time fixed for the meeting at which the person named in the instrument proposes to vote, or presented to the Chairman at such meeting.

     35. Effect of Death of Appointor or Transfer of Share or Revocation of Appointment.

          35.1 A vote cast in accordance with an instrument appointing a proxy shall be valid despite the prior death or bankruptcy of the appointing shareholder (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.

          35.2 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 who signed such instrument or by the shareholder 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 34.2 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 34.2 of these Articles, 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 shareholder 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 despite 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 35.2 at or prior to the time such vote was cast.

BOARD OF DIRECTORS

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     36. Powers of Board of Directors.

          36.1 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 required by law or these Articles to be done by the Company by action of its shareholders at a General Meeting. The authority conferred on the Board of Directors by this Article 36 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 that would have been valid if such regulation or resolution had not been adopted.

          36.2 Borrowing Power.

     Subject to Article 5.6, the Board of Directors may from time to time, at its discretion, cause the Company to borrow or guaranty 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 security interest on 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.

          36.3 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) that the Board of Directors, in its absolute discretion, shall deem fit, 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.

     37. Exercise of Powers of Board of Directors.

          37.1 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.

          37.2 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 voted thereon.

          37.3 A resolution in writing signed by all of the Directors then in office and lawfully entitled to vote thereon or to which all of the Directors have given their written consent (by

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letter, telegram, telex, facsimile or otherwise) shall be deemed to have been unanimously adopted by a meeting of the Board of Directors duly convened and held.

          37.4 In each case of a tie vote on the Board of Directors of the Company, the matter as to which no decision was reached shall be brought for debate to a general assembly of the shareholders of the Company.

     38. Delegation of Powers.

          38.1 The Board of Directors may, subject to Section 112 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 of these Articles that regulate 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.

          38.2 Without derogating from the provisions of Article 51, the Board of Directors may from time to time appoint a Secretary for 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.

          38.3 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 discretions vested in him.

     39. Number of Directors.

          39.1 Except as otherwise required by subarticles 5.6.2.1 and 5.6.3.1, the number of members of the Board of Directors of the Company shall be determined by an Ordinary Resolution of the general assembly of the shareholders of the Company. For so long as the general assembly has not resolved differently, the number of directors shall be seven.

          39.2 The members of the Board of Directors shall be elected as follows:

               39.2.1 The holders of a majority of the Ordinary Shares shall be entitled to appoint, replace or remove one (1) member of the Board of Directors (the “Ordinary Directors”).

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               39.2.2 The holders of a majority of the outstanding Series A-1 Preferred (the “Series A-1 Majority”) shall be entitled to appoint, replace or remove two (2) members of the Company’s Board of Directors (the “Series A-1 Directors”). The right of the Series A-1 Majority to appoint the Series A-1 Directors shall terminate upon the earlier of (a) such time as the original purchasers of Series A-1 Preferred Shares hold less than 50% of the Series A-1 Preferred Shares originally purchased by them and (b) immediately prior to the consummation of a Qualified IPO.

               39.2.3 The holders of a majority of the outstanding Series B-1 Preferred (the “Series B-1 Majority”) shall be entitled to appoint, replace or remove one (1) member of the Company’s Board of Directors (the “Series B-1 Director”). The right of the Series B-1 Majority to appoint the Series B-1 Director shall terminate upon the earlier of (a) such time as the original purchasers of Series B-1 Preferred Shares hold less than 50% of the Series B-1 Preferred Shares originally purchased by them and (b) immediately prior to the consummation of a Qualified IPO.

               39.2.4 The holders of a majority of the outstanding Series D Redeemable Preferred (the “Series D Majority”) shall be entitled to appoint, replace or remove one (1) member of the Company’s Board of Directors (the “Series D Director”). The right of the Series D Majority to appoint the Series D Director shall terminate upon the earlier of (a) such time as the original purchasers of Series D Redeemable Preferred Shares hold less than 50% of the Series D Redeemable Preferred Shares originally purchased by them and (b) immediately prior to the consummation of a Qualified IPO.

               39.2.5 The holders of a majority of the outstanding Ordinary Shares and Series A-1 Preferred, Series B-1 Preferred and Series D Redeemable Preferred, voting together, shall be entitled to appoint, replace or remove one (1) member of the Company’s Board of Directors, who shall be mutually acceptable to the holders of the outstanding Ordinary Shares and Series A-1 Preferred, Series B-1 Preferred and Series D Redeemable Preferred as an industry director.

               39.2.6 The Chief Executive Officer of the Company shall be a member of the Board of Directors.

     40. Appointment and Removal of Directors.

          40.1 Except as otherwise provided in these Articles, directors shall not be elected but shall be appointed.

          40.2 The appointment or removal of a Director shall be effected by the delivery of a notice to the Company at its principal office, signed by the holders of the shares entitled to effect such appointment or removal. Any appointment or removal shall become effective on the date fixed in the notice or upon delivery of the notice to the Company, whichever is later.

     41. 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.

     42. Continuing Directors in the Event of Vacancies.

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     Subject to Article 39, in the event of one or more vacancies in the Board of Directors, the remaining Directors may continue to act in every matter and, pending the filling of any vacancy pursuant to the provisions of Article 40, may appoint Directors to fill any such vacancy temporarily (such temporarily appointed Director being automatically deemed to be removed from the Board upon the appointment of a Director to fill the previous vacancy in accordance with Article 40); provided, however, that if they number less than a majority of the number provided for pursuant to Article 39 of these Articles, they may act only in an emergency or to fill the office of Director that has become vacant up to the minimum number or 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 a majority of the number of Directors provided for pursuant to Article 39 are in office as a result of such meeting.

     43. Vacation of Office.

          43.1 The office of a Director shall be vacated, ipso facto, upon the occurrence of any of the following: (i) such Director’s death, (ii) such Director is convicted of a crime as described in Section 232 of the Companies Law, (iii) such Director is removed by a court of law in accordance with Section 233 or the Companies Law, (iv) such Director becomes legally incompetent, (v) if such Director an individual, such Director is declared bankrupt, or (vi) if such Director is a corporate entity, upon its winding-up liquidation, whether voluntary or involuntary.

          43.2 The office of a Director shall be vacated by his written resignation. Such resignation shall become effective on the date fixed therein or upon the delivery to the Company, whichever is later.

     44. Remuneration of Directors.

     A Director shall be paid remuneration by the Company for his services as a Director, to the extent such remuneration shall have been approved by a General Meeting of the Company and pursuant to the provisions of the Companies Law.

     45. Conflict of Interests.

     Subject to the provisions of the Companies Law, no Director shall be disqualified by virtue of his office from holding any office or relationship of profit with the Company or with any company in which the Company shall be a shareholder or have another interest, 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 in any way be interested, be avoided, 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 relationship of profit or realized from 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 no later than the first meeting of the Board of Directors after the acquisition of his interest.

     46. Alternate Directors.

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          46.1 Any party or parties entitled to elect a director pursuant to Article 39 may, by written notice to the Company given in the manner set forth in Article 46.2 below, appoint any individual (who is not then a member of the Board of Directors) as an alternate for such director (in these Articles referred to as an “Alternate Director”), remove such Alternate Director and appoint another Alternate Director in place of any Alternate Director appointed by it whose office has been vacated for any reason. Unless the appointing party or parties, by the instrument appointing an Alternate Director or by written notice to the Company, limits such appointment to a specified period of time or restricts it to a specified meeting or action of the Board of Directors, or otherwise restricts its scope, the appointment shall be for all purposes, and for a period of time up to a maximum of one year from the date of appointment.

          46.2 Any notice to the Company pursuant to Article 46.1 shall be given in person to, or by sending the same by mail to the attention of, the General Manager of the Company at the principal office of the Company or to such other person or place as the Board of Directors shall have determined for such purpose, and shall become effective on the date fixed therein, or upon the receipt thereof by the Company at the place specified above, whichever is later.

          46.3 An Alternate Director shall have all the rights and obligations of the Director for whom the substitute is appointed; provided, however, that (i) he may not in turn appoint an alternate for himself (unless the instrument appointing him expressly provides otherwise), (ii) an Alternate Director shall have no standing at any meeting of the Board of Directors or any Committee of the Board of Directors while the Director for whom the substitute is appointed is present, and (iii) the Alternate Director is not entitled to remuneration.

          46.4 Any natural person may act as an Alternate Director. One person may not act as Alternate Director for more than one Director, and a person serving as a director of the Company may not act as an Alternate Director.

          46.5 The office of an Alternate Director shall be vacated under the circumstances, mutatis mutandis, set forth in Article 43, and such office shall ipso facto be vacated if the Director who appointed such Alternate Director ceases to be a Director.

PROCEEDINGS OF THE BOARD OF DIRECTORS

     47. Meetings.

          47.1 The Board of Directors may meet and adjourn its meetings and otherwise regulate such meetings and proceedings as the Directors deem fit.

          47.2 Any two (2) Directors may at any time, and the Chairman of the Board of Directors upon the request of any Director shall, convene a meeting of the Board of Directors, but not less than 3 days’ notice shall be given of any meeting so convened. Notice of any such meeting may be given in writing or by mail, telex, telegram or facsimile. Despite anything to the contrary in these Articles, 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 despite such defective notice if such failure or defect is waived prior to action being taken at such meeting by all Directors entitled to participate in such meeting to whom notice was not duly given.

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          47.3 Directors may attend any meeting via telephone so long as all may hear and be heard.

     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 a majority of the number of Directors fixed pursuant to Article 39. 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) when the meeting proceeds to business.

     49. Chairman of the Board of Directors.

     A director appointed by holders of a majority of the Board of Directors shall be appointed the Chairman of the Board of Directors. The Chairman of the Board of Directors shall have a tie-breaking vote on the Board in the event any vote of the Board ends in a tie. 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 the Chairman is not present within 30 minutes after the time fixed for holding the meeting or is unwilling to act as Chairman, the Directors appointed by the holders of a majority of the Board of Directors who are present shall choose someone of their number to be 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, even if it is subsequently discovered that there was some defect in the appointment of the participants in such meeting 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.

GENERAL MANAGER

     51. General Manager.

     The Board of Directors may from time to time appoint one or more persons, whether or not Directors, as General Manager or Managers, and may confer upon such person(s), and from time to time modify or revoke, such title(s) and such duties and authorities 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 General Manager shall have authority with respect to management of the Company in the ordinary course of business. Such appointment(s) shall be limited to a term of one year, subject to the provisions of the Companies Law and of any contract between any such person, and the Company shall 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.

MINUTES

     52. Minutes.

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          52.1 Minutes of each General Meeting, of each meeting of the Board of Directors and of each meeting of a 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 office or such other place as shall be determined by the Board of Directors. Such minutes shall, in all events, set forth the name of the persons present at the meeting and all resolutions adopted at the meeting.

          52.2 Any such minutes, 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.

     Subject to Articles 5.1 and 5.6, the Board of Directors may from time to time declare, and cause the Company to pay, such interim dividend as may appear to the Board of Directors to be justified by the profits of the Company. The final dividend in respect of any fiscal period shall be proposed by the Board of Directors and shall be payable only after the same has been approved by a resolution of the Company, but no such resolution shall provide for the payment of an amount exceeding that proposed by the Board of Directors for the payment of such final dividend, and no such resolution or any failure to approve a final dividend shall affect any interim dividend previously declared and paid. 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 Dividends.

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

     55. Amount Payable by Way of Dividends.

     Subject to the rights of the holders of shares as to dividends, any dividend paid by the Company shall be allocated among the shareholders entitled thereto in proportion to the sums paid up or credited as paid up on account of the nominal value of their respective holdings of the shares in respect of which such dividend is being paid without taking into account the premium paid up for the shares. The amount paid up on account of a share that has not yet been called for payment or fallen due for payment and upon which the Company pays interest to the shareholder shall not be deemed, for the purposes of this Article, to be a sum paid on account of the share.

     56. Interest.

     No dividend shall carry interest as against the Company.

     57. Payment in Specie.

     Upon the recommendation of the Board of Directors approved by a resolution of the Company’s shareholders, the Company (i) may cause any moneys, 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 control of the Company and

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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 basis 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 that shall be distributed accordingly, in payment, in whole or in part, of the uncalled liability on any issued shares or debentures or debenture stock; 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 hereof, the Board of Directors may settle any difficulty that may arise in regard to the distribution as it deems 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 shareholders upon the basis 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, debentures 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. Dividends on Unpaid Shares.

     Without derogating from Article 55, the Board of Directors may give an instruction that shall prevent the distribution of a dividend to the holders of shares on which the full nominal amount has not been paid up.

     60. Retention of Dividends.

          60.1 The Board of Directors may retain any dividend or other moneys payable or property distributable in respect of a share on which the Company has a lien, and may apply the same in or toward satisfaction of the debts, liabilities or obligations in respect of which the lien exists.

          60.2 The Board of Directors may retain any dividend or other moneys payable or property distributable in respect of a share in respect of which any person is, under Articles 22 and 23, entitled to become a shareholder, or which any person is, under such Articles, entitled to transfer, until such person shall become a shareholder 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 Board of Directors of any unclaimed dividend or such other moneys into a separate account shall not constitute the Company 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 a person entitled thereto.

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     62. Mechanics of Payment.

     Any dividend or other moneys payable in cash in respect of a share may be paid by check or draft 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 Shareholders Register or his bank account or the person whom the Company may then recognize as the owner thereof or entitled thereto under Article 22 or 23 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 draft 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 draft by the bank upon which 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 principal office of the Company, or at such other place or places as the Board of Directors may deem fit, and they shall always be open to inspection by all Directors. Such books of account and other corporate documents and records shall also be open to inspection by the shareholders and by auditors appointed by the shareholders, provided that such shareholders and auditors shall enter into confidentiality undertakings reasonably satisfactory to the Board of Directors.

     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 in General Meeting may, by Ordinary Resolution, act (and in the absence of any action in connection therewith shall be deemed to have so acted) to authorize the Board of Directors to fix such remuneration subject to such criteria or standards, if any, as may be provided in such Ordinary Resolution, and if no such criteria or standards are so provided,

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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 Section 138 and 139 of the Companies Law and to all regulations promulgated and orders issued thereunder, the Company may cause branch registers to be kept in any place outside Israel as the Board of Directors may deem 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 deem fit in connection with the maintenance of such branch registers.

AUDIT COMMITTEE

     68. Audit Committee.

          68.1 The Board of Directors may appoint an Audit Committee that shall be composed of three members of the Company’s Board of Directors, and which, at the time the Company conducts an initial public offering of its securities, shall meet the qualifications established in 115 of the Companies Law (the “Audit Committee”).

          68.2 The Audit Committee shall have the authority specified by the Board of Directors in the resolution establishing the Audit Committee.

          68.3 Approval by the majority of the members of the Audit Committee shall be deemed approval of the Audit Committee for the purposes of this Article.

          68.4 The Audit Committee shall meet upon receiving prior written notice of 7 days from the Board of Directors of the convening of a meeting. Such prior written notice shall contain details of the action in respect of which the meeting will be convened.

COMPENSATION COMMITTEE

     69. Compensation Committee.

          69.1 The Board of Directors may appoint a Compensation Committee that shall be composed of three members of the Company’s Board of Directors (the “Compensation Committee”).

          69.2 The Compensation Committee shall have the authority specified by the Board of Directors in the resolution establishing the Compensation Committee.

          69.3 Approval by the majority of the members of the Compensation Committee shall be deemed approval of the Compensation Committee for the purposes of this Article.

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          69.4 The Compensation Committee shall meet upon receiving prior written notice of 7 days from the Board of Directors of the convening of a meeting. Such prior written notice shall contain details of the action in respect of which the meeting will be convened.

INDEMNITY AND INSURANCE

     70. Exemption From Duty Of Care

     Subject to the provisions of the Companies Law including the receipt of all approvals as required therein or under any applicable law, the Board of Directors may resolve in advance to exempt an Office Holder 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.

          70.1 Indemnification

               70.1.1 Subject to the provisions of the Companies Law including the receipt of all approvals as required therein or under any applicable law, the Company may indemnify or enter into an agreement to indemnify in the future any “Office Holder” (as such term is defined in the Companies Law) to the fullest extent permitted by the Companies Law.

               70.1.2 Subject to the provisions of the Companies Law including the receipt of all approvals as required therein or under any applicable law, the Board of Directors may resolve retroactively to indemnify an Office Holder with respect to the following liabilities and expenses, provided that such liabilities or expenses were incurred by such Office Holder in such Office Holder’s capacity as an Office Holder of the Company:

                    70.1.2.1 a monetary liability imposed on an Office Holder pursuant to a judgment in favor of another person, including a judgment imposed on such Office Holder in a compromise or in an arbitration decision that was approved by a court of law; and

                    70.1.2.2 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 by another on behalf of the Company, 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 criminal intent.

                    70.1.3 Subject to the provisions of the Companies Law including the receipt of all approvals as required therein or under any applicable law, the Board of Directors may resolve in advance to indemnify the Company’s Office Holders for those liabilities and expenses described in subarticle 70.2.2.2, provided that (i) in the opinion of the Board of Directors such liabilities and expenses can be foreseen at the time the undertaking to indemnify is provided, and (ii) the Board of Directors shall set a reasonable limit to the amounts for such indemnification under the circumstances.

          70.2 Insurance

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               70.2.1 Subject to the provisions of the Companies Law including the receipt of all approvals as required therein or under any applicable law, the Company may enter into an agreement to insure an Office Holder for any 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:

                    70.2.1.1 violation of the duty of care of the Office Holder towards the Company or towards another person;

                    70.2.1.2 breach of the fiduciary duty towards the Company, provided that the Office Holder acted in good faith and with reasonable grounds to assume that the action in question was in the best interests of the Company; and

                    70.2.1.3 a financial obligation imposed on the Office Holder for the benefit of another person.

               70.2.2 Articles 70.1, 70.2 and 70.3.1 shall not apply under any of the following circumstances:

                    70.2.2.1 a breach of an Office Holder’s fiduciary duty, in which the Office Holder did not act in good faith and with reasonable grounds to assume that the action in question was in the best interest of the Company;

                    70.2.2.2 a grossly negligent or intentional violation of an Office Holder’s duty of care;

                    70.2.2.3 an intentional action by an Office Holder in which such Office Holder intended to reap a personal gain illegally; and

                    70.2.2.4 a fine or ransom levied on an Office Holder.

               70.2.3 The Company may procure insurance for or indemnify any person who is not an Office Holder, including without limitation, any employee, agent, consultant or contractor, provided, however, that any such insurance or indemnification is in accordance with the provisions of these Articles and the Companies Law.

WINDING UP

     71. 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 nominal value of their respective holdings of the shares in respect of which such distribution is being made.

RIGHTS OF SIGNATURE, STAMP AND SEAL

     72. Rights of Signature, Stamp and Seal.

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          72.1 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(s) of such person(s) on behalf of the Company shall bind the Company to the extent such person acted and signed within the scope of his or their authority.

          72.2 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

     73. Notices.

          73.1 Any written notice or other document (including notices required under Article 5 hereto) 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 shareholder at his address as it appears in the Shareholders Register or such other address as he may have designated in writing for the receipt of notices and other documents. 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 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 its principal office. Any such notice or other document shall be deemed to have been served when actually tendered if hand delivered, or 48 hours (7 business days if sent internationally) after it has been posted (or when actually received by the addressee if sooner). Notice sent by telegram, telex, facsimile or electronic mail shall be deemed to have been served when actually received by the addressee. A notice that is defectively addressed or that otherwise fails to comply with the provisions of this Article 73.1 shall nevertheless be deemed to have been served if and when actually received by the addressee.

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

          73.3 Any shareholder whose address is not listed in the Shareholders Register, and who shall not have designated in writing an address for the delivery of notices, shall not be entitled to receive any notice from the Company.

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EX-4.4

Exhibit 4.4

MELLANOX TECHNOLOGIES, LTD.

AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

TABLE OF CONTENTS

1.	Certain Definitions	2
2.	Restrictions on Transferability	3
3.	Restrictive Legend	4
4.	Proposed Transfers	4
	4.1   Notice of Proposed Transfers	4
5.	Registration	5
	5.1   Requested Registration.	5
	5.2   Company Registration	7
	5.3   Registration on Form S-3 or Form F-3	8
	5.4   Subsequent Registration Rights	9
	5.5   Expenses of Registration	10
	5.6   Registration Procedures	10
	5.7   Indemnification	11
	5.8   Information by Holder	13
	5.9   Rule 144 Reporting	13
	5.10 Termination of Registration Rights	13
6.	Financial Information Rights	13
7.	Observers	15
8.	Use of Proceeds	16
9.	Lockup Agreement	16
10.	Right of First Refusal	17
11.	Confidential Information and Invention Assignment Agreements	18
12.	Transfer of Rights	18
13.	Agreement to Vote	18
14.	Amendment	18
15.	Governing Law	19
16.	Entire Agreement	19
17.	Notices, etc	19
18.	Counterparts	20
19.	Grant of Proxy	20

i

MELLANOX TECHNOLOGIES, LTD.

AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

     This Amended and Restated Investor Rights Agreement (this “Agreement”) is made effective as of October 9, 2001 by and among Mellanox Technologies, Ltd., an Israeli company (the “Company”), purchasers of the Company’s Series A Preferred Shares, Series B Preferred Shares and Series D Redeemable Preferred Shares who are signatories to this Agreement (the “Purchasers”) and certain holders of the Company’s Ordinary Shares who are signatories to this Agreement (the “Founders” and, together with the Purchasers, the “Major Investors”) and, for purposes of Sections 1, 2, 3, 4, 5, 9, 12, 14, 15, 16, 17 and 18 only, the holder of Series C Preferred shares issued or issuable pursuant to the Series C Preferred Share Purchase Agreement dated November 5, 2000 (the “Series C Preferred Shares”).

RECITALS

     A. The Company and certain of the Purchasers are parties to the Series D Redeemable Preferred Share Purchase Agreement dated as of October 9, 2001 (the “Purchase Agreement”), whereby the Company will sell, and the Purchasers will buy, shares of the Company’s Series D Redeemable Preferred (the “Series D Redeemable Preferred Shares”);

     B. Certain of the Purchasers hold shares of the Company’s Series A Preferred Shares and/or Series B Preferred Shares and/or shares of Ordinary Shares issued upon conversion thereof and possess registration rights, information rights, and other rights pursuant to that certain Amended and Restated Investor Rights Agreement dated as of March 24, 2000, between the Company and such Purchasers (the “Prior Agreement”);

     C. The Purchasers who hold Series A Preferred Shares and/or Series B Preferred Shares desire to amend and restate in its entirety the Prior Agreement and to accept the rights created pursuant hereto in lieu of the rights granted to them under the Prior Agreement;

     D. The obligations of the Company and the Purchasers under the Purchase Agreement are conditioned, among other things, upon the execution and delivery of this Agreement by the Company and the Major Investors;

     E. The Company desires to grant to the Major Investors, and the Major Investors desire to be granted, the rights created herein;

     F. The holder of Series C Preferred Shares has been granted certain Registration Rights under the Series C Preferred Share Purchase Agreement dated November 5, 2000 (the “Series C Purchase Agreement”); and

     G. The Company, and the Purchasers who hold Series A Preferred Shares and/or Series B Preferred Shares desire to make the holder of Series C Preferred Shares a party to certain sections of the Agreement.

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AGREEMENT

     NOW, THEREFORE, in consideration of the mutual promises, representations, warranties, covenants and conditions set forth in this Agreement and in the Purchase Agreement, the Purchasers and the Company who are parties to the Prior Agreement hereby agree that the Prior Agreement shall be superseded and replaced in its entirety by this Agreement and the parties hereto mutually agree as follows:

     1. Certain Definitions. As used in this Agreement, the following terms shall have the following respective meanings:

     “Commission” means the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.

     “Conversion Shares” means the Company’s Ordinary Shares issued or issuable pursuant to conversion of the Preferred Shares.

     “Exchange Act” means the Securities Exchange Act of 1934, as amended, or any similar federal rule or statute and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.

     “Founder Shares” means the Company’s Ordinary Shares issued to a Founder.

     “Holder” means (i) any Purchaser holding Registrable Securities, (ii) any person holding Registrable Securities to whom the rights under this Agreement have been transferred in accordance with Section 10 hereof, and (iii) only for the purpose of Sections 1, 2, 3, 4, 5, 9, 12, 14, 15, 16, 17 and 18, any person holding Registrable Securities to whom certain registration rights have been granted pursuant to Section 8 of the Series C Purchase Agreement.

     “Initiating Holders” means any Holder or Holders who, in the aggregate, hold not less than 30% of the Registrable Securities then outstanding or any Holder or Holders who in the aggregate hold not less than 30% of the then outstanding Conversion Shares issued or issuable upon conversion of the Series D Redeemable Preferred Shares.

     “Preferred Shares” shall mean the Company’s Series A Preferred Shares issued pursuant to the Series A Preferred Share Purchase Agreement dated June 1, 1999, Series B Preferred Shares issued pursuant to the Series B Preferred Share Purchase Agreement dated March 24, 2000, Series D Redeemable Preferred Shares issued pursuant to the Purchase Agreement and, for purposes of Sections 1, 2, 3, 4, 5, 9, 12, 14, 15, 16, 17 and 18 only, Series C Preferred Shares issued or issuable pursuant to the Series C Purchase Agreement.

     “Qualified Initial Public Offering” shall mean the Company’s initial public offering pursuant to an effective registration statement under the Securities Act covering the offer and sale of the Company’s Ordinary Shares to the public with gross proceeds to the Company of not less than Fifty Million dollars ($50,000,000) at a per share price of at least $16.53 (as adjusted for stock splits, stock dividends, recapitalizations and the like), or any other public offering pursuant to an effective registration statement under the Securities Act covering the offer and

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sale of the Company’s Ordinary Shares to the public which shall result in the conversion of all Preferred Shares into Ordinary Shares.

     “Registrable Securities” means (i) the Conversion Shares, (ii) any Ordinary Shares of the Company issued or issuable in respect of any of the foregoing upon any stock split, stock dividend, recapitalization or similar event and (iii) any Ordinary Shares of the Company issued or issuable under any warrant issued in conjunction with the Purchase Agreement; provided, however, that securities shall only be treated as Registrable Securities if and so long as (x) they have not been registered or sold to or through a broker or dealer or underwriter in a public distribution or a public securities transaction and (y) the registration rights with respect to such securities have not terminated pursuant to Section 5.10, and provided further that Conversion Shares issuable upon conversion of Series C Preferred Shares shall be Registrable Securities for the purpose of Sections 1, 2, 3, 4, 5, 9, 12, 14, 15, 16, 17 and 18 only.

     The terms “register,” “registered” and “registration” refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement.

     “Registration Expenses” shall mean all expenses incurred by the Company in complying with Sections 5.1, 5.2 and 5.3 hereof, including without limitation, all registration, qualification and filing fees, printing expenses, escrow fees, fees and disbursements of counsel for the Company, blue sky fees and expenses, the expense of any special audits incident to or required by any such registration (but excluding the compensation of regular employees of the Company which shall be paid in any event by the Company). Registration Expenses shall also include the reasonable fees and disbursements for one special counsel to the selling shareholders.

     “Restricted Securities” shall mean the securities of the Company required to bear the legends set forth in Section 3 hereof.

     “Rule 144” and “Rule 145” shall mean Rules 144 and 145, respectively, promulgated under the Securities Act, or any similar federal rules thereunder, all as the same shall be in effect at the time.

     “Securities Act” shall mean the Securities Act of 1933, as amended, or any similar federal rule or statute and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.

     “Selling Expenses” shall mean all underwriting discounts, selling commissions and stock transfer taxes applicable to the securities registered by the Holders and, except as set forth above, all fees and disbursements of counsel for any Holder.

     2. Restrictions on Transferability. The Preferred Shares, the Conversion Shares and any other securities issued in respect of such shares upon any stock split, stock dividend, recapitalization, merger, or similar event (collectively, the “Shares”), shall not be sold, assigned, transferred or pledged except upon the conditions specified in this Agreement, which conditions are intended to ensure compliance with the provisions of the Securities Act. Each Holder or transferee will cause any proposed purchaser, assignee, transferee, or pledgee of any such shares

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held by the Holder or transferee to agree to take and hold such securities subject to the restrictions and upon the conditions specified in this Agreement.

     3. Restrictive Legend. Each certificate representing the Preferred Shares, the Conversion Shares, the Founder Shares or any other securities issued in respect of such stock upon any stock split, stock dividend, recapitalization, merger, or similar event, shall (unless otherwise permitted by the provisions of Section 4 below) be stamped or otherwise imprinted with legends in substantially the following form (in addition to any legends required by agreement or by applicable state securities laws):

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). SUCH SECURITIES MAY NOT BE TRANSFERRED UNLESS A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO SUCH TRANSFER OR IN THE OPINION OF COUNSEL FOR THE COMPANY, SUCH TRANSFER MAY BE MADE PURSUANT TO RULE 144 OR REGISTRATION UNDER THE ACT IS OTHERWISE UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT.

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A LOCKUP PERIOD OF UP TO 180 DAYS FOLLOWING THE EFFECTIVE DATE OF A REGISTRATION STATEMENT OF THE COMPANY FILED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND CERTAIN VOTING PROVISIONS, BOTH AS SET FORTH IN AN AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH LOCKUP PERIOD AND VOTING PROVISIONS ARE BINDING ON TRANSFEREES OF THESE SHARES.

     Each Holder consents to the Company making a notation on its records and giving stop transfer instructions to any transfer agent of its capital stock in order to implement the restrictions on transfer established in this Agreement.

     4. Proposed Transfers.

          4.1 Notice of Proposed Transfers. The holder of each certificate representing Restricted Securities by acceptance thereof agrees to comply in all respects with the provisions of this Section 4. Without in any way limiting the immediately preceding sentence, no sale, assignment, transfer or pledge of Restricted Securities shall be made by any holder thereof to any person unless such person shall first agree in writing to be bound by the restrictions of this Agreement. Prior to any proposed sale, assignment, transfer or pledge of any Restricted Securities, unless there is in effect a registration statement under the Securities Act covering the proposed transfer, the holder thereof shall give written notice to the Company of such holder’s

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intention to effect such transfer, sale, assignment or pledge. Each such notice shall describe the manner and circumstances of the proposed transfer, sale, assignment or pledge in sufficient detail, and, if requested by the Company, the holder shall also provide, at such holder’s expense, either (i) a written opinion of legal counsel who shall be, and whose legal opinion shall be, reasonably satisfactory to the Company addressed to the Company, to the effect that the proposed transfer of the Restricted Securities may be effected without registration under the Securities Act, or (ii) a “no action” letter from the Commission to the effect that the transfer of such securities without registration will not result in a recommendation by the staff of the Commission that action be taken with respect thereto, whereupon the holder of such Restricted Securities shall be entitled to transfer such Restricted Securities in accordance with the terms of the notice delivered by the holder to the Company; provided, however, that the Company shall not request an opinion of counsel or “no action” letter with respect to (i) a transfer not involving a change in beneficial ownership; (ii) a transaction involving the distribution without consideration of Restricted Securities by the holder to its constituent partners or members in proportion to their ownership interests in the holder; (iii) a transaction involving the transfer without consideration of Restricted Securities by an individual holder during such holder’s lifetime by way of gift or on death by will or intestacy; or (iv) to an “Affiliate” as that term is defined in Rule 405 promulgated by the Commission under the Securities Act. Each certificate evidencing the Restricted Securities transferred as above provided shall bear, except if such transfer is made pursuant to Rule 144, the appropriate restrictive legend set forth in Section 3 above, except that such certificate shall not bear such restrictive legend if in the opinion of counsel for such holder and counsel for the Company such legend is not required in order to establish compliance with any provision of the Securities Act. Notwithstanding the foregoing, each holder of Restricted Securities agrees that it will not request that a transfer of the Restricted Securities be made or that the legend set forth in Section 3 be removed from the certificate representing the Restricted Securities, solely in reliance on Rule 144(k), if as a result thereof the Company would be rendered subject to the reporting requirements of the Exchange Act.

     5. Registration.

          5.1 Requested Registration.

               (a) Notice of Registration. In case the Company shall receive from Initiating Holders a written request that the Company effect any registration with respect to shares of Registrable Securities, the Company will:

                    (i) promptly give written notice of the proposed registration to all other Holders; and

                    (ii) as soon as practicable, use commercially reasonable efforts to effect such registration as part of a firm commitment underwritten public offering with underwriters reasonably acceptable to the Initiating Holders and the Company (including, without limitation, appropriate qualification under applicable state securities laws and appropriate compliance with applicable regulations issued under the Securities Act and any other governmental requirements or regulations) as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any

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Holder or Holders joining in such request by delivering a written notice to such effect to the Company within twenty days after the date of such written notice from the Company.

                    Notwithstanding the foregoing, the Company shall not be obligated to take any action to effect or complete any such registration pursuant to this Section 5.1:

                         (A) prior to 180 days after the effective date of the Company’s first registered public offering of its Ordinary Shares;

                         (B) Unless the requested registration would have an aggregate offering price of all Registrable Securities sought to be registered by all Holders exceeding $5,000,000;

                         (C) Following the filing of, and for 180 days immediately following the effective date of, any registration statement pertaining to securities of the Company (other than a registration of securities in a Rule 145 transaction or with respect to an employee benefit plan), provided that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective;

                         (D) After the Company has effected two registrations pursuant to this Section 5.1(a) and such registrations have been declared or ordered effective; or

                         (E) If the Company shall furnish to the Initiating Holders a certificate signed by the President of the Company (i) giving notice of its bona fide intention to effect the filing of a registration statement with the Commission, or (ii) stating that in the good faith judgment of the Board of Directors it would be seriously detrimental to the Company or its shareholders for a registration statement to be filed in the near future. In such case, the Company’s obligation to use its commercially reasonable efforts to register, qualify or comply under this Section 5.1(a) shall be deferred one or more times for a period not to exceed 120 days from the receipt of the request to file such registration by such Initiating Holder or Holders, provided that the Company may not exercise this deferral right more than once per twelve month period.

               Subject to the foregoing clauses (A) through (E), the Company shall use its commercially reasonable efforts to file a registration statement covering the Registrable Securities so requested to be registered as soon as practicable after receipt of the request or requests of the Initiating Holders.

               (b) Underwriting. In the event of a registration pursuant to Section 5.1, the Company shall advise the Holders as part of the notice given pursuant to Section 5.1(a)(i) that the right of any Holder to registration pursuant to Section 5.1 shall be conditioned upon such Holder’s participation in the underwriting arrangements required by this Section 5.1, and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent requested shall be limited to the extent provided herein.

               The Company shall, together with all Holders proposing to distribute their securities through such underwriting, enter into an underwriting agreement in customary form with the managing underwriter selected for such underwriting by a majority in interest of the

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Initiating Holders, but subject to the Company’s reasonable approval. Notwithstanding any other provision of this Section 5.1, if, in the good faith judgment of the managing underwriter of such public offering, the inclusion of all of the Registrable Securities requested to be registered would materially and adversely affect the successful marketing of the offering, then the amount of the Registrable Securities to be included in the offering shall be reduced and the Registrable Securities and the other shares to be offered shall participate in such offering as follows: (i) first, the Registrable Securities requested to be included in such registration by the Holders, and if two or more Holders are included in the registration, pro rata among such Holders on the basis of the number of Registrable Securities owned by each such Holder, (ii) second, the Ordinary Shares requested to be included in such registration by the Company and (iii) third, any Ordinary Shares other than Registrable Securities requested to be registered by holders of such Ordinary Shares, pro-rata among such holders. The Company shall so advise all Holders requesting to be included in the registration and underwriting, and the number of shares of Registrable Securities that may be included in the registration and underwriting shall be allocated among all Holders requesting to be included in the registration and underwriting in proportion, as nearly as practicable, to the respective amounts of Registrable Securities held by them at the time of filing the registration statement. No Registrable Securities excluded from the underwriting by reason of the underwriter’s marketing limitation shall be included in such registration. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest 100 shares. If any Holder of Registrable Securities disapproves of the terms of the underwriting, such person may elect to withdraw therefrom by written notice to the Company.

          5.2 Company Registration.

               (a) Notice of Registration. If at any time or from time to time the Company shall determine to register any of its equity securities, either for its own account or the account of a Holder or other holders, other than (i) a registration relating solely to employee benefit plans, (ii) a registration relating solely to a Rule 145 transaction, or (iii) a registration in which the only equity security being registered is Ordinary Shares issuable upon conversion of convertible debt securities which are also being registered, the Company will:

                    (i) promptly give to each Holder written notice thereof; and

                    (ii) include in such registration (and any related qualifications including compliance with Blue Sky laws), and in any underwriting involved therein, all the Registrable Securities specified in a written request or requests, made within twenty (20) days after the date of such written notice from the Company, by any Holder.

               (b) Underwriting. If the registration of which the Company gives notice is for a registered public offering involving an underwriting, the Company shall so advise the Holders as a part of the written notice given pursuant to Section 5.2(a)(i). In such event, the right of any Holder to registration pursuant to Section 5.2 shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of Registrable Securities in the underwriting shall be limited to the extent provided herein.

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                    All Holders proposing to distribute their securities through such underwriting shall (together with the Company and the other Holders distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the managing underwriter selected for such underwriting by the Company. Notwithstanding any other provision of this Section 5.2, if, in the good faith judgment of the managing underwriter of such public offering, the inclusion of all of the Registrable Securities requested to be registered would materially and adversely affect the successful marketing of the offering, then the amount of the Registrable Securities to be included in the offering shall be reduced and the Registrable Securities and the other shares to be offered shall participate in such offering as follows: (i) first, the Ordinary Shares to be included in such registration by the Company, (ii) second, the Registrable Securities requested to be included in such registration by the Holders, and if two or more Holders are included in the registration, pro rata among the Holders on the basis of the number of Registrable Securities owned by each such Holder, but, except as to the Company’s initial public offering of its securities, in no event less than 33% of all shares to be included in such offering and (iii) third, any Ordinary Shares other than Registrable Securities requested to be registered by holders of such Ordinary Shares, pro-rata among such holders. The Company shall so advise all Holders requesting to be included in the registration and underwriting, and the number of shares of Registrable Securities that may be included in the registration and underwriting shall be allocated among all the Holders requesting to be included in the registration and underwriting in proportion, as nearly as practicable, to the respective amounts of Registrable Securities held by them at the time of filing the registration statement. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest 100 shares. If any Holder disapproves of the terms of any such underwriting, such person may elect to withdraw therefrom by written notice to the Company.

               (c) Right to Terminate Registration. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 5.2 prior to the effectiveness of such registration whether or not any Holder has elected to include securities in such registration.

          5.3 Registration on Form S-3 or Form F-3.

               (a) In addition to the rights set forth in Sections 5.1 and 5.2, if an Initiating Holder or a group of Initiating Holders request that the Company file a registration statement on Form S-3 or Form F-3, as applicable (or any successor thereto) for a public offering of shares of Registrable Securities the reasonably anticipated aggregate price to the public of which would exceed $1,000,000, and the Company is a registrant entitled to use Form S-3 or Form F-3, as applicable, to register securities for such an offering, the Company shall use its best efforts to cause such shares to be registered for the offering on such form (or any successor thereto). The Holders of the Registrable Securities are entitled to an unlimited number of Form S-3 or Form F-3, as applicable, registrations; provided, however, that the Company shall be required to file no more than two (2) such registration statements during any 12-month period. The Company shall:

                    (i) give prompt notice of such request to all Holders; and

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                    (ii) include in such registration (and any related qualifications including compliance with Blue Sky laws), and in any underwriting involved therein, all the Registrable Securities specified in a written request or requests, made within twenty (20) days after the date of such written notice from the Company, by any Holder.

               (b) Underwriting. If the registration of which the Company gives notice is for a registered public offering involving an underwriting, the Company shall so advise the Holders as a part of the written notice given pursuant to Section 5.3(a)(i). In such event, the right of any Holder to registration pursuant to Section 5.3 shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of Registrable Securities in the underwriting shall be limited to the extent provided herein.

                    All Holders proposing to distribute their securities through such underwriting shall (together with the Company and the other Holders distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the managing underwriter selected for such underwriting by the Company. Notwithstanding any other provision of this Section 5.3, if, in the good faith judgment of the managing underwriter of such public offering believes that marketing factors require a limitation of the number of shares to be underwritten, then, the Company shall so advise all Holders requesting to be included in the registration and underwriting, and the number of shares of Registrable Securities that may be included in the registration and underwriting shall be allocated among all the Holders requesting to be included in the registration and underwriting in proportion, as nearly as practicable, to the respective amounts of Registrable Securities held by them at the time of filing the registration statement. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest 100 shares. If any Holder disapproves of the terms of any such underwriting, such person may elect to withdraw therefrom by written notice to the Company.

                    Notwithstanding the foregoing, the Company shall not be obligated to take any action to effect or complete any such registration pursuant to this Section 5.3 if the Company shall furnish to the Initiating Holders a certificate signed by the President of the Company (i) giving notice of its bona fide intention to effect the filing of a registration statement with the Commission, or (ii) stating that in the good faith judgment of the Board of Directors it would be seriously detrimental to the Company or its shareholders for a registration statement to be filed in the near future. In such case, the Company’s obligation to use its commercially reasonable efforts to register, qualify or comply under this Section 5.3 shall be deferred one or more times for a period not to exceed 120 days from the receipt of the request to file such registration by such Initiating Holder or Initiating Holders, provided that the Company may not exercise this deferral right more than once per twelve month period.

                    Subject to the foregoing, the Company shall use its commercially reasonable efforts to file a registration statement covering the Registrable Securities so requested to be registered as soon as practicable after receipt of the request or requests of the Initiating Holder or Initiating Holders.

          5.4 Subsequent Registration Rights.

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               (a) Without the consent of any holder of Registrable Securities hereunder, the Company may grant to any holder of securities of the Company registration rights inferior to those granted hereunder.

               (b) The Company shall not enter into any agreement granting any holder or prospective holder of any securities of the Company registration rights pari passu with or superior to the rights granted the Purchasers hereunder without (i) the written consent of the holders of a majority of the then outstanding Registrable Securities, and (ii) the written consent the Holders holding at least a majority of the then outstanding Conversion Shares issued or issuable upon conversion of the then outstanding Series D Redeemable Preferred Shares.

          5.5 Expenses of Registration. All Registration Expenses incurred in connection with (i) two registrations pursuant to Section 5.1, (ii) all registrations pursuant to Section 5.2, and (iii) all registrations pursuant to Section 5.3, shall be borne by the Company. Unless otherwise stated, all Selling Expenses relating to securities registered on behalf of the Holders shall be borne by the Holders of such securities pro rata on the basis of the number of shares so registered or proposed to be so registered.

          5.6 Registration Procedures. In the case of each registration effected by the Company pursuant to this Agreement, the Company will keep each Holder advised in writing as to the initiation of such registration and as to the completion thereof. The Company will:

               (a) Prepare and file with the Commission a registration statement and such amendments and supplements as may be necessary and use commercially reasonable efforts to cause such registration statement to become and remain effective for at least 120 days or until the distribution described in the registration statement has been completed, whichever first occurs;

               (b) Furnish to the Holders participating in such registration and to the underwriters of the securities being registered such reasonable number of copies of the registration statement, preliminary prospectus, final prospectus and such other documents as such underwriters may reasonably request in order to facilitate the public offering of such securities;

               (c) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Act with respect to the disposition of all securities covered by such registration statement;

               (d) Use all commercially reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions;

               (e) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering;

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               (f) Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Act or the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing;

               (g) Cause all such Registrable Securities registered pursuant hereunder to be listed on each securities exchange on which similar securities issued by the Company are then listed; and

               (h) Provide a transfer agent and registrar for all Registrable Securities registered pursuant hereunder and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration.

          5.7 Indemnification.

               (a) The Company will indemnify each Holder, each of its affiliates, officers and directors and partners, and each person controlling such Holder within the meaning of Section 15 of the Securities Act, with respect to which registration has been effected pursuant to this Agreement, against all expenses, claims, losses, damages or liabilities (or actions in respect thereof), including any of the foregoing incurred in settlement of any litigation, commenced or threatened, arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement, prospectus, offering circular or other document, or any amendment or supplement thereto, incident to any such registration, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, or any violation by the Company of the Securities Act, the Exchange Act, state securities laws or any rule or regulation promulgated under such laws applicable to the Company in connection with any such registration, and the Company will reimburse each such Holder, each of its affiliates, officers and directors, and each person controlling such Holder, for any legal and any other expenses reasonably incurred, as such expenses are incurred, in connection with investigating, preparing or defending any such claim, loss, damage, liability or action, provided that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission or alleged untrue statement or omission, made in reliance upon and in conformity with written information furnished to the Company by an instrument duly executed by such Holder or controlling person, and stated to be specifically for use therein.

               (b) Each Holder will, if Registrable Securities held by such Holder are included in the securities as to which such registration is being effected, indemnify the Company, each of its directors and officers, other holders of the Company’s securities covered by such registration statement, each person who controls the Company within the meaning of Section 15 of the Securities Act, and each other such Holder, each of its officers and directors and each person controlling such Holder within the meaning of Section 15 of the Securities Act, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such

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registration statement, prospectus, offering circular or other document, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation by the Holder of the Securities Act, the Exchange Act, state securities laws or any rule or regulation promulgated under such laws applicable to the Holder, and will reimburse the Company, such other Holders, such directors, officers, persons, underwriters or control persons for any legal or any other expenses reasonably incurred, as such expenses are incurred, in connection with investigating or defending any such claim, loss, damage, liability or action, but only to the extent that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular or other document in reliance upon and in conformity with written information furnished to the Company by an instrument duly executed by such Holder and stated to be specifically for use therein. Notwithstanding the foregoing, the liability of each Holder under this subsection 5.7(b) shall be limited in an amount equal to the net proceeds from the offering received by such Holder, unless such liability arises out of or is based on willful misconduct or fraud by such Holder.

               (c) Each party entitled to indemnification under this Section 5.7 (the “Indemnified Party”) shall give notice to the party required to provide indemnification (the “Indemnifying Party”) promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld), and the Indemnified Party may participate in such defense at such party’s expense, and provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Agreement unless the failure to give such notice is materially prejudicial to an Indemnifying Party’s ability to defend such action and provided further, that the Indemnifying Party shall not assume the defense for matters as to which there is a conflict of interest or there are separate and different defenses, in which case the Indemnifying Party shall pay the reasonable fees and expenses of one counsel to the Indemnified Party. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party (whose consent shall not be unreasonably withheld), consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation.

               (d) If the indemnification provided for in this Section 5.7 is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any loss, liability, claim, damage or expense referred to herein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the Indemnified Party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage or expense, as well as any other relevant equitable considerations. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information

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supplied by the Indemnifying Party or by the Indemnified Party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission.

               (e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained on the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.

          5.8 Information by Holder. The Holder or Holders of Registrable Securities included in any registration shall furnish to the Company such information regarding such Holder or Holders, the Registrable Securities held by them and the distribution proposed by such Holder or Holders as the Company may request in writing and as shall be required in connection with any registration referred to in this Agreement.

          5.9 Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the Commission which may at any time permit the sale of the Restricted Securities to the public without registration, after such time as a public market exists for the Ordinary Shares of the Company, the Company agrees to use commercially reasonable efforts to:

               (a) Make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times after the effective date that the Company becomes subject to the reporting requirements of the Securities Act or the Exchange Act;

               (b) File with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements); and

               (c) So long as a Holder owns any Restricted Securities, to furnish to the Holder forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of said Rule 144 (at any time after 90 days after the effective date of the first registration statement filed by the Company for an offering of its securities to the general public), a copy of the most recent annual or quarterly report of the Company, and such other reports and documents of the Company and other information in the possession of or reasonably obtainable by the Company as the Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing the Holder to sell any such securities without registration.

          5.10 Termination of Registration Rights. The rights granted pursuant to Sections 5.1, 5.2 and 5.3 of this Agreement shall terminate as to any Holder upon the earlier of (i) the date five years after the effective date of a Qualified Initial Public Offering and (ii) the date such Holder is able to immediately sell all shares of Registrable Securities held or entitled to be held upon conversion by such Holder under Rule 144 during any 90-day period without regard to Rule 144(k).

     6. Financial Information Rights.

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               (a) The Company will provide the following documents to each Purchaser, as soon as practicable after the end of the fiscal year ending December 31, 2001 and each fiscal year thereafter, and in any event within ninety (90) days after the end of each such fiscal year, consolidated balance sheets of the Company and its subsidiaries, if any, as of the end of such fiscal year, and consolidated statements of operations and consolidated statements of cash flows and shareholders’ equity of the Company and its subsidiaries, if any, for such year, prepared in accordance with generally accepted accounting principles and setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and audited by independent public accountants of national standing selected by the Company.

               (b) The Company will provide the following documents to each Purchaser who continues to hold 100,000 shares of Preferred Shares and/or Conversion Shares (subject to adjustment for recapitalizations, stock splits, stock dividends and the like):

                    (i) As soon as practicable after the end of the first, second and third quarterly accounting periods in each fiscal year of the Company and in any event within forty-five (45) days thereafter, a consolidated balance sheet of the Company and its subsidiaries, if any, as of the end of each such quarterly period, and consolidated statements of operations and consolidated statements of cash flows of the Company and its subsidiaries, if any, for such period and for the current fiscal year to date, prepared in accordance with generally accepted accounting principles (other than accompanying notes), subject to changes resulting from year-end audit adjustments, in reasonable detail and signed by the principal financial or accounting officer of the Company, and such other documents generally distributed or made available to the Company’s shareholders; and

                    (ii) As soon as practicable, but in any event at least sixty (60) days prior to the end of each fiscal year, a budget and business plan for the next fiscal year, prepared on a monthly basis, including balance sheets, income statements, statements of cash flows and such other matters as the Board of Directors may determine for such months and, as soon as prepared, any other budgets or revised budgets prepared by the Company.

               (c) The Company will provide the following documents to each Purchaser who continues to hold 450,000 shares of Preferred Shares and/or Conversion Shares (subject to adjustment for recapitalizations, stock splits, stock dividends and the like):

                    (i) As soon as practicable after the end of each month, but in any event within thirty (30) days of the end of each month, an unaudited income statement and statement of cash flows and balance sheet for and as of the end of such month, prepared in accordance with generally accepted accounting principles (other than accompanying notes), subject to changes resulting from year-end audit adjustments, in reasonable detail and signed by the principal financial or accounting officer of the Company.

               (d) For purposes of determining the minimum holdings pursuant to this Section 6, any Purchaser which is a partnership or limited liability company shall be deemed to hold any Preferred Shares originally purchased by such Purchaser and subsequently distributed to constituent partners or members of such Purchaser, but which have not been resold by such partners or members. If the partnership or limited liability company is still in existence, the

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Company may satisfy any obligation to distribute reports to individual partners of the partnership or members of a limited liability company by delivering a single copy of each report to the partnership or limited liability company as agent for the constituent partners or members.

               (e) Each Purchaser or transferee of rights under this Section 6 acknowledges and agrees that any information obtained pursuant to this Section 6 which may be considered nonpublic information will be maintained in confidence by such Purchaser or transferee, will not be disclosed to any third party without the Company’s consent and will not be utilized by such Purchaser or transferee in connection with purchases or sales of the Company’s securities except in compliance with applicable state and Federal securities laws.

               (f) The covenants of the Company set forth in this Section 6 shall terminate and be of no further force or effect upon the earliest to occur of (i) the closing of the Company’s initial public offering of its Ordinary Shares; or (ii) the sale of all or substantially all of the assets of the Company or the acquisition of the Company by another entity by means of merger or consolidation resulting in the exchange of the outstanding shares of the Company for securities or consideration issued, or caused to be issued, by the acquiring corporation or its subsidiary, unless the shareholders of the Company immediately prior to such transaction hold at least 50% of the voting power of the surviving corporation or its parent in such a transaction.

     7. Observers.

               (a) So long as Intel Atlantic, Inc. (“Intel Atlantic”) holds at least 500,000 Series B Preferred Shares (as adjusted for stock splits, stock dividends, recapitalizations and the like), the Company will permit a representative of Intel Atlantic (the “Intel Observer”) to attend all meetings of the Company’s Board of Directors (the “Board”) and all committees thereof (whether in person, by telephone or otherwise) in a non-voting, observer capacity, and shall provide to the Intel Observer, concurrently with the members of the Board, and in the same manner, notice of such meeting and a copy of all materials, consents and resolutions provided to such members. The Company acknowledges that Intel Atlantic or its affiliates (collectively, “Intel”) are likely to have, from time to time, information that may be of interest to the Company (“Information”) regarding a wide variety of matters including, by way of example only: (1) Intel’s technologies, plans and services, and plans and strategies relating thereto; (2) current and future investments Intel has made, may make, may consider or may become aware of with respect to other companies and other technologies, products and services, including, without limitation, technologies, products and services that may be competitive with the Company’s; and (3) developments with respect to the technologies, products and services, and plans and strategies relating thereto, of other companies, including, without limitation, companies that may be competitive with the Company. The Company recognizes that a portion of such Information may be of interest to the Company. Such Information may or may not be known by the Intel Observer. The Company, as a material part of the consideration for this Agreement, agrees that Intel and the Intel Observer shall have no duty to disclose any Information to the Company or permit the Company to participate in any projects or investments based on any Information, or to otherwise take advantage of any opportunity that may be of interest to the Company if it were aware of such Information, and hereby waives, to the extent permitted by law, any claim based on the corporate opportunity doctrine or otherwise that could limit Intel’s ability to pursue opportunities based on such Information or that would require Intel or the Intel Observer to

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disclose any such Information to the Company or offer any opportunity relating thereto to the Company. Notwithstanding the foregoing, the Company reserves the right to exclude such Intel Observer from access to any material or meeting or portion thereof if a majority of members on the Board of Directors of the Company determine in good faith that such exclusion is reasonably necessary to prevent a conflict of interest, preserve an attorney-client privilege, protect highly confidential proprietary information, or for other similar reasons.

               (b) If, for any reason, Bessemer Venture Partners, together with all its affiliates (“BVP”), is not entitled to designate a member of the Board of Directors to represent the Series D Redeemable Preferred pursuant to Section 13 of this Agreement, and so long as BVP holds at least 250,000 Series D Redeemable Shares or Ordinary Shares issued upon the conversion thereof, the Company will permit a representative of BVP (the “BVP Observer”) to attend all meetings of Board and all committees thereof (whether in person, by telephone or otherwise) in a non-voting, observer capacity, and shall provide to the BVP Observer, concurrently with the members of the Board, and in the same manner, notice of such meeting and a copy of all materials, consents and resolutions provided to such members. The Company may require as a condition precedent to the rights under this Section 7(b) that each person proposing to attend any meeting of the Board and each person to have access to any of the information provided by the Company to the Board agree to hold in confidence and trust all information so received during such meetings or otherwise; and provided further, that the Company reserves the right not to provide information and to exclude such representative from any meeting or portion thereof if a majority of members of the Board of Directors of the Company determine in good faith that delivery of such information or attendance at such meeting or portion thereof by such representative would result in disclosure of trade secrets to such representative or would adversely affect the attorney-client privilege between the Company and its counsel.

     8. Use of Proceeds. The Company shall use the proceeds derived from the sale of its Series D Redeemable Preferred Shares pursuant to the Purchase Agreement primarily for general operating purposes.

     9. Lockup Agreement. Each Purchaser, Holder, Founder and transferee hereby agrees that, in connection with the Company’s initial public offering of its securities, if so requested by the Company or any representative of the underwriters (the “Managing Underwriter”), such Purchaser, Holder, Founder or transferee shall not sell or otherwise transfer any securities of the Company during the period specified by the Company’s Board of Directors at the request of the Managing Underwriter (the “Market Standoff Period”), with such period not to exceed 180 days following the effective date of a registration statement of the Company filed under the Securities Act; provided that all officers, directors and one percent (1%) shareholders agree to a similar restriction. The Company may impose stop-transfer instructions with respect to securities subject to the foregoing restrictions until the end of such Market Standoff Period. The provisions of this Section shall not apply to (a) any transactions relating to Ordinary Shares in the open market after completion of the public offering or (b) any transfers of securities of the Company to affiliates of a Purchaser or Holder. If the Company or the underwriter of any public offering of the Company’s securities waive or terminate any standoff or lockup restrictions imposed on a holder or holders of securities of the Company in an aggregate amount in excess of twenty thousand (20,000) Ordinary Shares, then such waiver or termination shall be granted to all

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holders subject to standoff or lockup restrictions pro rata based on the number of Ordinary Shares beneficially held by such holders.

     10. Right of First Refusal.

               (a) The Company hereby grants to each Purchaser the right of first refusal to purchase its Pro Rata Share of New Securities (as defined in this Section 10) which the Company may, from time to time, propose to sell and issue. A “Pro Rata Share,” for purposes of this right of first refusal, equals the proportion that the total number of shares of Ordinary Shares then held by such Purchaser plus the number of shares of Ordinary Shares issuable upon conversion of the Preferred Shares then held by such Purchaser bears to the sum of the total number of shares of Ordinary Shares (as adjusted for stock splits, stock dividends, recapitalizations and the like) then outstanding plus the number of shares of Ordinary Shares (as adjusted for stock splits, stock dividends, recapitalizations and the like) issuable upon exercise or conversion of all then outstanding securities exercisable for or convertible into, directly or indirectly, Ordinary Shares.

                         (A) Except as set forth below, “New Securities” shall mean any shares of capital stock of the Company, including Ordinary Shares and any series of preferred shares, whether now authorized or not, and rights, options or warrants to purchase said shares of Ordinary Shares or Preferred Shares, and securities of any type whatsoever that are, or may become, convertible into or exchangeable for said shares of Ordinary Shares or preferred shares. Notwithstanding the foregoing, “New Securities” does not include: (i) Ordinary Shares issued pursuant to a transaction described in subarticles 5.3.3.3, 5.3.3.4, 5.3.3.5, 5.3.3.6, 5.3.4 or 5.3.5 of the Restated Articles; (ii) up to 9,185,542 Ordinary Shares or any other securities pursuant to a share option or other incentive plan or as part of a compensation arrangement to an officer, employee, director or consultant approved by the Board of Directors including, without limitation, the exercise of options outstanding as of the Original Issue Date; (iii) Ordinary Shares issued on conversion of Preferred Shares; (iv) Ordinary Shares issued in the Company’s Qualified Initial Public Offering; (v) Ordinary Shares issued to equipment lessors, banks, financial institutions or similar entities, or to strategic partners of the Company, in a transaction approved by a vote of a majority of the directors elected pursuant to Article 39.2 of the Restated Articles, the principal purpose of which is other than raising of capital through the sale of equity securities of the Company.

               (b) In the event the Company proposes to undertake an issuance of New Securities, it shall give each Purchaser written notice of its intention, describing the amount and type of New Securities, and the price and terms upon which the Company proposes to issue the same. Each Purchaser shall have 10 days from the date of receipt of any such notice to agree to purchase up to its respective Pro Rata Share of such New Securities for the price and upon the terms specified in the notice by giving written notice to the Company and stating therein the quantity of New Securities to be purchased.

               (c) Beginning ten days after the notice given pursuant to Section 10(c) above, the Company shall have 120 days to sell the New Securities not elected or eligible to be purchased by Purchasers at the price and upon the terms no more favorable to the purchasers of such securities than specified in the Company’s notice. In the event the Company has not sold all

17

of the New Securities within said 120 day period, the Company shall not thereafter issue or sell any New Securities without first offering such securities in the manner provided above.

               (d) The provisions of this Section 10 will terminate and be of no further force or effect upon the earlier to occur of: (i) immediately prior to the closing of the Company’s Qualified Initial Public Offering, or (ii) the sale of all or substantially all of the assets of the Company or the acquisition of the Company by another entity by means of merger or consolidation resulting in the exchange of the outstanding shares of the Company for securities or consideration issued, or caused to be issued, by the acquiring corporation or its subsidiary, unless the shareholders of the Company immediately prior to such transaction hold at least 50% of the voting power of the surviving corporation or its parent in such a transaction.

     11. Confidential Information and Invention Assignment Agreements. The Company will maintain a policy requiring each person now or hereafter employed by it or any subsidiary with access to confidential information to enter into a Confidential Information and Invention Assignment Agreement substantially in a form attached to the Purchase Agreement.

     12. Transfer of Rights.

               (a) The rights granted under Sections 5, 6 and 10 of this Agreement may be assigned to any transferee or assignee, other than a competitor or potential competitor of the Company (as determined in good faith by the Company’s Board of Directors) in connection with any transfer or assignment of Registrable Securities by the Holder; and

               (b) notwithstanding the foregoing, the rights granted under Sections 5 and 10 of this Agreement may be assigned to any wholly-owned subsidiary of a Holder in connection with any transfer or assignment of Registrable Securities by such Holder,

     provided that: (i) each such transfer is otherwise effected in accordance with applicable securities laws and the terms of this Agreement; (ii) prior written notice is given to the Company; (iii) such transferee or assignee agrees to be bound by the provisions of this Agreement; and (iv) such transferee acquires at least 50,000 shares of Registrable Securities.

     13. Agreement to Vote. As long as BVP holds at least 250,000 shares of Series D Redeemable Preferred, each holder of Series D Redeemable Preferred Shares agrees to vote all of their respective shares of Series D Redeemable Preferred so as to elect one (1) representative designated by BVP as the Series D Director . If BVP holds less than 250,000 shares of Series D Redeemable Preferred, each holder of Series D Redeemable Preferred shall vote all of their respective shares of Series D Redeemable Preferred so as to elect one (1) representative designated by the holders of a majority of the shares of Series D Redeemable Preferred as the Series D Director.

     14. Amendment. Except as otherwise provided herein, additional parties may be added to this Agreement, any provision of this Agreement may be amended or the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company, the Holders of a majority of the Registrable Securities then outstanding. Any amendment or waiver effected in accordance with

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this Section 14 shall be binding upon each Purchaser, Holder of Registrable Securities at the time outstanding, each future holder of any of such securities, the Founders, and the Company.

     15. Governing Law. This Agreement shall be governed in all respects by the internal laws of the State of California without regard to conflict of laws provisions.

     16. Entire Agreement. This Agreement constitutes the full and entire understanding and Agreement among the parties regarding the matters set forth herein. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon the successors, assigns, heirs, executors and administrators of the parties hereto.

     17. Notices, etc. All notices and other communications required or permitted hereunder shall, for all purposes of this Agreement, be treated as effective or having been given (i) if delivered personally (including by overnight express or messenger), when received, (ii) if delivered by facsimile, the first business day after the date of confirmation that the facsimile has been successfully transmitted to the facsimile number for the party notified, (iii) if sent by mail to an address in the United States, at the earlier of its receipt or three (3) days after the same has been deposited in a regularly maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid, or (iv) if sent by mail to an address outside of the United States, seven (7) days after being mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid. Such notices or other communications shall be sent to each party at the address below:

               (a) if to a Purchaser, at such other address as such Purchaser shall have furnished to the Company;

               (b) if to a Founder, at such other address as such Founder shall have furnished to the Company; and

               (c) if to the Company, to:

Mellanox Technologies, Ltd.
2900 Stender Way
Santa Clara, CA 95054
Attention: Eyal Waldman, CEO
Fax: (408) 970-3403

     or at such other address as the Company shall have furnished to the Purchasers, with a copy to:

Latham & Watkins
135 Commonwealth Drive
Menlo Park, CA 94025
Attention: Alan C. Mendelson, Esq.
Fax: (650) 463-2600

     and another copy to: Yigal Arnon & Co.

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22 Rivlin Street
Jerusalem, 91000
Israel
Attention: Barry Levenfeld, Adv.
Fax: +972-2-623-9236

     18. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original and all of which together shall constitute one instrument.

     19. Grant of Proxy. Should the provisions of Section 13 be construed to constitute the granting of proxies, such proxies shall be deemed coupled with an interest and are irrevocable for the term of Section 13.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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

“COMPANY”	“PURCHASERS”
MELLANOX TECHNOLOGIES, LTD.	Entity Investors
An Israeli company	By:
/s/ Eyal Waldman	Print Name:
Eyal Waldman
Chief Executive Officer	Its:
	Individual Investors

Mellanox Amended and Restated Investor Rights Agreement
Signature Page — 1

“FOUNDERS”

/s/ Eyal Waldman

EYAL WALDMAN

/s/ Roni Ashuri

RONI ASHURI

/s/ Shai Cohen

SHAI COHEN

/s/ Michael Kagan

MICHAEL KAGAN

/s/ Evelyn Landsman

EVELYN LANDSMAN

/s/ Shimon Rotenberg

SHIMON ROTENBERG

/s/ Eitan Zehavi

EITAN ZEHAVI

/s/ Udi Katz

UDI KATZ

/s/ Alon Webman

ALON WEBMAN

Mellanox Amended and Restated Investor Rights Agreement
Signature Page — 2

EX-10.1

Exhibit 10.1

Mellanox Technologies Ltd.

1999 United States Equity Incentive Plan

Adopted August 26, 1999
Amended September 3, 2004
Approved By Shareholders [August 26, 1999]
Termination Date: August 25, 2009

1. Purposes.

     (a) Eligible Stock Award Recipients. The persons eligible to receive Stock Awards are the Employees, Directors and Consultants of the Company and its Affiliates.

     (b) Available Stock Awards. The purpose of the Plan is to provide a means by which eligible recipients of Stock Awards may be given an opportunity to benefit from increases in value of the Ordinary Shares through the granting of the following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii) stock bonuses and (iv) rights to acquire restricted stock.

     (c) General Purpose. The Company, by means of the Plan, seeks to retain the services of the group of persons eligible to receive Stock Awards, to secure and retain the services of new members of this group and to provide incentives for such persons to exert maximum efforts for the success of the Company and its Affiliates.

2. Definitions.

     (a) “Affiliate” means any parent corporation or subsidiary corporation of the Company, whether now or hereafter existing, as those terms are defined in Sections 424(e) and (f), respectively, of the Code.

     (b) “Board” means the Board of Directors of the Company.

     (c) “Code ” means the Internal Revenue Code of 1986, as amended.

     (d) “Committee” means a committee of one or more members of the Board appointed by the Board in accordance with subsection 3(c).

     (e) “Company” means Mellanox Technologies Ltd., an Israeli corporation.

     (f) “Consultant” means any person, including an advisor, (i) engaged by the Company or an Affiliate to render consulting or advisory services and who is compensated for such services or (ii) who is a member of the Board of Directors of an Affiliate. However, the term “Consultant” shall not include either Directors who are not compensated by the Company

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for their services as Directors or Directors who are merely paid a director’s fee by the Company for their services as Directors.

     (g) “Continuous Service” means that the Participant’s service with the Company or an Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. The Participant’s Continuous Service shall not be deemed to have terminated merely because of a change in the capacity in which the Participant renders service to the Company or an Affiliate as an Employee, Consultant or Director or a change in the entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant’s Continuous Service. For example, a change in status from an Employee of the Company to a Consultant of an Affiliate or a Director will not constitute an interruption of Continuous Service. The Board or the chief executive officer of the Company, in that party’s sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by that party, including sick leave, military leave or any other personal leave.

     (h) “Covered Employee” means the chief executive officer and the four (4) other highest compensated officers of the Company for whom total compensation is required to be reported to shareholders under the Exchange Act, as determined for purposes of Section 162(m) of the Code.

     (i) “Director” means a member of the Board of Directors of the Company.

     (j) “Disability” means (i) before the Listing Date, the inability of a person, in the opinion of a qualified physician acceptable to the Company, to perform the major duties of that person’s position with the Company or an Affiliate of the Company because of the sickness or injury of the person and (ii) after the Listing Date, the permanent and total disability of a person within the meaning of Section 22(e)(3) of the Code.

     (k) “Employee” means any person employed by the Company or an Affiliate. Mere service as a Director or payment of a director’s fee by the Company or an Affiliate shall not be sufficient to constitute “employment” by the Company or an Affiliate.

     (l) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

     (m) “Fair Market Value” means, as of any date, the value of the Ordinary Shares determined as follows:

          (i) If the Ordinary Shares are listed on any established stock exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair Market Value of an Ordinary Share shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or market (or the exchange or market with the greatest volume of trading in the Ordinary Shares) on the last market trading day prior to the day of determination, as reported in The Wall Street Journal or such other source as the Board deems reliable.

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          (ii) In the absence of such markets for the Ordinary Shares, the Fair Market Value shall be determined in good faith by the Board.

          (iii) Prior to the Listing Date, the value of the Ordinary Shares shall be determined in a manner consistent with Section 260.140.50 of Title 10 of the California Code of Regulations.

     (n) “Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.

     (o) “Listing Date” means the first date upon which any security of the Company is listed (or approved for listing) upon notice of issuance on any securities exchange or designated (or approved for designation) upon notice of issuance as a national market security on an interdealer quotation system if such securities exchange or interdealer quotation system has been certified in accordance with the provisions of Section 25100(o) of the California Corporate Securities Law of 1968.

     (p) “Non-Employee Director” means a Director who either (i) is not a current Employee or Officer of the Company or its parent or a subsidiary, does not receive compensation (directly or indirectly) from the Company or its parent or a subsidiary for services rendered as a consultant or in any capacity other than as a Director (except for an amount as to which disclosure would not be required under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act (“Regulation S-K”)), does not possess an interest in any other transaction as to which disclosure would be required under Item 404(a) of Regulation S-K and is not engaged in a business relationship as to which disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a “non-employee director” for purposes of Rule 16b-3.

     (q) “Nonstatutory Stock Option” means an Option not intended to qualify as an Incentive Stock Option.

     (r) “Officer” means (i) before the Listing Date, any person designated by the Company as an officer and (ii) on and after the Listing Date, a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

     (s) “Option” means an Incentive Stock Option or a Nonstatutory Stock Option granted pursuant to the Plan.

     (t) “Option Agreement” means a written agreement between the Company and an Optionholder evidencing the terms and conditions of an individual Option grant. Each Option Agreement shall be subject to the terms and conditions of the Plan.

     (u) “Optionholder” means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.

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     (v) “Ordinary Shares” means the Ordinary Shares of nominal value NIS 0.01 each of the Company.

     (w) “Outside Director” means a Director who either (i) is not a current employee of the Company or an “affiliated corporation” (within the meaning of Treasury Regulations promulgated under Section 162(m) of the Code), is not a former employee of the Company or an “affiliated corporation” receiving compensation for prior services (other than benefits under a tax qualified pension plan), was not an officer of the Company or an “affiliated corporation” at any time and is not currently receiving direct or indirect remuneration from the Company or an “affiliated corporation” for services in any capacity other than as a Director or (ii) is otherwise considered an “outside director” for purposes of Section 162(m) of the Code.

     (x) “Participant” means a person to whom a Stock Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Stock Award.

     (y) “Plan” means this Mellanox Technologies Ltd. 1999 United States Equity Incentive Plan.

     (z) “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect from time to time.

     (aa) “Securities Act” means the Securities Act of 1933, as amended.

     (bb) “Stock Award” means any right granted under the Plan, including an Option, a stock bonus and a right to acquire restricted stock.

     (cc) “Stock Award Agreement” means a written agreement between the Company and a holder of a Stock Award evidencing the terms and conditions of an individual Stock Award grant. Each Stock Award Agreement shall be subject to the terms and conditions of the Plan.

     (dd) “Ten Percent Shareholder” means a person who owns (or is deemed to own pursuant to Section 424(d) of the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of any of its Affiliates.

3. Administration.

     (a) Administration by Board. The Board shall administer the Plan unless and until the Board delegates administration to a Committee, as provided in subsection 3(c). Any interpretation of the Plan by the Board and any decision by the Board under the Plan shall be final and binding on all persons. Notwithstanding the above, the Board shall automatically have a residual authority if no Committee shall be constituted or if such Committee shall cease to operate for any reason whatsoever.

     (b) Powers of Board.

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          (i) The Board shall have full power and authority (1) to designate Participants; (2) to determine the terms and provisions of respective Stock Award Agreements (which need not be identical) including, but not limited to, the number of Ordinary Shares in the Company to be covered by each Stock Award, the time(s) when and the extent to which the Stock Awards may be exercised, any conditions upon which the vesting of the Ordinary Shares acquired pursuant to a Stock Award may be accelerated, and the nature and duration of restrictions as to transferability or restrictions constituting substantial risk of forfeiture; (3) to accelerate the right of a Participant to exercise, in whole or in part, any previously granted Stock Award; (4) to interpret the provisions and supervise the administration of the Plan; (5) to determine the Fair Market Value of the Ordinary Shares; (6) to designate Options as Incentive Stock Options or Nonstatutory Stock Options; and (7) to determine any other matter which is necessary or desirable for, or incidental to administration of the Plan.

          (ii) All decisions and selections made by the Board or the Committee pursuant to the provisions of the Plan shall be made by a majority of its members except that no member of the Board or the Committee shall vote on, or be counted for quorum purposes, with respect to any proposed action of the Board or the Committee relating to any Stock Award to be granted to that member. Any decision reduced to writing and signed by a majority of the members who are authorized to make such decision shall be fully effective as if it had been made by a majority at a meeting duly held.

          (iii) The interpretation and construction by the Board of any provision of the Plan or of any Stock Award thereunder shall be final and conclusive unless otherwise determined by the Board.

          (iv) Subject to the Company decision, each member of the Board or the Committee shall be indemnified and held harmless by the Company against any cost or expense (including counsel fees) reasonably incurred by such member, 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 fraud or bad faith, to the 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 Articles of Association, any agreement, any vote of shareholders or disinterested directors, insurance policy or otherwise.

     (c) Delegation to Committee.

          (i) General. The Board may delegate administration of the Plan to a Committee or Committees of two (2) or more members of the Board, and the term “Committee” shall apply to any person or persons to whom such authority has been delegated. If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board, including the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board shall thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may abolish the Committee

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at any time and revest in the Board the administration of the Plan. The Committee shall select one of its members as its chairman (“the Chairman”) and shall hold its meetings at such times and places as the Chairman shall determine. The Committee shall keep records of its meetings and shall make such rules and regulations for the conduct of its business as it shall deem advisable.

          (ii) Committee Composition when Ordinary Shares are Publicly Traded. At such time as the Ordinary Shares are publicly traded, in the discretion of the Board, a Committee may consist solely of two or more Outside Directors, in accordance with Section 162(m) of the Code, and/or solely of two or more Non-Employee Directors, in accordance with Rule 16b-3. Within the scope of such authority, the Board or the Committee may (1) delegate to a committee of one or more members of the Board who are not Outside Directors the authority to grant Stock Awards to eligible persons who are either (a) not then Covered Employees and are not expected to be Covered Employees at the time of recognition of income resulting from such Stock Award or (b) not persons with respect to whom the Company wishes to comply with Section 162(m) of the Code and/or) (2) delegate to a committee of one or more members of the Board who are not Non-Employee Directors the authority to grant Stock Awards to eligible persons who are not then subject to Section 16 of the Exchange Act.

4. Shares Subject to the Plan.

     (a) Share Reserve. Subject to the provisions of Section 11 relating to adjustments upon changes in Ordinary Shares, the number of Ordinary Shares that may be issued pursuant to Stock Awards pursuant to the Plan and pursuant to the Mellanox Technologies Ltd. 1999 Israeli Share Option Plan shall not exceed in the aggregate two million two hundred seventy thousand (2,270,000) Ordinary Shares.

     (b) Reversion of Shares to the Share Reserve. If any Stock Award shall for any reason expire or otherwise terminate, in whole or in part, without having been exercised in full, the Ordinary Shares not acquired under such Stock Award shall revert to and again become available for issuance under the Plan and under the Mellanox Technologies Ltd. 1999 Israeli Share Option Plan.

     (c) Source of Shares. The Ordinary Shares subject to the Plan and to the Mellanox Technologies Ltd. 1999 Israeli Share Option Plan may be unissued shares or reacquired shares, bought on the market or otherwise, if permitted by law.

     (d) Share Reserve Limitation. Prior to the Listing Date and to the extent then required by Section 260.140.45 of Title 10 of the California Code of Regulations, the total number of Ordinary Shares issuable upon exercise of all outstanding Stock Awards and the total number of Ordinary Shares provided for under any stock bonus or similar plan of the Company shall not exceed the applicable percentage as calculated in accordance with the conditions and

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exclusions of Section 260.140.45 of Title 10 of the California Code of Regulations, based on the Ordinary Shares that are outstanding at the time the calculation is made.¹

5. Eligibility.

     (a) Eligibility for Specific Stock Awards. Incentive Stock Options may be granted only to Employees. Stock Awards other than Incentive Stock Options may be granted to Employees, Directors and Consultants.

     (b) Ten Percent Shareholders.

          (i) A Ten Percent Shareholder shall not be granted an Incentive Stock Option unless the exercise price of such Option is at least one hundred ten percent (110%) of the Fair Market Value of the Ordinary Shares at the date of grant and the Option is not exercisable after the expiration of five (5) years from the date of grant.

          (ii) Prior to the Listing Date, a Ten Percent Stockholder shall not be granted a Nonstatutory Stock Option unless the exercise price of such Option is at least (i) one hundred ten percent (110%) of the Fair Market Value of the Ordinary Shares at the date of grant or (ii) such lower percentage of the Fair Market Value of the Ordinary Shares at the date of grant as is permitted by Section 260.140.41 of Title 10 of the California Code of Regulations at the time of the grant of the Option.

          (iii) Prior to the Listing Date, a Ten Percent Stockholder shall not be granted a restricted stock award unless the purchase price of the restricted stock is at least (i) one hundred percent (100%) of the Fair Market Value of the Ordinary Shares at the date of grant or (ii) such lower percentage of the Fair Market Value of the Ordinary Shares at the date of grant as is permitted by Section 260.140.41 of Title 10 of the California Code of Regulations at the time of the grant of the Option.

     (c) Consultants.

          (i) Prior to the Listing Date, a Consultant shall not be eligible for the grant of a Stock Award if, at the time of grant, either the offer or the sale of the Company’s securities to such Consultant is not exempt under Rule 701 of the Securities Act (“Rule 701”) because of the nature of the services that the Consultant is providing to the Company, or because the Consultant is not a natural person, or as otherwise provided by Rule 701, unless the Company determines that such grant need not comply with the requirements of Rule 701 and will satisfy another

¹ Section 260.140.45 generally provides that the total number of shares issuable upon exercise of all outstanding options (exclusive of certain rights) and the total number of shares called for under any stock bonus or similar plan shall not exceed a number of shares which is equal to 30% of the then outstanding shares of the issuer (convertible preferred or convertible senior common shares counted on an as if converted basis), exclusive of shares subject to promotional waivers under Section 260.141, unless a percentage higher than 30% is approved by at least two-thirds of the outstanding shares entitled to vote.

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exemption under the Securities Act as well as comply with the securities laws of all other relevant jurisdictions.

          (ii) From and after the Listing Date, a Consultant shall not be eligible for the grant of a Stock Award if, at the time of grant, a Form S-8 Registration Statement under the Securities Act (“Form S-8”) is not available to register either the offer or the sale of the Company’s securities to such Consultant because of the nature of the services that the Consultant is providing to the Company, or because the Consultant is not a natural person, or as otherwise provided by the rules governing the use of Form S-8, unless the Company determines both (i) that such grant (A) shall be registered in another manner under the Securities Act (e.g., on a Form S-3 Registration Statement) or (B) does not require registration under the Securities Act in order to comply with the requirements of the Securities Act, if applicable, and (ii) that such grant complies with the securities laws of all other relevant jurisdictions.

          (iii) Rule 701 and Form S-8 generally are available to consultants and advisors only if (1) they are natural persons; (2) they provide bona fide services to the issuer, its parents, its majority-owned subsidiaries or (for Rule 701 purposes only) majority-owned subsidiaries of the issuer’s parent; and (3) the services are not in connection with the offer or sale of securities in a capital-raising transaction, and do not directly or indirectly promote or maintain a market for the issuer’s securities.

6. Option Provisions.

     Each Option shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. All Options shall be separately designated Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and, if certificates are issued, a separate certificate or certificates will be issued for Ordinary Shares purchased on exercise of each type of Option. The provisions of separate Options need not be identical, but each Option shall include (through incorporation of provisions hereof by reference in the Option or otherwise) the substance of each of the following provisions:

     (a) Term. Subject to the provisions of subsection 5(b) regarding Ten Percent Shareholders, no Option shall be exercisable after the expiration of ten (10) years from the date it was granted.

     (b) Exercise Price of an Incentive Stock Option. Subject to the provisions of subsection 5(b) regarding Ten Percent Shareholders, the exercise price of each Incentive Stock Option shall be not less than one hundred percent (100%) of the Fair Market Value of the Ordinary Shares subject to the Option on the date the Option is granted. Notwithstanding the foregoing, an Incentive Stock Option may be granted with an exercise price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 424(a) of the Code.

     (c) Exercise Price of a Nonstatutory Stock Option. Subject to the provisions of subsection 5(b) regarding Ten Percent Shareholders, the exercise price of each Nonstatutory

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Stock Option granted prior to the Listing Date shall be not less than eighty-five percent (85%) of the Fair Market Value of the Ordinary Shares subject to the Option on the date the Option is granted. The exercise price of each Nonstatutory Stock Option granted on or after the Listing Date shall be not less than eighty-five percent (85%) of the Fair Market Value of the Ordinary Shares subject to the Option on the date the Option is granted. Notwithstanding the foregoing, a Nonstatutory Stock Option may be granted with an exercise price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 424(a) of the Code.

     (d) Consideration. The purchase price of Ordinary Shares acquired pursuant to an Option shall be paid, to the extent permitted by applicable statutes and regulations, either (i) in cash at the time the Option is exercised or (ii) at the discretion of the Board at the time of the grant of the Option (or subsequently in the case of a Nonstatutory Stock Option) in any other form of legal consideration that may be acceptable to the Board.

     (e) Transferability of an Incentive Stock Option. An Incentive Stock Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder. Notwithstanding the foregoing, the Optionholder may, by delivering written notice to the Company, in a form satisfactory to the Company, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option.

     (f) Transferability of a Nonstatutory Stock Option. A Nonstatutory Stock Option granted prior to the Listing Date shall not be transferable except by will or by the laws of descent and distribution and, to the extent provided in the Option Agreement, to such further extent as permitted by Section 260.140.41(d) of Title 10 of the California Code of Regulations at the time of the grant of the Option, and shall be exercisable during the lifetime of the Optionholder only by the Optionholder. A Nonstatutory Stock Option granted on or after the Listing Date shall be transferable to the extent provided in the Option Agreement. If the Nonstatutory Stock Option does not provide for transferability, then the Nonstatutory Stock Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder. Notwithstanding the foregoing, the Optionholder may, by delivering written notice to the Company, in a form satisfactory to the Company, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option.

     (g) Vesting Generally. The total number of Ordinary Shares subject to an Option may, but need not, vest and therefore become exercisable in periodic installments that may, but need not, be equal. The Option may be subject to such other terms and conditions on the time or times when it may be exercised (which may be based on performance or other criteria) as the Board may deem appropriate. The vesting provisions of individual Options may vary. The provisions of this subsection 6(g) are subject to any Option provisions governing the minimum number of Ordinary Shares as to which an Option may be exercised.

     (h) Minimum Vesting Prior to the Listing Date. Notwithstanding the foregoing subsection 6(g), to the extent that the following restrictions on vesting are required by Section

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260.140.41(f) of Title 10 of the California Code of Regulations at the time of the grant of the Option, then:

          (i) Options granted prior to the Listing Date to an Employee who is not an Officer, Director or Consultant shall provide for vesting of the total number of Ordinary Shares at a rate of at least twenty percent (20%) per year over five (5) years from the date the Option was granted, subject to reasonable conditions such as continued employment; and

          (ii) Options granted prior to the Listing Date to Officers, Directors or Consultants may be made fully exercisable, subject to reasonable conditions such as continued employment, at any time or during any period established by the Company.

     (i) Termination of Continuous Service. In the event an Optionholder’s Continuous Service terminates (other than upon the Optionholder’s death or Disability), the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination) but only within such period of time ending on the earlier of (i) the date three (3) months following the termination of the Optionholder’s Continuous Service (or such longer or shorter period specified in the Option Agreement, which period shall not be less than thirty (30) days for Options granted prior to the Listing Date unless such termination is for cause), or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination, the Optionholder does not exercise his or her Option within the time specified in the Option Agreement, the Option shall terminate.

     (j) Extension of Termination Date. An Optionholder’s Option Agreement may also provide that if the exercise of the Option following the termination of the Optionholder’s Continuous Service (other than upon the Optionholder’s death or Disability) would be prohibited at any time solely because the issuance of Ordinary Shares would violate the registration requirements under the Securities Act, then the Option shall terminate on the earlier of (i) the expiration of the term of the Option set forth in subsection 6(a) or (ii) the expiration of a period of three (3) months after the termination of the Optionholder’s Continuous Service during which the exercise of the Option would not be in violation of such registration requirements.

     (k) Disability of Optionholder. In the event that an Optionholder’s Continuous Service terminates as a result of the Optionholder’s Disability, the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination), but only within such period of time ending on the earlier of (i) the date twelve (12) months following such termination (or such longer or shorter period specified in the Option Agreement, which period shall not be less than six (6) months for Options granted prior to the Listing Date) or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination, the Optionholder does not exercise his or her Option within the time specified herein, the Option shall terminate.

     (l) Death of Optionholder. In the event (i) an Optionholder’s Continuous Service terminates as a result of the Optionholder’s death or (ii) the Optionholder dies within the period (if any) specified in the Option Agreement after the termination of the Optionholder’s Continuous Service for a reason other than death, then the Option may be exercised (to the extent

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the Optionholder was entitled to exercise such Option as of the date of death) by the Optionholder’s estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a person designated to exercise the option upon the Optionholder’s death pursuant to subsection 6(e) or 6(f), but only within the period ending on the earlier of (1) the date eighteen (18) months following the date of death (or such longer or shorter period specified in the Option Agreement, which period shall not be less than six (6) months for Options granted prior to the Listing Date) or (2) the expiration of the term of such Option as set forth in the Option Agreement. If, after death, the Option is not exercised within the time specified herein, the Option shall terminate.

     (m) Early Exercise. The Option may, but need not, include a provision whereby the Optionholder may elect at any time before the Optionholder’s Continuous Service terminates to exercise the Option as to any part or all of the Ordinary Shares subject to the Option prior to the full vesting of the Option. Subject to the “Repurchase Limitation” in subsection 10(h), any unvested Ordinary Shares so purchased may be subject to a repurchase option in favor of the Repurchaser as defined in Section 14(b)(i) below or to any other restriction the Board determines to be appropriate.

7. Provisions of Stock Awards Other Than Options.

     (a) Stock Bonus Awards. Each stock bonus agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. The terms and conditions of stock bonus agreements may change from time to time, and the terms and conditions of separate stock bonus agreements need not be identical, but each stock bonus agreement shall include (through incorporation of provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:

          (i) Consideration. A stock bonus may be awarded in consideration for past services actually rendered to the Company or an Affiliate for its benefit.

          (ii) Vesting. Subject to the “Repurchase Limitation” in subsection 10(h), Ordinary Shares awarded under the stock bonus agreement may, but need not, be subject to a share repurchase option in favor of the Company in accordance with a vesting schedule to be determined by the Board.

          (iii) Termination of Participant’s Continuous Service. Subject to the “Repurchase Limitation” in subsection 10(h), in the event a Participant’s Continuous Service terminates, the Company may reacquire any or all of the Ordinary Shares held by the Participant which have not vested as of the date of termination under the terms of the stock bonus agreement.

          (iv) Transferability. For a stock bonus award made before the Listing Date, rights to acquire Ordinary Shares under the stock bonus agreement shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Participant only by the Participant. For a stock bonus award made on or after the Listing Date, rights to acquire Ordinary Shares under the stock bonus agreement shall be

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transferable by the Participant only upon such terms and conditions as are set forth in the stock bonus agreement, as the Board shall determine in its discretion, so long as Ordinary Shares awarded under the stock bonus agreement remain subject to the terms of the stock bonus agreement.

     (b) Restricted Stock Awards. Each restricted stock purchase agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. The terms and conditions of the restricted stock purchase agreements may change from time to time, and the terms and conditions of separate restricted stock purchase agreements need not be identical, but each restricted stock purchase agreement shall include (through incorporation of provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:

          (i) Purchase Price. Subject to the provisions of subsection 5(b) regarding Ten Percent Shareholders, the purchase price under each restricted stock purchase agreement shall be such amount as the Board shall determine and designate in such restricted stock purchase agreement. For restricted stock awards made prior to the Listing Date, the purchase price shall not be less than eighty-five percent (85%) of the Ordinary Shares’ Fair Market Value on the date such award is made or at the time the purchase is consummated. For restricted stock awards made on or after the Listing Date, the purchase price shall not be less than eighty-five percent (85%) of the Ordinary Shares’ Fair Market Value on the date such award is made or at the time the purchase is consummated.

          (ii) Consideration. The purchase price of Ordinary Shares acquired pursuant to the restricted stock purchase agreement shall be paid either: (i) in cash at the time of purchase; (ii) at the discretion of the Board, according to a deferred payment or other similar arrangement with the Participant; or (iii) in any other form of legal consideration that may be acceptable to the Board in its discretion.

          (iii) Vesting. Subject to the “Repurchase Limitation” in subsection 10(h), Ordinary Shares acquired under the restricted stock purchase agreement may, but need not, be subject to a share repurchase option in favor of the Company in accordance with a vesting schedule to be determined by the Board.

          (iv) Termination of Participant’s Continuous Service. Subject to the “Repurchase Limitation” in subsection 10(h), in the event a Participant’s Continuous Service terminates, the Company may repurchase or otherwise reacquire any or all of the Ordinary Shares held by the Participant which have not vested as of the date of termination under the terms of the restricted stock purchase agreement.

          (v) Transferability. For a restricted stock award made before the Listing Date, rights to acquire Ordinary Shares under the restricted stock purchase agreement shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Participant only by the Participant. For a restricted stock award made on or after the Listing Date, rights to acquire Ordinary Shares under the restricted stock purchase agreement shall be transferable by the Participant only upon such terms and conditions as are set

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forth in the restricted stock purchase agreement, as the Board shall determine in its discretion, so long as Ordinary Shares awarded under the restricted stock purchase agreement remain subject to the terms of the restricted stock purchase agreement.

8. Covenants of the Company.

     (a) Availability of Shares. During the terms of the Stock Awards, the Company shall keep available at all times the number of Ordinary Shares required to satisfy such Stock Awards.

     (b) Securities Law Compliance. The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Stock Awards and to issue and sell Ordinary Shares upon exercise of the Stock Awards; provided, however, that this undertaking shall not require the Company to register under the Securities Act the Plan, any Stock Award or any Ordinary Shares issued or issuable pursuant to any such Stock Award. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority which counsel for the Company deems necessary for the lawful issuance and sale of Ordinary Shares under the Plan, the Company shall be relieved from any liability for failure to issue and sell Ordinary Shares upon exercise of such Stock Awards unless and until such authority is obtained.

9. Use of Proceeds From Stock.

     Proceeds from the sale of Ordinary Shares pursuant to Stock Awards shall constitute general funds of the Company.

10. Miscellaneous.

     (a) Acceleration of Exercisability and Vesting. The Board shall have the power to accelerate the time at which a Stock Award may first be exercised or the time during which a Stock Award or any part thereof will vest in accordance with the Plan, notwithstanding the provisions in the Stock Award stating the time at which it may first be exercised or the time during which it will vest.

     (b) Shareholder Rights. No Participant shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any Ordinary Shares subject to such Stock Award unless and until such Participant has satisfied all requirements for exercise of the Stock Award pursuant to its terms.

     (c) No Employment or other Service Rights. Nothing in the Plan or any instrument executed or Stock Award granted pursuant thereto shall confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Stock Award was granted or shall affect the right of the Company or an Affiliate to terminate (i) the employment of an Employee with or without notice and with or without cause, (ii) the service of a Consultant pursuant to the terms of such Consultant’s agreement with the Company or an Affiliate or (iii) the service of a Director pursuant to the Articles of Association of the Company

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or the Articles of Association or Bylaws of an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be.

     (d) Incentive Stock Option $100,000 Limitation. To the extent that the aggregate Fair Market Value (determined at the time of grant) of Ordinary Shares with respect to which Incentive Stock Options are exercisable for the first time by any Optionholder during any calendar year (under all plans of the Company and its Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or portions thereof which exceed such limit (according to the order in which they were granted) shall be treated as Nonstatutory Stock Options.

     (e) Investment Assurances. The Company may require a Participant, as a condition of exercising or acquiring Ordinary Shares under any Stock Award, (i) to give written assurances satisfactory to the Company as to the Participant’s knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Stock Award; and (ii) to give written assurances satisfactory to the Company stating that the Participant is acquiring Ordinary Shares subject to the Stock Award for the Participant’s own account and not with any present intention of selling or otherwise distributing the Ordinary Shares. The foregoing requirements, and any assurances given pursuant to such requirements, shall be inoperative if (iii) the issuance of the Ordinary Shares upon the exercise or acquisition of Ordinary Shares under the Stock Award has been registered under a then currently effective registration statement under the Securities Act or (iv) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the Ordinary Shares.

     (f) Withholding Obligations. To the extent provided by the terms of a Stock Award Agreement, the Participant may satisfy any federal, state or local tax withholding obligation relating to the exercise or acquisition of Ordinary Shares under a Stock Award by any of the following means (in addition to the Company’s right to withhold from any compensation paid to the Participant by the Company) or by a combination of such means: (i) tendering a cash payment; (ii) authorizing the Company to withhold Ordinary Shares from the Ordinary Shares otherwise issuable to the participant as a result of the exercise or acquisition of Ordinary Shares under the Stock Award in an amount not to exceed the minimum amount of tax required to be withheld by law; or (iii) delivering to the Company owned and unencumbered Ordinary Shares that have been held by the Participant for a period of not less than six months prior to the date of delivery, in an amount not to exceed the minimum amount of tax required to be withheld by law.

     (g) Information Obligation. Prior to the Listing Date, to the extent required by Section 260.140.46 of Title 10 of the California Code of Regulations, the Company shall deliver

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financial statements to Participants at least annually. This subsection 10(g) shall not apply to key Employees whose duties in connection with the Company assure them access to equivalent information.

     (h) Repurchase Limitation. The terms of any repurchase option shall be specified in the Stock Award and may be either at Fair Market Value at the time of repurchase or at not less than the original purchase price. To the extent required by Section 260.140.41 and Section 260.140.42 of Title 10 of the California Code of Regulations at the time a Stock Award is made, any repurchase option contained in a Stock Award granted prior to the Listing Date to a person who is not an Officer, Director or Consultant shall be upon the terms described below:

          (i) Fair Market Value. If the repurchase option gives the Company the right to repurchase the Ordinary Shares upon termination of employment at not less than the Fair Market Value of the Ordinary Shares to be purchased on the date of termination of Continuous Service, then (i) the right to repurchase shall be exercised for cash or cancellation of purchase money indebtedness for the Ordinary Shares within ninety (90) days of termination of Continuous Service (or in the case of Ordinary Shares issued upon exercise of Stock Awards after such date of termination, within ninety (90) days after the date of the exercise) or such longer period as may be agreed to by the Company and the Participant (for example, for purposes of satisfying the requirements of Section 1202(c)(3) of the Code regarding “qualified small business stock”) and (ii) the right terminates when the Ordinary Shares become publicly traded.

          (ii) Original Purchase Price. If the repurchase option gives the Company the right to repurchase the Ordinary Shares upon termination of Continuous Service at the original purchase price, then (i) the right to repurchase at the original purchase price shall lapse at the rate of at least twenty percent (20%) of the Ordinary Shares per year over five (5) years from the date the Stock Award is granted (without respect to the date the Stock Award was exercised or became exercisable) and (ii) the right to repurchase shall be exercised for cash or cancellation of purchase money indebtedness for the Ordinary Shares within ninety (90) days of termination of Continuous Service (or in the case of Ordinary Shares issued upon exercise of Options after such date of termination, within ninety (90) days after the date of the exercise) or such longer period as may be agreed to by the Company and the Participant (for example, for purposes of satisfying the requirements of Section 1202(c)(3) of the Code regarding “qualified small business stock”).

11. Adjustments upon Changes in Stock.

     (a) Capitalization Adjustments. If any change is made in the Ordinary Shares subject to the Plan, or subject to any Stock Award, without the receipt of consideration by the Company (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of             shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company), the Plan will be appropriately adjusted in the class(es) and maximum number of securities subject to the Plan pursuant to subsection 4(a), and the outstanding Stock Awards will be appropriately adjusted in the class(es) and number of securities and price per share of Ordinary Shares subject to such outstanding Stock Awards. The

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Board shall make such adjustments, and its determination shall be final, binding and conclusive. (The conversion of any convertible securities of the Company shall not be treated as a transaction “without receipt of consideration” by the Company.)

     (b) Adjustments.

          (i) In the event of a merger of the Company with or into another corporation, or Company while unexercised Stock Awards remain outstanding under the Plan, each outstanding Stock Award shall be assumed or there shall be substituted for the Ordinary Shares subject to the unexercised portions of such outstanding Stock Awards an appropriate number of shares of each class of shares or other securities of the successor company (or a parent or subsidiary of the successor company) that were distributed to the shareholders of the Company in respect of such shares, and appropriate adjustments shall be made in the exercise price per share to reflect such action, all as will be determined by the Board whose determination shall be final.

          (ii) Notwithstanding the above and subject to any applicable law, the Board, in its discretion, may determine that there shall be a clause in a Stock Award Agreement instructing that, if in any such transaction as described in subsection 11(b)(i) above, the successor company (or parent or subsidiary of the successor company) does not agree to assume or substitute for the Stock Award, the vesting and, if applicable, exercisability of the Ordinary Shares subject to such Stock Award shall be accelerated so that any unvested Ordinary Shares shall be immediately vested in full as of the date ten (10) days prior to the effective date of such transaction.

          (iii) For the purposes of subsection 11(b)(i) above, the Stock Award shall be considered assumed or substituted if, following the merger or acquisition, the Stock Award confers the right to purchase or receive, for each Ordinary Share subject to the Stock Award immediately prior to the merger or acquisition, the consideration (whether shares, options, cash, or other securities or property) received in the merger or acquisition by holders of Ordinary Shares for each Ordinary Share held on the effective date of the transaction (and if such holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Ordinary Shares); provided, however, that if such consideration received in the merger or acquisition is not solely ordinary shares (or their equivalent) of the successor company or its parent or subsidiary, the Board may, with the consent of the successor company, provide for the consideration to be received upon the exercise of the Stock Award to be solely ordinary shares (or their equivalent) of the successor company or its parent or subsidiary equal in fair market value to the per Ordinary Share consideration received by holders of a majority of the outstanding Ordinary Shares in the merger or acquisition; and provided further that the Board may determine, in its discretion, that in lieu of such assumption or substitution of Stock Awards for stock awards of the successor company or its parent or subsidiary, such Stock Awards will be substituted for any other type of asset or property including cash that is fair under the circumstances.

          (iv) If the Company is liquidated or dissolved while unexercised Stock Awards remain outstanding under the Plan, then the Board, in its discretion, may determine that such outstanding Stock Awards may be exercised in full by the Participants as of the effective date of

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any such liquidation or dissolution of the Company without regard to the vesting schedule of the Stock Award, by the Participants giving notice in writing to the Company of their intention to so exercise.

          (v) If the Company is liquidated or dissolved while Ordinary Shares acquired pursuant to Stock Awards remain unvested, then the Board, in its discretion, may determine that such unvested Ordinary Shares shall be deemed to be vested as of the effective date of any such liquidation or dissolution of the Company without regard to the vesting schedule of the Stock Award.

     (c) Bring Along Right. Anything herein to the contrary notwithstanding, if prior to the completion of a public offering of the Company’s shares, all or substantially all of the shares of the Company are to be sold, or upon a merger or reorganization or the like, all or substantially all of the shares of the Company are to be exchanged for securities of another Company (a “Transaction”), then each Participant shall be obliged to sell or exchange, as the case may be, any Ordinary Shares such Participant purchased under the Plan, in accordance with the instructions issued by the Board in connection with the Transaction, whose determination shall be final.

12. Amendment of the Plan and Stock Awards.

     (a) Amendment of Plan. The Board at any time, and from time to time, may amend the Plan. However, except as provided in Section 11 relating to adjustments upon changes in Ordinary Shares, no amendment shall be effective unless approved by the shareholders of the Company to the extent shareholder approval is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3 or any Nasdaq or securities exchange listing requirements.

     (b) Shareholder Approval. The Board may, in its sole discretion, submit any other amendment to the Plan for shareholder approval, including, but not limited to, amendments to the Plan intended to satisfy the requirements of Section 162(m) of the Code and the regulations thereunder regarding the exclusion of performance-based compensation from the limit on corporate deducibility of compensation paid to certain executive officers.

     (c) Contemplated Amendments. It is expressly contemplated that the Board may amend the Plan in any respect the Board deems necessary or advisable to provide eligible Employees with the maximum benefits provided or to be provided under the provisions of the Code and the regulations promulgated thereunder relating to Incentive Stock Options and/or to bring the Plan and/or Incentive Stock Options granted under it into compliance therewith.

     (d) No Impairment of Rights. Rights under any Stock Award granted before amendment of the Plan shall not be impaired by any amendment of the Plan unless (i) the Company requests the consent of the Participant and (ii) the Participant consents in writing.

     (e) Amendment of Stock Awards. The Board at any time, and from time to time, may amend the terms of any one or more Stock Awards; provided, however, that the rights under any Stock Award shall not be impaired by any such amendment unless (i) the Company requests the consent of the Participant and (ii) the Participant consents in writing.

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13. Termination or Suspension of the Plan.

     (a) Plan Term. The Board may suspend or terminate the Plan at any time. Unless sooner terminated, the Plan shall terminate on the day before the tenth (10th) anniversary of the date the Plan is adopted by the Board or approved by the shareholders of the Company, whichever is earlier. No Stock Awards may be granted under the Plan while the Plan is suspended or after it is terminated.

     (b) No Impairment of Rights. Suspension or termination of the Plan shall not impair rights and obligations under any Stock Award granted while the Plan is in effect except with the written consent of the Participant.

13A. Restriction on Sale.

     Notwithstanding anything to the the contrary herein, prior to the Listing Date, a Participant may not sell, pledge or otherwise transfer any             shares issued under this Plan, or any interest in such Shares, prior to the expiration of six (6) months from the date of issuance of such shares. Any sale, pledge or transfer of Shares after such six (6) month period shall be subject to the right of first refusal set forth below and any such relevant terms and restrictions as may be contained in the Company’s Articles of Association.

14. Right of First Refusal.

     (a) No Right of First Refusal for Participants. Notwithstanding anything to the contrary in the Articles of Association of the Company, none of the Participants shall have a right of first refusal in relation with any sale of shares in the Company.

     (b) Right of First Refusal for other Shareholders.

          (i) The sale of Ordinary Shares acquired by the Participants under the Plan shall be subject to the right of first refusal of other shareholders of the Company as set forth in the Articles of Association of the Company. In the event that the Articles of Association of the Company shall not contain any provision regarding rights of first refusal, then, unless otherwise provided by the Board, until such time as the Company shall effectuate a public offering of the Company’s shares, the sale of Ordinary Shares issuable upon exercise of a Stock Award shall be subject to a right of first refusal on the part of the Repurchaser(s). Repurchaser(s) means (i) the Company, if permitted by applicable laws; (ii) if the Company is not permitted by applicable laws, then any Affiliate designated by a unanimous decision reached by the Board; or (iii) if no unanimous decision is reached by the Board, then the Company existing shareholders (save, for avoidance of doubt, for other Participants who already have acquired Ordinary Shares pursuant to a Stock Award under the Plan), pro rata in accordance with their shareholding. The Participant shall give a notice of sale (the “Notice”) to the Company in order to offer the Ordinary Shares to the Repurchaser(s).

          (ii) The notice shall specify the name of each proposed purchaser or other Transferee (“Proposed Transferee”), the number of Ordinary Shares offered for sale, the price

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per Ordinary Share and the payment terms. The Repurchaser(s) will be entitled for thirty (30) days from the day of receipt of the Notice (the “30 Days Period”), to purchase all or part of the offered Ordinary Shares. If by the end of the 30 Days Period not all of the offered Ordinary Shares have been purchased by the Repurchase(s), the Participant will be entitled to sell such Ordinary Shares at any time during the ninety (90) days following the end of the 30 Days Period on terms not more favorable than those set out in the Notice, provided that the Proposed Transferee agrees in writing that the provisions of this subsection 14(b) shall continue to apply to the Ordinary Shares in the hands of such Proposed Transferee.

15. Effective Date of Plan.

     The Plan shall become effective as determined by the Board, but no Stock Award shall be exercised (or, in the case of a stock bonus, shall be granted) unless and until the Plan has been approved by the shareholders of the Company, which approval shall be within twelve (12) months before or after the date the Plan is adopted by the Board.

16. Choice of Law.

     The law of Israel shall govern all questions concerning the construction, validity and interpretation of this Plan, without regard to such state’s conflict of laws rules.

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MELLANOX TECHNOLOGIES, LTD.

EARLY EXERCISE STOCK PURCHASE AGREEMENT
(1999 United States Equity Incentive Plan)

     This Agreement is made by and between Mellanox Technologies, Ltd., an Israeli corporation (the “Company”), and ___ (“Purchaser”).

Witnesseth:

     Whereas, Purchaser holds a stock option dated ____ to purchase ordinary Shares of the Company (the “Option”) pursuant to the Company’s 1999 United States Equity Incentive Plan (the “Plan”); and

     Whereas, the Option consists of a Stock Option Grant Notice and a Stock Option Agreement; and

     Whereas, Purchaser desires to exercise the Option on the terms and conditions contained herein; and

     Whereas, Purchaser wishes to take advantage of the early exercise provision of the Purchaser’s Option and therefore to enter into this Agreement;

     Now, therefore, it is agreed between the parties as follows:

     1. Incorporation of Plan and Option by Reference. This Agreement is subject to all of the terms and conditions as set forth in the Plan and the Option. If there is a conflict between the terms of this Agreement and/or the Option and the terms of the Plan, the terms of the Plan shall control. If there is a conflict between the terms of this Agreement and the terms of the Option, the terms of the Option shall control. Defined terms not explicitly defined in this Agreement but defined in the Plan shall have the same definitions as in the Plan. Defined terms not explicitly defined in this Agreement or the Plan but defined in the Option shall have the same definitions as in the Option.

     2. Purchase and Sale of Ordinary Shares.

          (a) Agreement To Purchase And Sell Ordinary Shares. Purchaser hereby agrees to purchase from the Company, and the Company hereby agrees to sell to Purchaser, Ordinary Shares of the Company (the “Shares”) in accordance with the Notice of Exercise duly executed by Purchaser and attached hereto as Exhibit A.

          (b) Closing. The closing hereunder, including payment for and delivery of the Ordinary Shares, shall occur at the offices of the Company immediately following the execution of this Agreement, or at such other time and place as the parties may mutually agree; provided, however, that if shareholder approval of the Plan is required before the Option may be exercised, then the Option may not be exercised, and the closing shall be delayed, until such shareholder

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approval is obtained. If such shareholder approval is not obtained within the time limit specified in the Plan, then this Agreement shall be null and void.

     3. Unvested Share Repurchase or Assignment Option.

          (a) Repurchase Option. In the event Purchaser’s Continuous Service terminates, then the Company shall have an irrevocable option (the “Repurchase Option”) for a period of ninety (90) days after said termination (or in the case of shares issued upon exercise of the Option after such date of termination, within ninety (90) days after the date of the exercise), or such longer period as may be agreed to by the Company and the Purchaser, to repurchase from Purchaser or Purchaser’s personal representative, as the case may be, or, at its sole discretion, assign to one or more individuals and/or entities (each, an “Assignee”), the right to purchase from Purchaser or Purchaser’s personal representative, those shares that Purchaser received pursuant to the exercise of the Option that have not as yet vested as of such termination date in accordance with the Vesting Schedule indicated on Purchaser’s Stock Option Grant Notice (the “Unvested Shares”).

          (b) Shares Repurchasable or Assignable at Purchaser’s Original Exercise Price. The Company or the Assignee(s), as the case may be, may repurchase all or any of the Unvested Shares at a price equal to the Purchaser’s Exercise Price (“Option Price”) for such shares as indicated on Purchaser’s Stock Option Grant Notice or may assign to the Assignee(s) the right to purchase any Unvested Shares at the Option Price.

     4. Exercise of Repurchase Option. The Repurchase Option shall be exercised by written notice signed by an Officer of the Company and delivered or mailed as provided herein. Such notice shall identify the number of Ordinary Shares to be purchased, the identity of the Assignee(s) of the Repurchase Option, if any, and shall notify Purchaser of the time, place and date for settlement of such purchase, which shall be scheduled by the Company or the Assignee(s), as the case may be, within the term of the Repurchase Option set forth above. The Company shall be entitled to pay for any Ordinary Shares purchased pursuant to its Repurchase Option, at the Company’s option, in cash or by offset against any indebtedness owing to the Company by Purchaser (including without limitation any Note given in payment for the Ordinary Shares), or by a combination of both. Upon delivery of such notice and payment of the purchase price, the Company or Assignee(s), as the case may be, shall become the legal and beneficial owner(s) of the Ordinary Shares being (re)purchased and all rights and interest therein or related thereto, and the Company or Assignee(s), as the case may be, shall have the right to transfer to its own name the Ordinary Shares being (re)purchased by the Company or the Assignee(s), as the case may be, without further action by Purchaser. As a condition to the Company’s obligations under this Agreement, the spouse of the Purchaser, if any, shall execute and deliver to the Company the Consent of Spouse attached hereto as Exhibit C.

     5. Capitalization Adjustments to Ordinary Shares. In the event of a “Capitalization Adjustment” affecting the Company’s outstanding Ordinary Shares as a class as designated in the Plan, then any and all new, substituted or additional securities or other property to which Purchaser is entitled by reason of Purchaser’s ownership of Ordinary Shares shall be immediately subject to the Repurchase Option and be included in the word “Ordinary Shares” for all purposes of the Repurchase Option with the same force and effect as the Ordinary Shares

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presently subject to the Repurchase Option, but only to the extent the Ordinary Shares are, at the time, covered by such Repurchase Option. While the total Option Price shall remain the same after each such event, the Option Price per share of Ordinary Shares upon exercise of the Repurchase Option shall be appropriately adjusted.

     6. Change in Control. In the event of a “Change in Control” as designated in the Plan, then the Repurchase Option may be assigned by the Company to the successor of the Company (or such successor’s parent company), if any, in connection with such Change in Control. To the extent the Repurchase Option remains in effect following such Change in Control, it shall apply to the new capital stock or other property received in exchange for the Ordinary Shares in consummation of the Change in Control, but only to the extent the Ordinary Shares was at the time covered by such right. Appropriate adjustments shall be made to the price per share payable upon exercise of the Repurchase Option to reflect the Change in Control upon the Company’s capital structure; provided, however, that the aggregate Option Price shall remain the same.

     7. Rights of Purchaser. Subject to the provisions of the Option, Purchaser shall exercise all rights and privileges of a shareholder of the Company with respect to the Shares. Purchaser shall be deemed to be the holder of the shares for purposes of receiving any dividends that may be paid with respect to such shares and for purposes of exercising any voting rights relating to such shares, even if some or all of such shares have not yet vested and been released from the Company’s Repurchase Option.

     8. Limitations on Transfer. In addition to any other limitation on transfer created by applicable securities laws, Purchaser shall not sell, assign, hypothecate, donate, encumber or otherwise dispose of any interest in the Ordinary Shares while the Ordinary Shares are subject to the Repurchase Option. After any Ordinary Shares have been released from the Repurchase Option, Purchaser shall not sell, assign, hypothecate, donate, encumber or otherwise dispose of any interest in the Ordinary Shares except in compliance with the provisions herein and applicable securities laws. Furthermore, the Ordinary Shares shall be subject to any right of first refusal in favor of the Company or its assignees that may be contained in the Company’s Bylaws.

     9. Restrictive Legends. All certificates representing the Ordinary Shares shall have endorsed thereon legends in substantially the following forms (in addition to any other legend which may be required by other agreements between the parties hereto):

          (a)“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN OPTION SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER, OR SUCH HOLDER’S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THIS COMPANY. ANY TRANSFER OR ATTEMPTED TRANSFER OF ANY SHARES SUBJECT TO SUCH OPTION IS VOID WITHOUT THE PRIOR EXPRESS WRITTEN CONSENT OF THE COMPANY.”

          (b)“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED. THEY

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MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.”

          (c) Any legend required by appropriate blue sky officials.

     10. Investment Representations. In connection with the purchase of the Ordinary Shares, Purchaser represents to the Company the following:

          (a)Purchaser is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Ordinary Shares. Purchaser is acquiring the Ordinary Shares for investment for Purchaser’s own account only and not with a view to, or for resale in connection with, any “distribution” thereof within the meaning of the Securities Act.

          (b)Purchaser understands that the Ordinary Shares have not been registered under the Securities Act by reason of a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Purchaser’s investment intent as expressed herein.

          (c) Purchaser further acknowledges and understands that the Ordinary Shares must be held indefinitely unless the Ordinary Share are subsequently registered under the Securities Act or an exemption from such registration is available. Purchaser understands that the certificate evidencing the Ordinary Shares will be imprinted with a legend that prohibits the transfer of the Ordinary Shares unless the Ordinary Shares are registered or such registration is not required in the opinion of counsel for the Company.

          (d) Purchaser is familiar with the provisions of Rules 144 and 701, under the Securities Act, as in effect from time to time, which, in substance, permit limited public resale of “restricted securities” acquired, directly or indirectly, from the issuer thereof (or from an affiliate of such issuer), in a non-public offering subject to the satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the time of issuance of the securities, such issuance will be exempt from registration under the Securities Act. In the event the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the securities exempt under Rule 701 may be sold by Purchaser ninety (90) days thereafter, subject to the satisfaction of certain of the conditions specified by Rule 144 and the market stand-off provision described in Purchaser’s Stock Option Agreement.

     In the event that the sale of the Ordinary Shares does not qualify under Rule 701 at the time of purchase, then the Ordinary Shares may be resold by Purchaser in certain limited circumstances subject to the provisions of Rule 144, which requires, among other things: (i) the availability of certain public information about the Company and (ii) the resale occurring following the required holding period under Rule 144 after the Purchaser has purchased, and made full payment of (within the meaning of Rule 144), the securities to be sold.

          (e) Purchaser further understands that at the time Purchaser wishes to sell the Ordinary Shares there may be no public market upon which to make such a sale, and that, even if such a public market then exists, the Company may not be satisfying the current public current

4

information requirements of Rule 144 or 701, and that, in such event, Purchaser would be precluded from selling the Ordinary Shares under Rule 144 or 701 even if the minimum holding period requirement had been satisfied.

     11. Section 83(b) Election. Purchaser understands that Section 83(a) of the Code, taxes as ordinary income the difference between the amount paid for the Ordinary Shares and the fair market value of the Ordinary Shares as of the date any restrictions on the Ordinary Shares lapse. In this context, “restriction” includes the right of the Company to buy back the Ordinary Shares pursuant to the Repurchase Option set forth above. Purchaser understands that Purchaser may elect to be taxed at the time the Ordinary Share are purchased, rather than when and as the Repurchase Option expires, by filing an election under Section 83(b) (an “83(b) Election”) of the Code with the Internal Revenue Service within thirty (30) days from the date of purchase. Even if the fair market value of the Ordinary Shares at the time of the execution of this Agreement equals the amount paid for the Ordinary Shares, the 83(b) Election must be made to avoid income under Section 83(a) in the future. Purchaser understands that failure to file such an 83(b) Election in a timely manner may result in adverse tax consequences for Purchaser. Purchaser further understands that Purchaser must file an additional copy of such 83(b) Election with his or her federal income tax return for the calendar year in which the date of this Agreement falls. Purchaser acknowledges that the foregoing is only a summary of the effect of United States federal income taxation with respect to purchase of the Ordinary Shares hereunder, and does not purport to be complete. Purchaser further acknowledges that the Company has directed Purchaser to seek independent advice regarding the applicable provisions of the Code, the income tax laws of any municipality, state or foreign country in which Purchaser may reside, and the tax consequences of Purchaser’s death. Purchaser assumes all responsibility for filing an 83(b) Election and paying all taxes resulting from such election or the lapse of the restrictions on the Ordinary Shares.

     12. Refusal to Transfer. The Company shall not be required (a) to transfer on its books any Ordinary Shares of the Company which shall have been transferred in violation of any of the provisions set forth in this Agreement or (b) to treat as owner of such shares or to accord the right to vote as such owner or to pay dividends to any transferee to whom such shares shall have been so transferred.

     13. No Employment Rights. This Agreement is not an employment contract and nothing in this Agreement shall affect in any manner whatsoever the right or power of the Company (or a parent or subsidiary of the Company) to terminate Purchaser’s employment for any reason at any time, with or without cause and with or without notice.

     14. Miscellaneous.

          (a) Notices. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or sent by telegram or fax or upon deposit in the United States Post Office, by registered or certified mail with postage and fees prepaid, addressed to the other party hereto at such party’s address hereinafter shown below its signature or at such other address as such party may designate by ten (10) days’ advance written notice to the other party hereto.

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          (b) Successors and Assigns. This Agreement shall inure to the benefit of the successors and assigns of the Company and, subject to the restrictions on transfer herein set forth, be binding upon Purchaser, Purchaser’s successors, and assigns. The Company may assign the Repurchase Option hereunder at any time or from time to time, in whole or in part.

          (c) Attorneys’ Fees; Specific Performance. Purchaser shall reimburse the Company for all costs incurred by the Company in enforcing the performance of, or protecting its rights under, any part of this Agreement, including reasonable costs of investigation and attorneys’ fees. It is the intention of the parties that the Company, upon exercise of the Repurchase Option and payment of the Option Price, pursuant to the terms of this Agreement, shall be entitled to receive the Ordinary Shares, in specie, in order to have such Ordinary Shares available for future issuance without dilution of the holdings of other shareholders. Furthermore, it is expressly agreed between the parties that money damages are inadequate to compensate the Company for the Ordinary Shares and that the Company shall, upon proper exercise of the Repurchase Option, be entitled to specific enforcement of its rights to purchase and receive said Ordinary Shares.

          (d) Governing Law; Venue. This Agreement shall be governed by and construed in accordance with the laws of the State of California. The parties agree that any action brought by either party to interpret or enforce any provision of this Agreement shall be brought in, and each party agrees to, and does hereby, submit to the jurisdiction and venue of, the appropriate state or federal court for the district encompassing the Company’s principal place of business.

          (e) Further Execution. The parties agree to take all such further action(s) as may reasonably be necessary to carry out and consummate this Agreement as soon as practicable, and to take whatever steps may be necessary to obtain any governmental approval in connection with or otherwise qualify the issuance of the securities that are the subject of this Agreement.

          (f) Independent Counsel. Purchaser acknowledges that this Agreement has been prepared on behalf of the Company by Latham & Watkins, counsel to the Company and that Latham & Watkins does not represent, and is not acting on behalf of, Purchaser. Purchaser has been provided with an opportunity to consult with Purchaser’s own counsel with respect to this Agreement.

          (g) Entire Agreement; Amendment. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes and merges all prior agreements or understandings, whether written or oral. This Agreement may not be amended, modified or revoked, in whole or in part, except by an agreement in writing signed by each of the parties hereto.

          (h) Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of

6

the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of the Agreement shall be enforceable in accordance with its terms.

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

     In witness whereof, the parties hereto have executed this Agreement as of ________________.

Mellanox Technologies, Ltd.
By
Title
Address:	P.O. Box 586
	Yokneam 20692
	Israel
Purchaser
Address:

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Attachments:

Exhibit A	Notice of Exercise
Exhibit B	Assignment Separate from Certificate
Exhibit C	Consent of Spouse

Exhibit A

NOTICE OF EXERCISE

Exh. A-1

NOTICE OF EXERCISE
(Standard Form)

Mellanox Technologies Ltd.
PO Box 586
Yokneam Israel, 20692

Date of Exercise:                                         

Ladies and Gentlemen:

          This constitutes notice under my stock option that I elect to purchase the number of shares for the price set forth below.

Type of option (check one):	Incentive o	Nonstatutory o
Stock option dated:
Number of shares as to which option is exercised:
Certificates to be issued in name of:
Total exercise price:	$
Method of payment delivered herewith:	Cash o
	$

          By this exercise, I agree (i) to provide such additional documents as you may require pursuant to the terms of the 1999 United States Equity Incentive Plan, (ii) to provide for the payment by me to you (in the manner designated by you) of your withholding obligation, if any, relating to the exercise of this option, and (iii) if this exercise relates to an incentive stock option, to notify you in writing within fifteen (15) days after the date of any disposition of any of the shares of Common Stock issued upon exercise of this option that occurs within two (2) years after the date of grant of this option or within one (1) year after such Ordinary Shares are issued upon exercise of this option.

          I hereby make the following certifications and representations with respect to the number of Ordinary Shares of the Company listed above (the “Shares”), which are being acquired by me for my own account upon exercise of the Option as set forth above:

          I acknowledge that the Shares have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and are deemed to constitute “restricted securities” under Rule 701 and “control securities” under Rule 144 promulgated under the Securities Act. I warrant and represent to the Company that I have no present intention of distributing or selling said Shares, except as permitted under the Securities Act and any applicable state securities laws.

          I further acknowledge that I will not be able to resell the Shares for at least ninety (90) days after the stock of the Company becomes publicly traded (i.e., subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934) under Rule 701 and that more restrictive conditions apply to affiliates of the Company under Rule 144.

          I further acknowledge that all certificates representing any of the Shares subject to the provisions of the Option shall have endorsed thereon appropriate legends reflecting the foregoing limitations, as well as any legends reflecting restrictions pursuant to the Company’s Articles of Incorporation, Bylaws and/or applicable securities laws.

          I further agree that, if required by the Company (or a representative of the underwriters) in connection with the first underwritten registration of the offering of any securities of the Company under the Securities Act, I will not sell, dispose of, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, any Shares or other securities of the Company held by me, for a period of time specified by the underwriter(s) (not to exceed one hundred eighty (180) days) following the effective date of the registration statement of the Company filed under the Securities Act. I further agree to execute and deliver such other agreements as may be reasonably requested by the Company and/or the underwriter(s) that are consistent with the foregoing or that are necessary to give further effect thereto. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to my Shares until the end of such period.

Very truly yours,

Exhibit B

STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE

Exh. B-1

STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE

     For Value Received, the undersigned hereby sells, assigns and transfers unto Mellanox Technologies, Ltd., a corporation organized under the laws of Israel (the “Company”), pursuant to the Repurchase Option under that certain Early Exercise Stock Purchase Agreement, dated                      by and between the undersigned and the Company (the “Agreement”),                      (                    ) Ordinary Shares of the Company standing in the undersigned’s name on the books of the Company represented by Certificate No(s)                      and does hereby irrevocably constitute and appoint the Company’s Secretary attorney to transfer said Ordinary Shares on the books of the Company with full power of substitution in the premises. This Assignment may be used only in accordance with and subject to the terms and conditions of the Agreement, in connection with the repurchase of Ordinary Shares issued to the undersigned pursuant to the Agreement, and only to the extent that such shares remain subject to the Company’s Repurchase Option under the Agreement.

     Dated:                                         

(Signature)

(Print Name)

(Instruction: Please do not fill in any blanks other than the “Signature” line and the “Print Name” line. The purpose of this Assignment is to enable the Company to exercise its Repurchase Option set forth in the Agreement without requiring additional signatures on the part of Purchaser.)

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Exhibit C

CONSENT OF SPOUSE

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CONSENT OF SPOUSE

     The undersigned spouse of Optionholder has read and hereby approves the terms and conditions of the Stock Option Grant Notice, the Stock Option Agreement and the United States Equity Incentive Plan. In consideration of the Company’s granting his or her spouse the right to purchase Ordinary Shares as set forth in this Stock Option Grant Notice, the undersigned hereby agrees to be irrevocably bound by the terms and conditions of this Stock Option Grant Notice, the Plan and the Stock Option Agreement and further agrees that any community property interest shall be similarly bound. The undersigned hereby appoints the undersigned’s spouse as attorney-in-fact for the undersigned with respect to any amendment or exercise of rights under this Stock Option Grant Notice, the Plan or this Stock Option Agreement.

Dated:                                         

Spouse of Optionee

[Print Name]

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Mellanox Technologies Ltd.
Stock Option Grant Notice
(1999 United States Equity Incentive Plan — Standard Form)

Mellanox Technologies Ltd. (the “Company”), pursuant to its 1999 United States Equity Incentive Plan (the “Plan”), hereby grants to Optionholder an option to purchase the number of the Company’s Ordinary Shares set forth below. This option is subject to all of the terms and conditions as set forth herein and in the Stock Option Agreement, the Plan and the Notice of Exercise, all of which are attached hereto and incorporated herein in their entirety.

Optionholder:

Date of Grant:

Vesting Commencement Date:

Number of Shares Subject to Option:

Exercise Price (Per Share):

Total Exercise Price:

Expiration Date:

Type of Grant:	o Incentive Stock Option 1                  o Nonstatutory Stock Option
Exercise Schedule:	Early Exercise Permitted
Vesting Schedule:	1/4th of the shares vest one year after the Vesting Commencement Date. 1/48th of the shares vest monthly thereafter over the next three years.
Payment:	By one or a combination of the following items (described in the Stock Option Agreement):
	By cash or check
	Pursuant to a Regulation T Program if the Shares are publicly traded
	By delivery of already-owned shares if the Shares are publicly traded

Additional Terms/Acknowledgements: The undersigned Optionholder acknowledges receipt of, and understands and agrees to, this Grant Notice, the Stock Option Agreement and the Plan. Optionholder further acknowledges that as of the Date of Grant, this Grant Notice, the Stock Option Agreement and the Plan set forth the entire understanding between Optionholder and the Company regarding the acquisition of stock in the Company and supersede all prior oral and written agreements on that subject with the exception of (i) options previously granted and delivered to Optionholder under the Plan, and (ii) the following agreements only:

Other Agreements:
Mellanox Technologies Ltd.		Optionholder:
By:
	Signature	Signature
Title:		Date:
Date:

Attachments: Stock Option Agreement, 1999 United States Equity Incentive Plan and Notice of Exercise

1 If this is an incentive stock option, it (plus your other outstanding incentive stock options) cannot be first exercisable for more than $100,000 in any calendar year. Any excess over $100,000 is a nonstatutory stock option.

Attachment I

Stock Option Agreement

See 1999 Plan Stock Option Agreement

Attachment II

See 1999 United States Equity Incentive Plan

Mellanox Technologies Ltd.
Stock Option Grant Notice
(1999 United States Equity Incentive Plan)

Mellanox Technologies Ltd. (the “Company”), pursuant to its 1999 United States Equity Incentive Plan (the “Plan”), hereby grants to Optionholder an option to purchase the number of the Company’s Ordinary Shares set forth below. This option is subject to all of the terms and conditions as set forth herein and in the Stock Option Agreement, the Plan and the Notice of Exercise, all of which are attached hereto and incorporated herein in their entirety.

Optionholder:

Date of Grant:

Vesting Commencement Date:

Number of Shares Subject to Option:

Exercise Price (Per Share):

Total Exercise Price:

Expiration Date:

Type of Grant1:	Incentive stock options or Nonstatutory stock options.
Exercise Schedule:	Early Exercise Permitted
Vesting Schedule:	1/4th of the shares vest one year after the Vesting Commencement Date. 1/48th of the shares vest monthly thereafter over the next three years.
	If, in the event of a “Change of Control”, and within twelve (12) months thereafter, the Company terminates Optionholder’s employment without “Cause” or if Optionholder resigns for “Good Reason,” fifty percent (50%) of the shares subject to this option to purchase Ordinary Shares of the Company that are unvested on the date of such termination or resignation shall vest immediately upon such termination or resignation.
	A “Change of Control” shall mean (i) a merger or consolidation of the Company, whether or not approved by the Board of Directors, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (ii) a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets, approved by the shareholders of the Company.
	“Cause” shall mean (1) Optionholder’s willful refusal or willful failure to comply with a lawful instruction of the Board, or (2) Optionholder’s conviction of any felony involving an act of moral turpitude. The Company may not terminate Optionholder for Cause unless the Company gives Optionholder written notice of its intent to terminate Optionholder for Cause with an explicit written explanation for all reasons for the for-Cause termination, and the Company, in good faith, permits Optionholder thirty (30) days to cure the alleged wrongs. If Optionholder cures the alleged wrongs, within thirty (30) days of such notice, Optionholder cannot be terminated for Cause.
	“Good Reason” shall mean any of the following events which is not cured by the Company within 15 days after Optionholder gives written notice thereof to the Company: (i) any reduction of or failure to pay Optionholder’s base salary in effect immediately prior to the Change of Control; (ii) any other material breach by the Company of any material term of

¹ If this is an incentive stock option, it (plus your other outstanding incentive stock options) cannot be first exercisable for more than $100,000 in any calendar year. Any excess over $100,000 is a nonstatutory stock option.

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	Optionholder’s employment with the Company; (iii) any material adverse change in Optionholder’s job titles, duties, responsibilities, status, reporting responsibilities or perquisites granted hereunder, without Optionholder’s consent; or (iv) any change in Optionholder’s principal work location which increases Optionholder’s one-way commute from home to the office by more than 50 miles. “Good Reason” shall cease to exist for an event on the 30th day following the later of its occurrence or Optionholder’s knowledge thereof, unless Optionholder has given the Company notice thereof prior to such date.
Payment:	By one or a combination of the following items (described in the Stock Option Agreement):
	By cash or check
	Pursuant to a Regulation T Program if the Shares are publicly traded
	By delivery of already-owned shares if the Shares are publicly traded

Additional Terms/Acknowledgements: The undersigned Optionholder acknowledges receipt of, and understands and agrees to, this Stock Option Grant Notice, the Stock Option Agreement and the Plan. Optionholder further acknowledges that as of the Date of Grant, this Grant Notice, the Stock Option Agreement and the Plan set forth the entire understanding between Optionholder and the Company regarding the acquisition of stock in the Company and supersede all prior oral and written agreements on that subject with the exception of (i) options previously granted and delivered to Optionholder under the Plan, and (ii) the following agreements only:

Other Agreements:
Mellanox Technologies Ltd.			Optionholder:
By:
	Signature	Signature
Title:		Date:
Date:

Attachments: Stock Option Agreement, 1999 United States Equity Incentive Plan and Notice of Exercise

Attachment I

See Stock Option Agreement

Mellanox Technologies Ltd.
1999 United States Equity Incentive Plan

Stock Option Agreement
(Incentive and Nonstatutory Stock Options)

     Pursuant to your Stock Option Grant Notice (“Grant Notice”) and this Stock Option Agreement, Mellanox Technologies Ltd. (the “Company”) has granted you an option under its 1999 United States Equity Incentive Plan (the “Plan”) to purchase the number of the Company’s Ordinary Shares indicated in your Grant Notice at the exercise price indicated in your Grant Notice. Defined terms not explicitly defined in this Stock Option Agreement but defined in the Plan shall have the same definitions as in the Plan.

     The details of your option are as follows:

     1. Vesting. Subject to the limitations contained herein, your option will vest as provided in your Grant Notice, provided that vesting will cease upon the termination of your Continuous Service.

     2. Number of Shares and Exercise Price. The number of Ordinary Shares subject to your option and your exercise price per share referenced in your Grant Notice may be adjusted from time to time for Capitalization Adjustments, as provided in the Plan.

     3. Exercise Prior to Vesting (“Early Exercise”). If permitted in your Grant Notice (i.e., the “Exercise Schedule” indicates that “Early Exercise” of your option is permitted) and subject to the provisions of your option, you may elect at any time that is both (i) during the period of your Continuous Service and (ii) during the term of your option, to exercise all or part of your option, including the nonvested portion of your option; provided, however, that:

          (a) a partial exercise of your option shall be deemed to cover first vested Ordinary Shares and then the earliest vesting installment of unvested Ordinary Shares;

          (b) any Ordinary Shares so purchased from installments that have not vested as of the date of exercise shall be subject to the purchase option in favor of the Company as described in the Company’s form of Early Exercise Stock Purchase Agreement;

          (c) you shall enter into the Company’s form of Early Exercise Stock Purchase Agreement with a vesting schedule that will result in the same vesting as if no early exercise had occurred; and

          (d) if your option is an incentive stock option, then, as provided in the Plan, to the extent that the aggregate Fair Market Value (determined at the time of grant) of the Ordinary Shares with respect to which your option plus all other incentive stock options you hold are exercisable for the first time by you during any calendar year (under all plans of the Company and its Affiliates) exceeds one hundred thousand dollars ($100,000), your option(s) or portions

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thereof that exceed such limit (according to the order in which they were granted) shall be treated as nonstatutory stock options.

     4. Method of Payment. Payment of the exercise price is due in full upon exercise of all or any part of your option. You may elect to make payment of the exercise price in cash or by check or in any other manner permitted by your Grant Notice, which may include one or more of the following:

          (e) In the Company’s sole discretion at the time your option is exercised and provided that at the time of exercise the Ordinary Shares are publicly traded and quoted regularly in The Wall Street Journal, pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of Ordinary Shares, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds.

          (f) Provided that at the time of exercise the Ordinary Shares are publicly traded and quoted regularly in The Wall Street Journal, by delivery of already-owned Ordinary Shares either that you have held for the period required to avoid a charge to the Company’s reported earnings (generally six months) or that you did not acquire, directly or indirectly from the Company, that are owned free and clear of any liens, claims, encumbrances or security interests, and that are valued at Fair Market Value on the date of exercise. “Delivery” for these purposes, in the sole discretion of the Company at the time you exercise your option, shall include delivery to the Company of your attestation of ownership of such Ordinary Shares in a form approved by the Company. Notwithstanding the foregoing, you may not exercise your option by tender to the Company of Ordinary Shares to the extent such tender would violate the provisions of any law, regulation or agreement restricting the redemption of the Company’s stock.

          (g) Pursuant to the following deferred payment alternative if Early Exercise is permitted:

               (i) Not less than one hundred percent (100%) of the aggregate exercise price, plus accrued interest, shall be due four (4) years from date of exercise or, at the Company’s election, upon termination of your Continuous Service.

               (ii) Interest shall be compounded at least annually and shall be charged at the minimum rate of interest necessary to avoid the treatment as interest, under any applicable provisions of the Code, of any portion of any amounts other than amounts stated to be interest under the deferred payment arrangement.

               (iii) In order to elect the deferred payment alternative, you must, as a part of your written notice of exercise, give notice of the election of this payment alternative and, in order to secure the payment of the deferred exercise price to the Company hereunder, if the Company so requests, you must tender to the Company a promissory note and a security agreement covering the purchased Ordinary Shares, both in form and substance satisfactory to the Company, or such other or additional documentation as the Company may request.]

     5. Whole Shares. You may exercise your option only for whole Ordinary Shares.

     6. Securities Law Compliance. Notwithstanding anything to the contrary contained herein, you may not exercise your option unless the Ordinary Shares issuable upon such exercise are then registered under the Securities Act or, if such Ordinary Shares are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. The exercise of your option must also comply with other applicable laws and regulations governing your option, and you may not exercise your option if the Company determines that such exercise would not be in material compliance with such laws and regulations.

     7. Term. The term of your option commences on the Date of Grant and expires upon the earliest of the following:

          (h) three (3) months after the termination of your Continuous Service for any reason other than your Disability or death, provided that if during any part of such three- (3-) month period your option is not exercisable solely because of the condition set forth in the preceding paragraph relating to “Securities Law Compliance,” your option shall not expire until the earlier of the Expiration Date or until it shall have been exercisable for an aggregate period of three (3) months after the termination of your Continuous Service;

          (i) twelve (12) months after the termination of your Continuous Service due to your Disability;

          (j) eighteen (18) months after your death if you die either during your Continuous Service or within three (3) months after your Continuous Service terminates;

          (k) the Expiration Date indicated in your Grant Notice; or

          (l) the tenth (10th) anniversary of the Date of Grant.

     If your option is an incentive stock option, note that, to obtain the federal income tax advantages associated with an “incentive stock option,” the Code requires that at all times beginning on the date of grant of your option and ending on the day three (3) months before the date of your option’s exercise, you must be an employee of the Company or an Affiliate, except in the event of your death or Disability. The Company has provided for extended exercisability of your option under certain circumstances for your benefit but cannot guarantee that your option will necessarily be treated as an “incentive stock option” if you continue to provide services to the Company or an Affiliate as a Consultant or Director after your employment terminates or if you otherwise exercise your option more than three (3) months after the date your employment terminates.

     8. Exercise.

          (m) You may exercise the vested portion of your option (and the unvested portion of your option if your Grant Notice so permits) during its term by delivering a Notice of Exercise (in a form designated by the Company) together with the exercise price to the Secretary

of the Company, or to such other person as the Company may designate, during regular business hours, together with such additional documents as the Company may then require.

          (n) By exercising your option you agree that, as a condition to any exercise of your option, the Company may require you to enter into an arrangement providing for the payment by you to the Company of any tax withholding obligation of the Company arising by reason of (1) the exercise of your option, (2) the lapse of any substantial risk of forfeiture to which the Ordinary Shares are subject at the time of exercise, or (3) the disposition of Ordinary Shares acquired upon such exercise.

          (o) If your option is an incentive stock option, by exercising your option you agree that you will notify the Company in writing within fifteen (15) days after the date of any disposition of any of the Ordinary Shares issued upon exercise of your option that occurs within two (2) years after the date of your option grant or within one (1) year after such Ordinary Shares are transferred upon exercise of your option.

          (p) By exercising your option you agree that the Company (or a representative of the underwriter(s)) may, in connection with the first underwritten registration of the offering of any securities of the Company under the Securities Act, require that you not sell, dispose of, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, any Ordinary Shares or other securities of the Company held by you, for a period of time specified by the underwriter(s) (not to exceed one hundred eighty (180) days) following the effective date of the registration statement of the Company filed under the Securities Act. You further agree to execute and deliver such other agreements as may be reasonably requested by the Company and/or the underwriter(s) that are consistent with the foregoing or that are necessary to give further effect thereto. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to your Ordinary Shares until the end of such period.

     9. Transferability. Your option is not transferable, except by will or by the laws of descent and distribution, and is exercisable during your life only by you. Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, you may designate a third party who, in the event of your death, shall thereafter be entitled to exercise your option.

     10. Right of First Refusal. Ordinary Shares that you acquire upon exercise of your option are subject to the right of first refusal that is described in the Plan.

     11. Option not a Service Contract. Your option is not an employment or service contract, and nothing in your option shall be deemed to create in any way whatsoever any obligation on your part to continue in the employ of the Company or an Affiliate, or of the Company or an Affiliate to continue your employment. In addition, nothing in your option shall obligate the Company or an Affiliate, their respective shareholders, Boards of Directors, Officers or Employees to continue any relationship that you might have as a Director or Consultant for the Company or an Affiliate.

     12. Withholding Obligations.

          (q) At the time you exercise your option, in whole or in part, or at any time thereafter as requested by the Company, you hereby authorize withholding from payroll and any other amounts payable to you, and otherwise agree to make adequate provision for (including by means of a “cashless exercise” pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board to the extent permitted by the Company), any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or an Affiliate, if any, which arise in connection with your option.

          (r) Upon your request and subject to approval by the Company, in its sole discretion, and compliance with any applicable conditions or restrictions of law, the Company may withhold from fully vested Ordinary Shares otherwise issuable to you upon the exercise of your option a number of whole Ordinary Shares having a Fair Market Value, determined by the Company as of the date of exercise, not in excess of the minimum amount of tax required to be withheld by law. If the date of determination of any tax withholding obligation is deferred to a date later than the date of exercise of your option, share withholding pursuant to the preceding sentence shall not be permitted unless you make a proper and timely election under Section 83(b) of the Code, covering the aggregate number of Ordinary Shares acquired upon such exercise with respect to which such determination is otherwise deferred, to accelerate the determination of such tax withholding obligation to the date of exercise of your option. Notwithstanding the filing of such election, Ordinary Shares shall be withheld solely from fully vested Ordinary Shares determined as of the date of exercise of your option that are otherwise issuable to you upon such exercise. Any adverse consequences to you arising in connection with such share withholding procedure shall be your sole responsibility.

          (s) You may not exercise your option unless the tax withholding obligations of the Company and/or any Affiliate are satisfied. Accordingly, you may not be able to exercise your option when desired even though your option is vested, and the Company shall have no obligation to issue a certificate for such Ordinary Shares or release such Ordinary Shares from any escrow provided for herein.

     13. Notices. Any notices provided for in your option or the Plan shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five (5) days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company.

     14. Governing Plan Document. Your option is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your option, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of your option and those of the Plan, the provisions of the Plan shall control.

Attachment II

See 1999 United States Equity Incentive Plan

EX-10.2

Exhibit 10.2

MELLANOX TECHNOLOGIES LTD.

THE 1999

ISRAELI SHARE OPTION PLAN

As amended effective as of September 3, 2004

1.	NAME
	This Plan, as amended from time to time, shall be known as the Mellanox Technologies Ltd. 1999 Israeli Share Option Plan (the “ISOP”).
2.	PURPOSE OF THE ISOP
	The ISOP is intended as an incentive to retain, in the employ of Mellanox Technologies Ltd. (“the Company”) and its Subsidiaries, persons of training, experience, and ability, to attract new employees, directors or consultants, whose services are considered valuable, to encourage the sense of proprietorship of such persons, and to stimulate the active interest of such persons in the development and financial success of the Company by providing them with opportunities to purchase Shares in the Company, pursuant to the ISOP approved by the board of directors of the Company (“the Board”). Options granted under the ISOP may or may not contain such terms as will qualify such Options for the special tax treatment under Section 102 of the Israeli Income Tax Ordinance (New Version) 1961 (the “Ordinance”) and any regulations, rules, orders or procedures promulgated thereunder, including the Income Tax Rules (Tax Benefits in Stock Issuance to Employees) 5349-1989 (“Section 102”).
	Options containing such terms as will qualify them for the special tax treatment under Section 102 shall be referred to herein as “102 Options”.
	Options that do not contain such terms as will qualify them for the special tax treatment under Section 102 shall be referred to herein as “3(I) Options”.
	All Options granted hereunder, whether together or separately, shall be hereinafter referred to as “Options”.
	The term “Subsidiary” shall mean for the purposes of the ISOP: any company (other than the Company) in an unbroken chain of companies beginning with the Company

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	if, at the time of granting an option, each of the companies other than the last company in the unbroken chain owns shares possessing fifty percent (50%) or more of the total combined voting power of all classes of shares in one of the other companies in such chains.
3.	ADMINISTRATION OF THE ISOP
	The Board or a share option committee appointed and maintained by the Board for such purpose (“the Committee”) shall have the power to administer the ISOP. Notwithstanding the above, the Board shall automatically have a residual authority if no Committee shall be constituted or if such Committee shall cease to operate for any reason whatsoever.
	The Committee shall consist of such number of members (not less than two (2) in number) as may be fixed by the Board. The Committee shall select one of its members as its chairman (“the Chairman”) and shall hold its meetings at such times and places as the Chairman shall determine. The Committee shall keep records of its meetings and shall make such rules and regulations for the conduct of its business as it shall deem advisable.
	Any member of such Committee shall be eligible to receive Options under the ISOP while serving on the Committee, unless otherwise specified herein.
	The Committee shall have full power and authority (i) to designate participants; (ii) to determine the terms and provisions of respective Option Agreements (which need not be identical) including, but not limited to, the number of Shares in the Company to be covered by each Option, provisions concerning the time or times when and the extent to which the Options may be exercised, any conditions upon which the vesting of the Options may be accelerated, and the nature and duration of restrictions as to transferability or restrictions constituting substantial risk of forfeiture; (iii) to accelerate the right of an Optionee to exercise, in whole or in part, any previously granted Option; (iv) to interpret the provisions and supervise the administration of the ISOP; (v) to determine the Fair Market Value ( as defined below) of the Shares ( as defined below); (vi) to designate Options as 102 Options or 3(I)Options and (vii) to determine any other matter which is necessary or desirable for, or incidental to administration of the ISOP.
	All decisions and selections made by the Board or the Committee pursuant to the provisions of the ISOP shall be made by a majority of its members except that no member of the Board or the Committee shall vote on, or be counted for quorum purposes, with respect to any proposed action of the Board or the Committee relating to any Option to be granted to that member. Any decision reduced to writing and signed by a majority of the members who are authorized to make such decision shall be fully effective as if it had been made by a majority at a meeting duly held.
	The interpretation and construction by the Committee of any provision of the ISOP or of any Option thereunder shall be final and conclusive unless otherwise determined by the Board.

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Subject to the Company’s decision, each member of the Board 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 ISOP unless arising out of such member’s own fraud or bad faith, to the 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 Articles of Association, any agreement, any vote of shareholders or disinterested directors, insurance policy or otherwise.

“Fair Market Value” means, as of any date, the value of a Share determined as follows:

(i)	If the Shares are listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market system, or The Nasdaq SmallCap Market of the Nasdaq Stock Market, the Fair Market Value shall be the closing sales price for such Shares (or the closing bid, if no sales were reported), as quoted on such exchange or system for the last market trading day prior to time of determination, as reported in the Wall Street Journal, or such other source as the Administrator deems reliable.
(ii)	If the Shares are regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value shall be the mean between the high bid and low asked prices for the Shares on the last market trading day prior to the day of determination, or;
(iii)	In the absence of an established market for the Shares, the Fair Market Value thereof shall be determined in good faith by the committee.

4.	DESIGNATION OF PARTICIPANTS
	The persons eligible for participation in the ISOP as recipients of Options shall include any employees, directors and consultants of the Company or of any Subsidiary of the Company. The grant of an Option hereunder shall neither entitle the recipient thereof to participate nor disqualify the recipient from participating in, any other grant of Options pursuant to the ISOP or any other option or stock plan of the Company or any of its affiliates.
	Anything in the ISOP to the contrary notwithstanding, all grants of Options to directors and office holders (“Nosei Misra” — as such term is defined in the Companies Ordinance (New Version), 1983 — the “Companies Ordinance”) shall be authorized and implemented in accordance with the provisions of the Companies Ordinance, as in effect from time to time.
5.	TRUSTEE
	Options which shall be granted under the ISOP and/or any Shares issued upon exercise of such Options and/or other shares received subsequently following any realization of rights, shall be issued to a Trustee nominated by the Committee, and approved in accordance with the provisions of Section 102 (the “Trustee”) and held

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	for the benefit of the Optionees. 102 Options and any Shares received subsequently following exercise of 102 Options, shall be held by the Trustee for a period of not less than two years (24 months) from the Date Of Grant.
	Anything to the contrary notwithstanding, the Trustee shall not release any Options which were not already exercised into Shares by the Optionee or release any Shares issued upon exercise of Options prior to the full payment of the Optionee’s tax liabilities arising from Options which were granted to the Optionee and/or any Shares issued upon exercise of such Options.
	Upon receipt of the Option, the Optionee will sign an undertaking to release the Trustee from any liability in respect of any action or decision duly taken and bona fide executed in relation with the ISOP, or any Option or Share granted to the Optionee thereunder.
6.	SHARES RESERVED FOR THE ISOP; RESTRICTION THEREON

6.1	The Company shall reserve Two Million Two Hundred and Seventy Thousand (2,270,000) authorized but unissued Ordinary Shares, nominal value NIS 0.01 each, of the Company (the “Shares”) for purposes of the ISOP and for the purposes of the Mellanox Technologies Ltd 1999 United States Equity Incentive Plan, subject to adjustment as set forth in paragraph 8 below. Any of such Shares which may remain unissued and which are not subject to outstanding Options at the termination of the ISOP shall cease to be reserved for the purpose of the ISOP, but until termination of the ISOP the Company shall at all times reserve sufficient number of Shares to meet the requirements of the ISOP. Should any Option for any reason expire or be canceled prior to its exercise or relinquishment in full, the Shares therefore subject to such Option may again be subjected to an Option under the ISOP or under the Mellanox Technologies Ltd. 1999 United States Equity Incentive Plan.
6.2	Each Option granted pursuant to the ISOP shall be evidenced by a written agreement between the Company and the Optionee (the “Option Agreement”), in such form as the Committee shall from time to time approve. Each Option Agreement shall state, inter- alia, a number of the Shares to which the Option relates and the type of Option granted thereunder (whether a 102 Option or a 3(I) Option).
6.3	All Shares issued upon exercise of the Options shall entitle the holder thereof to receive dividends and other distributions thereon.

7. OPTION PRICE

7.1	The purchase price of each Share subject to an Option or any portion thereof shall be determined by the Committee in its sole and absolute discretion in accordance with applicable law, subject to any guidelines as may be determined by the Board from time to time (the “Purchase Price”).
7.2	The Purchase Price shall be payable upon the exercise of the Option in a form satisfactory to the Committee, including without limitation, by cash or cheque.

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8.	ADJUSTMENTS
	Upon the occurrence of any of the following described events, Optionee’s rights to purchase Shares under the ISOP shall be adjusted as hereafter provided:

8.1	In the event of a merger of the Company with or into another corporation, or the sale of all or substantially all of the assets or shares of the Company while unexercised Options remain outstanding under the ISOP, each outstanding Option shall be assumed or there shall be substituted for the Shares subject to the unexercised portions of such outstanding Options an appropriate number of shares of each class of shares or other securities of the successor company (or a parent or subsidiary of the successor company) which were distributed to the shareholders of the Company in respect of such shares, and appropriate adjustments shall be made in the purchase price per share to reflect such action, all as will be determined by the Committee whose determination shall be final.
8.2	Notwithstanding the above and subject to any applicable law, the Committee, in its discretion, may determine that there shall be a clause in an Option Agreement instructing that, if in any such transaction as described in section 8.1 above, the successor company (or parent or subsidiary of the successor company) does not agree to assume or substitute for the Options, the Vesting Dates shall be accelerated so that any unvested Option shall be immediately vested in full as of the date ten (10) days prior to the effective date of such transaction.
8.3	For the purposes of section 8.1 above, the Option shall be considered assumed or substituted if, following the merger or acquisition, the Option confers the right to purchase or receive, for each Share of Optioned Shares immediately prior to the merger or acquisition, the consideration (whether shares, options, cash, or other securities or property) received in the merger or acquisition by holders of Shares for each Share held on the effective date of the transaction (and if such holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the merger or acquisition is not solely ordinary shares (or their equivalent) of the successor company or its parent or subsidiary, the Committee may, with the consent of the successor company, provide for the consideration to be received upon the exercise of the Option to be solely ordinary shares (or their equivalent) of the successor company or its parent or subsidiary equal in fair market value to the per Share consideration received by holders of a majority of the outstanding Shares in the merger or acquisition; and provided further that the Committee may determine, in its discretion, that in lieu of such assumption or substitution of Options for options of the successor company or its parent or subsidiary, such Options will be substituted for any other type of asset or property including cash which is fair under the circumstances.
8.4	If the Company is liquidated or dissolved while unexercised Options remain outstanding under the ISOP, then the Committee, in its discretion, may determine that such outstanding Options may be exercised in full by the

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	Optionees as of the effective date of any such liquidation or dissolution of the Company without regard to the installment exercise provisions of Paragraph 9(2) of the ISOP, by the Optionees giving notice in writing to the Company of their intention to so exercise.
8.5	If the outstanding shares of the Company shall at any time be changed or exchanged by declaration of a stock dividend (bonus shares), stock split, combination or exchange of shares, recapitalization, or any other like event by or of the Company, and as often as the same shall occur, then the number, class and kind of Shares subject to the ISOP or subject to any Options therefore granted, and the purchase prices, shall be appropriately and equitably adjusted so as to maintain the proportionate number of Shares without changing the aggregate purchase price, provided, however, that no adjustment shall be made by reason of the distribution of subscription rights (rights offering) on outstanding stock. Upon happening of any of the foregoing, the class and aggregate number of Shares issuable pursuant to the ISOP (as set forth in paragraph 6 hereof), in respect of which Options have not yet been exercised, shall be appropriately adjusted, all as will be determined by the Committee whose determination shall be final.
8.6	Anything herein to the contrary notwithstanding, if prior to the completion of an IPO all or substantially all of the shares of the Company are to be sold, or upon a merger or reorganization or the like, all or substantially all of the shares of the Company are to be exchanged for securities of another company (a “Transaction”), then each Optionee shall be obliged to sell or exchange, as the case may be, any Shares such Optionee purchased under the ISOP, in accordance with the instructions issued by the Committee in connection with the Transaction, whose determination shall be final.

9. TERM AND EXERCISE OF OPTIONS

9.1	Options shall be exercised by the Optionee by giving written notice to the Company, in such form and method as may be determined by the Company and the Trustee and when applicable, in accordance with the requirements of Section 102, which exercise shall be effective upon receipt of such notice and the Purchase Price by the Company at its principal office. The notice shall specify the number of Shares with respect to which the Option is being exercised.
9.2	Each Option granted under the ISOP shall be exercisable following the Vesting Dates and for the number of Shares as shall be provided in Exhibit B to the Option Agreement. However no Option shall be exercisable after the Expiration Date.
9.3	Options granted under the ISOP shall not be transferable by Optionees other than by will or laws of descent and distribution, and during an Optionee’s lifetime shall be exercisable only by that Optionee.
9.4	The Options may be exercised by the Optionee in whole at any time or in part from time to time, to the extent that the Options become vested and excercisable, prior to the Expiration Date, and provided that, subject to the

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	provisions of Section 9.6 below, the Optionee is an employee or director or consultant of the Company or any of its Subsidiaries, at all times during the period beginning with the granting of the Option and ending upon the date of exercise.
9.5	Subject to the provisions of Section 9.6 below, in the event of termination of Optionee’s employment or service as a consultant or director with the Company or any of its Subsidiaries, all Options granted to him will immediately be expired. A notice of termination of employment or service shall be deemed to constitute termination of employment.
9.6	Notwithstanding anything to the contrary hereinabove, an Option may be exercised after the date of termination of Optionee’s employment or service with the Company or any Subsidiary of the Company during an additional period of time beyond the date of such termination, but only with respect to the number of Options already vested at the time of such termination according to the Vesting Periods of the Options set forth in Section 4 of such Optionee’s Option agreement, if: (i) termination is without Cause (as defined below), in which event any Options still in force and unexpired may be exercised within a period of three months from the date of such termination, (ii) termination is the result of death or disability of the Optionee, in which event any Options still in force and unexpired may be exercised within a period of 18 (eighteen) months from the date of termination in the event of death and 12 (twelve) months from the date of termination in the event of disability, or (iii) prior to the date of such termination, the Committee shall authorize an extension of the terms of all or part of the Options beyond the date of such termination for a period not to exceed the period during which the Options by their terms would otherwise have been exercisable.
	The term “Cause” shall mean (i) conviction of any felony involving moral turpitude or affecting the Company; (ii) any refusal to carry out a reasonable directive of the CEO which involves the business of the Company or its affiliates and was capable of being lawfully performed; (iii) embezzlement of funds of the Company or its affiliates; (iv) any breach of the Optionee’s fiduciary duties or duties of care of the Company; including without limitation disclosure of confidential information of the Company; and (v) any conduct (other than conduct in good faith) reasonably determined by the Board of Directors to be materially detrimental to the Company.
9.7	To avoid doubt, the holders of Options shall not have any of the rights or privileges of shareholders of the Company in respect of any Shares purchasable upon the exercise of any part of an Option, nor shall they be deemed to be a class of shareholders or creditors of the Company for purpose of the operation of section 233 of the Companies Ordinance or any successor to such section, until registration of the Optionee as holder of such Shares in the Company’s register of members upon exercise of the Option in accordance with the provisions of the ISOP
9.8	Any form of Option Agreement authorized by the ISOP may contain such other provisions as the Committee may, from time to time, deem advisable.

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9A. Restriction on Sale.

       Notwithstanding anything to the the contrary herein, prior to an IPO, an Optionee may not sell, pledge or otherwise transfer any shares issued under this Plan, or any interest in such Shares, prior to the elapse of six (6) months from the date of issuance of such shares. Any sale, pledge or transfer of Shares after such six (6) month period shall be subject to the right of first refusal set forth below and any such relevant terms and restrictions as may be contained in the Company’s Articles of Association.

10. SHARES SUBJECT TO RIGHT OF FIRST REFUSAL

10.1	Notwithstanding anything to the contrary in the Articles of Association of the Company, none of the Optionees shall have a right of first refusal in relation with any sale of shares in the Company.
10.2	Sale of Shares by the Optionees shall be subject to the right of first refusal of other shareholders as set forth in the Articles of Association of the Company. In the event that the Articles of Association of the Company shall not contain any provision regarding rights of first refusal, then, unless otherwise provided by the Committee, until such time as the Company shall effectuate an IPO, the sale of Shares issuable upon exercise of an Option, shall be subject to a right of first refusal on the part of the Repurchaser(s). Repurchaser(s) means (i) the Company, if permitted by applicable laws; (ii) if the Company is not permitted by applicable laws, then any affiliate or Subsidiary of the Company designated by a unanimous decision is reached by the Board of Directors; or (iii) if no unanimous decision is reached by the Board of Directors, then the Company’s existing shareholders (save, for avoidance of doubt, for other Optionees who already exercised their Options), pro rata in accordance with their shareholding. The Optionee shall give a notice of sale (the “Notice”) to the Company in order to offer the Shares to the Repurchaser(s).
	The notice shall specify the name of each proposed purchaser or other Transferee ( “Proposed Transferee”), the Number of Shares offered for sale, the price per Share and the payment terms. The Repurchaser(s) will be entitled for 30 days from the day of receipt of the Notice (the “30 Days Period”), to purchase all or part of the offered Shares. If by the end of the 30 Days Period not all of the offered Shares have been purchased by the Repurchaser(s), the Optionee will be entitled to sell such Shares at any time during the 90 days following the end of the 30 Days Period on terms not more favorable than those set out in the Notice, provided that the Proposed Transferee agrees in writing that the provisions of this section shall continue to apply to the Shares in the hands of such Proposed Transferee.

11.	DIVIDENDS
	With respect to all Shares (in contrary to unexercised Options) issued upon the exercise of Options purchased by the Optionee and held by the Trustee, the Optionee shall be entitled to receive dividends in accordance with the quantity of such Shares, and subject to any applicable taxation on distribution of dividends. During the period

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	in which Shares issued to the Trustee on behalf of a Optionee are held by the Trustee, the cash dividends paid with respect thereto shall be paid directly to the Optionee.
12.	ASSIGNABILITY AND SALE OF OPTIONS
	No Option, purchasable hereunder, whether fully paid or not, shall be assignable, transferable or given as collateral or any right with respect to them given to any third party whatsoever, and during the lifetime of the Optionee each and all of such Optionee’s rights to purchase Shares hereunder shall be exercisable only by the Optionee.
	As long as the Shares are held by the Trustee in favor of the Optionee, than all rights the last possesses over the Shares are personal, can not be transferred, assigned, pledged or mortgaged, other than by will or laws of descent and distribution.
13.	TERM OF THE ISOP
	The ISOP shall be effective as of the day it was adopted by the Board and shall terminate at the end of 10 (ten) years from such day of adoption.
14.	AMENDMENTS OR TERMINATION
	The Committee may at any time amend, alter, suspend or terminate the ISOP. No amendment, alteration, suspension or termination of the ISOP shall impair the rights of any Optionee, unless mutually agreed otherwise between the Optionee and the Committee, which agreement must be in writing and signed by the Optionee and the Company. Termination of the ISOP shall not affect the Committee’s ability to exercise the powers granted to it hereunder with respect to Options granted under the ISOP prior to the date of such termination.
15.	GOVERNMENT REGULATIONS
	The ISOP, and the granting and exercise of Options hereunder, and the obligation of the Company to sell and deliver Shares under such Options, shall be subject to all applicable laws, rules, and regulations, whether of the State of Israel or of the United States or any other State having jurisdiction over the Company and the Optionee, including the registration of the Shares under the United States Securities Act of 1933, and to such approvals by any governmental agencies or national securities exchanges as may be required. Nothing herein shall be deemed to require the Company to register the Shares under the securities law of any jurisdiction.
16.	CONTINUANCE OF EMPLOYMENT
	Neither the ISOP nor the Option Agreement with the Optionee shall impose any obligation on the Company or a Subsidiary thereof, to continue any Optionee in its employ or service, and nothing in the ISOP or in any Option granted pursuant thereto shall confer upon any Optionee any right to continue in the employ or the service of the Company or a Subsidiary thereof or restrict the right of the Company or a Subsidiary thereof to terminate such employment or service at any time.
17.	GOVERNING LAW & JURISDICTION

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	The ISOP shall be governed by and construed and enforced in accordance with the laws of the State of Israel applicable to contracts made and to be performed therein, without giving effect to the principles of conflict of laws. The competent courts of Tel-Aviv, Israel shall have sole jurisdiction in any matters pertaining to the ISOP.
18.	TAX CONSEQUENCES
	Any tax consequences arising from the grant or exercise of any Option, from the payment for Shares covered thereby or from any other event or act (of the Company, the Trustee or the Optionee), hereunder, shall be borne solely by the Optionee. The Company 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 Optionee shall agree to indemnify the Company and 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 Optionee.
	The Committee and/or the Trustee shall not be required to release any Share certificate to an Optionee until all required payments have been fully made.
19.	NON-EXCLUSIVITY OF THE ISOP
	The adoption of the ISOP by the Board shall not be construed as amending, modifying or rescinding any previously approved incentive arrangements or as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of stock Options otherwise then under the ISOP, and such arrangements may be either applicable generally or only in specific cases. For the avoidance of doubt, prior grant of options to Optionees of the Company under their employment agreements, and not in the framework of any previous option plan, shall not be deemed an approved incentive arrangement for the purpose of this Section.
20.	MULTIPLE AGREEMENTS
	The terms of each Option may differ from other Options granted under the ISOP at the same time, or at any other time. The Committee may also grant more than one Option to a given Optionee during the term of the ISOP, either in addition to, or in substitution for, one or more Options previously granted to that Optionee.

MELLANOX TECHNOLOGIES LTD.

OPTION AGREEMENT

Made as of the            day of           200_

BETWEEN:	MELLANOX TECHNOLOGIES LTD.
	(hereinafter the “Company”)
		on the one part
AND:	Name
	I.D. No.
	Address:
	(hereinafter the “Optionee”)
		on the other part

Whereas	On June 1999, the Company adopted the Mellanox 1999 Israeli Share Option Plan, a copy of which is attached as Exhibit A hereto, forming an integral part hereof (the “ISOP”); and -
Whereas	The Company has determined that the Optionee be granted an Option under the ISOP to purchase shares of the Company, and the Optionee has agreed to such grant, all on the terms and subject to the conditions hereinafter provided.

NOW, THEREFORE, it is agreed as follows:

1. PREAMBLE AND DEFINITIONS

1.1	The Preamble and exhibits to this Agreement constitute an integral part hereof.
1.2	Unless otherwise defined herein, capitalized terms used herein shall have the meaning ascribed to them in the ISOP.

2. GRANT OF OPTION

2.1	The Company hereby grants to the Optionee the number of Options set forth in Section 1 of Exhibit B hereto, each Option exercisable for one Ordinary Share of NIS 0.01, taken from the total number of shares reserved for the purpose of the ISOP in the Company’s authorized capital, , to purchase shares at the Purchase Price set forth in Section 2 of Exhibit B, on the terms and subject to the conditions hereinafter provided. As used in this Option Agreement, “Shares” shall mean the ordinary shares which Optionee may purchase by exercising his or her Options.
	The Purchase Price will be paid in NIS in accordance with the representative rate of exchange of the U.S. dollar, published by the Bank of Israel and known on the date of giving the Exercise Notice (as set forth in Section 5.1 hereinafter).
2.2	The Optionee is aware that the Company intends to issue additional shares and to grant additional options in the future to various entities and individuals, as the Company in its sole discretion shall determine.

3. PERIOD OF OPTION AND CONDITIONS OF EXERCISE

3.1 The terms of this Option Agreement shall commence on the date hereof (the “Date Of Grant”) and terminate at the Expiration Date (as defined in Section 6 below), or at the time at which the Option expires pursuant to the terms of the ISOP or pursuant to this Agreement.

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3.2	The Options may be exercised by the Optionee in whole at any time or in part from time to time, as determined by the Board, and to the extent that the Options become vested and exercisable in accordance with Exhibit B, prior to the Expiration Date, and provided that, subject to the provisions of Section 3.4 below, the Optionee is an employee, or director or consultant of the Company or any of its Subsidiaries, at all times during the period beginning with the granting of the Option and ending upon the date of exercise.
3.3	Subject to the provisions of Section 3.4 below, in the event of termination of the Optionee’s employment or service as a consultant or director with the Company or any of its Subsidiaries, all Options granted to the Optionee will immediately expire. A notice of termination of employment by either the Company or the Optionee shall be deemed to constitute termination of employment.
3.4	Notwithstanding anything to the contrary hereinabove, an Option may be exercised after the date of termination of Optionee’s employment or service as a consultant or director with the Company or any Subsidiary of the Company during an additional period of time beyond the date of such termination, but only with respect to the number of Options already vested at the time of such termination according to the Vesting Dates of the Options (the “Qualified Options”), if: (i) termination is without Cause, in which event any Qualified Option still in force and unexpired may be exercised within a period of three months from the date of such termination, (ii) termination is the result of death or disability of the Optionee, in which event any Qualified Option still in force and unexpired may be exercised within a period of 18 (eighteen) months from the date of termination in the event of death, and 12 (twelve) months from the date of termination in the event of disability, or (iii) prior to the date of such termination, the Committee shall authorize an extension of the terms of all or part of the Options beyond the date of such termination for a period not to exceed the period during which the Options by their terms would otherwise have been exercisable.
	The term “Cause” shall mean (i) conviction of any felony involving moral turpitude or affecting the Company; (ii) any refusal to carry out a reasonable directive of the CEO which involves the business of the Company or its affiliates and was capable of being lawfully performed; (iii) embezzlement of funds of the Company or of its affiliates; (iv) any breach of the Optionee’s fiduciary duties or duties of care of the Company; including without limitation disclosure of confidential information of the Company; and (v) any conduct (other than conduct in good faith) reasonably determined by the Board of Directors to be materially detrimental to the Company.
3.5	The Options may be exercised only to purchase whole Shares, and in no case may a fraction of a Share be purchased, if any fractional Shares would be deliverable upon exercise, such fraction shall be rounded up one-half or less, or otherwise rounded down, to the nearest whole number.

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4.	VESTING
	Subject to the requirements as to the number of Shares for which an Option is exercisable, as set forth in Section 2.1 above, Options shall be vested (i.e., Options shall become exercisable) at the dates set forth in Section 3 of exhibit B hereto (the “Vesting Periods”).
	Notwithstanding the above and subject to any applicable law, the Board or the Committee may determine with respect to the Optionee (in the event that the Optionee is not employed by the Company on a full-time basis at the time of grant) that the Vesting Periods shall be accelerated, but not decelerated, proportionately, in accordance with the Optionee’s scope of employment in the Company, until such time as the Optionee is employed full-time by the Company.
5.	METHOD OF EXERCISE

5.1

Options shall be exercised by the Optionee by giving a written notice, to the Company, in such form and method as may be determined by the Company and the Trustee (the “Exercise Notice”), which exercise shall be effective upon receipt of such notice by the Company at its principal office, together with receipt by the Company of the Purchase Price for the number of Shares with respect to which the Option is being exercised. The notice shall specify the number of Shares with respect to which the Option is being exercised.

5.2

The Shares shall immediately be issued or transferred to the Trustee and be held by the Trustee in accordance with the provisions of Section 5 of the ISOP, The Trustee shall not transfer any 3(I) Options to the Optionee prior to exercise of the Options into Shares. The Trustee will transfer the Shares to the Optionee upon demand, but in case of Shares received following the exercise of 102 Options, not earlier than two years (24 months) from Date of Grant. If any law or regulation requires the Company to take any action with respect to the Shares so demanded before the issuance thereof, then the date of their issuance shall be extended for the period necessary to take such action. The Optionee hereby authorizes the Trustee to sign an agreement with the Company whereby Shares will not be transferred without deduction of taxes at source. The Optionee hereby undertakes to release the Trustee from any liability in respect of any action or decision duly taken and bona fide executed in relation with the ISOP, or any Option or Share granted to him thereunder.

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6. TERMINATION OF OPTION

6.1

Except as otherwise stated in this Agreement, the Options, to the extent not previously exercised, shall terminate forthwith upon the earlier of: (i) the expiration date set forth in Exhibit B hereto; and - (ii) the expiration of any extended period in any of the events set forth in Section 3.4 above; (and such earlier date shall be hereinafter referred to as the “Expiration Date”).

6.2

Without derogating from the above, the Committee may, with the prior written consent of the Optionee, from time to time cancel all or any portion of the Options then subject to exercise, and the Company’s obligation in respect of such Options may be discharged by (i) payment to the Optionee of an amount in cash equal to the excess, if any, of the Fair Market Value of the Shares pertaining to such canceled Options, at the date of such cancellation, over the aggregate Purchase Price of such Shares, (ii) the issuance or transfer to the Optionee of Shares of the Company with a Fair Market Value at the date of such transfer equal to any such excess, or (iii) a combination of cash and Shares with a combined value equal to any such excess, all determined by the Committee in its sole discretion.

7. ADJUSTMENTS

7.1

In the event of a merger of the Company with or into another company (the “Successor Company”), or the sale of all or substantially all of the assets or shares of the Company (any of the foregoing being hereinafter referred to as the “Transaction”) while unexercised Options remain outstanding under the ISOP (the “Unexercised Options”), then each Unexercised Option shall be assumed or there shall be substituted for the Shares subject to the Unexercised Options an appropriate number of shares of each class of shares or other securities of the Successor Company (or a parent or subsidiary of the Successor Company) which were distributed to the shareholders of the Company in respect of such shares, and appropriate adjustments shall be made in the Purchase Price to reflect such action, and all other terms and conditions of the Option Agreements, such as the Vesting Dates, shall remain in force, all as will be determined by the Committee whose determination shall be final.

7.2

Notwithstanding the above and subject to any applicable law:

7.2.1 If in a case of a Transaction, the Successor Company does not agree to assume or substitute the Options, the Vesting Dates shall be accelerated so that any unvested Option shall vest immediately as of the date ten (10) days prior to the effective date of the Transaction.

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7.3	For the purposes of Section 7.1, the Option shall be considered assumed or substituted if, following the Transaction, the Option confers the right to purchase or receive, for each Share of Optioned Shares immediately prior to the Transaction, the consideration (whether shares, options, cash, or other securities or property) received in the Transaction by holders of shares for each share held on the effective date of the transaction (and if such holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares); provided, however, that if such consideration received in the Transaction is not solely ordinary shares (or their equivalent) of the Successor Company or its parent or subsidiary, the Committee may, with the consent of the Successor Company, provide for the consideration to be received upon the exercise of the Option to be solely ordinary shares (or their equivalent) of the Successor Company or its parent or subsidiary equal in Fair Market Value to the per Share consideration received by holders of a majority of the outstanding shares in the Transaction; and provided further that the Committee may determine, in its discretion, that in lieu of such assumption or substitution of Options for options of the Successor Company or its parent or subsidiary, such Options will be substituted for any other type of asset or property including cash which is fair under the circumstances.
7.4	If the Company is liquidated or dissolved while Unexercised Options remain outstanding, then the Board, in its own discretion, may determine that all such outstanding Options may be exercised in full by the Optionee as of the effective date of any such liquidation or dissolution of the Company without regard to the vesting provisions of Exhibit B. In case the Board determines that the outstanding Options may be exercised, then all such outstanding Options may be exercised in full by the Optionee giving notice in writing to the Company of his/her intention to so exercise.
7.5	If the outstanding shares of the Company shall at any time be changed or exchanged by declaration of a stock dividend (bonus shares), stock split, combination or exchange of shares, re-capitalization, or any other like event by or of the Company, and as often as the same shall occur, then the number, class and kind of Shares subject to the Options theretofore granted, and the Option Price, shall be appropriately and. equitably adjusted so as to maintain the proportionate number of Shares without changing the aggregate Option Price; provided, however, that no adjustment shall be made by reason of the distribution of subscription rights (rights offering) on outstanding stock, all as will be determined by the Board whose determination shall be final.

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7.6 Bring-Along Right. Anything herein to the contrary notwithstanding, if prior to the completion of an IPO all or substantially all of the shares of the Company are to be sold, or upon a merger or reorganization or the like, all or substantially all of the shares of the Company are to be exchanged for securities of another Company, then in such event the Optionee shall be obliged to sell or exchange, as the case may be, the Shares such Optionee purchased hereunder, in accordance with the instructions then issued by the Board, which will be given according to the decided upon policy concerning Optionees under the ISOP.

8. RIGHTS PRIOR TO EXERCISE OF OPTION; LIMITATIONS AFTER PURCHASE OF SHARES

8.1	Subject to the provisions of Section 8.2 below, the Optionee shall not have any of the rights or privileges of shareholders of the Company in respect of any Shares purchasable upon the exercise of any Options unless and until, following exercise, the Option is registered as holder of such shares in the company’s register of members but in case of Options and Shares held by the Trustee, subject always to the provisions of section 5 of the ISOP, with respect to Options and Shares held by the Trustee.
8.2	With respect to all Shares (in contrast to unexercised Options) issued upon the exercise of Options purchased by the Optionee, the Optionee shall be entitled to receive dividends in accordance with the quantity of such Shares, and subject to any applicable taxation on distribution of dividends. During the period in which Shares are held by the Trustee on behalf of an Optionee (if an), the cash dividends paid with respect thereto shall be paid directly to the Optionee.
8.3	No Option granted hereunder, whether fully paid or not, shall be assignable, transferable or given as collateral or any right with respect to it given to any third party whatsoever, and during the lifetime of the Optionee each and all of the Optionee’s rights to purchase Shares hereunder shall be exercisable only by the Optionee.
	As long as the Shares are held by the Trustee in favor of the Optionee, then all rights the last possesses over the Shares are personal, can not be transferred, assigned, pledged or mortgaged, other than by will or laws of descent and distribution.
	Any such action made directly or indirectly, for an immediate validation or for a future one, shall be void.
8.4	Optionee acknowledges that if the Company’s shares are registered for trading in any public market, the Optionee’s right to sell Shares may be subject to some limitations, as set forth by the Company or its underwriters. In such event, the Optionee will unconditionally agree to any such limitations.

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8.5	The Optionee shall not dispose of any Shares in transactions which violate, in the opinion of the Company, any applicable rules and regulations.
8.6	The Optionee agrees that the Company shall have the authority to endorse upon the certificate or certificates representing the Shares such legends referring to the foregoing restrictions, and any other applicable restrictions, as it may deem appropriate (which do not violate the Optionee’s rights according to this Agreement).

9. SHARES SUBJECT TO RIGHT OF FIRST REFUSAL

9.1	Notwithstanding anything to the contrary in the Articles of Association of the Company, the Optionee shall not have a right of first refusal in relation to any sale of shares in the Company.
9.2	Any sale of Shares by the Optionee shall be subject to the right of first refusal of other shareholders as set forth in the Articles of Association of the Company. In the event that the Articles of Association of the Company do not contain any provision regarding rights of first refusal, then, unless otherwise provided by the Board, until such time as the Company shall effectuate an IPO, the sale of Shares issuable upon exercise of an Option shall be subject to a right of first refusal on the part of the Repurchaser(s). Repurchaser(s) means (i) the Company, if permitted by applicable laws; (ii) if the Company is not permitted by applicable laws, then any affiliate or Subsidiary of the Company designated by a unanimous decision reached by the Board of Directors; or (iii) if no unanimous decision is reached by the Board of Directors, then the Company’s existing shareholders (save, for avoidance of doubt, for other Optionees who already exercised their Options), pro rata in accordance with their shareholdings. The Optionee shall give a notice of sale (the “Notice”) to the Company in order to offer the Shares to the Repurchaser(s).
	The Notice shall specify the name of each proposed purchaser or other transferee (the “Proposed Transferee”), the number of Shares offered for sale, the price per Share and the payment terms. The Repurchaser(s) will be entitled for 30 days from the clay of receipt of the Notice (the “30 Days Period”), to purchase all or part of the offered Shares. If by the end of the 30 Days Period not all of the offered Shares have been purchased by the Repurchaser(s), the Optionee will be entitled to sell such Shares at any time during the 90 days following the end of the 30 Days Period on terms not more favorable than those set out in the Notice, provided that (he Proposed Transferee agrees in writing that the provisions of this section shall continue to apply to the Shares in the hands of such Proposed Transferee.

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10.	GOVERNMENT REGULATIONS
	The ISOP, and the granting and exercise of the Option thereunder, and the Company’s obligation to sell and deliver Shares or cash under the Option, are subject to all applicable laws, rules and regulations, whether of the State of Israel or of the United States or any other State having jurisdiction over the Company and the Optionee, including the registration of the shares under the United States Securities Act of 1933, and to such approvals by any governmental agencies or national securities exchanges as may be required. Nothing herein shall be deemed to require the Company to register the shares under the securities law of any jurisdiction.
11.	CONTINUANCE OF EMPLOYMENT OR HIRED SERVICES
	Neither this Option Agreement nor the ISOP shall impose any obligation on the Company or a Subsidiary thereof, to continue the Optionee in its employ or service, and nothing in the ISOP or in this Option Agreement shall confer upon Optionee any right to continue in the employ or the sendee of the Company or a Subsidiary thereof or restrict the right of the Company or a Subsidiary thereof to terminate such employment or service at any time.
12.	GOVERNING LAW & JURISDICTION
	This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Israel applicable to contracts made and to be performed therein, without giving effect to the principles of conflict of laws. The competent courts of Tel-Aviv, Israel shall have sole jurisdiction in any matters pertaining to this Agreement.
13.	TAX CONSEQUENCES
	Any tax consequences arising from the grant or exercise of any Option, from the payment for Shares covered thereby or from any other event or act (of the Company, the Trustee or the Optionee), hereunder, shall be borne solely by the Optionee. The Company and/or the Trustee shall withhold taxes according to the requirements under the applicable laws, rules, and regulations, including the withholding of taxes at source. Furthermore, the Optionee shall agree to indemnify the Company and 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 Optionee.
	None of the Board, the Committee and/or the Trustee shall be required to release any Share certificate to an Optionee until all required payments have been fully made.
	The Optionee hereby undertakes not to transfer Shares issued upon the exercise of 102 Options, nor any other shares received subsequently following any realization of rights which are subject to Section 102, by a way of a tax - exempt transfer or a transfer under sections 104(a), 104(b) or 97(a) of the Income Tax Ordinance.

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14.	FAILURE TO ENFORCE NOT A WAIVER
	The failure of any party to enforce at any time any provisions of this Option Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.
15.	PROVISIONS OF THE ISOP
	The Options provided for herein are granted pursuant to the ISOP, and said Options and this Option Agreement are in all respects governed by the ISOP and subject to all of the terms and provisions whether such terms and provisions are incorporated in this Option Agreement solely by reference or are expressly cited herein.
	Any interpretation of this Option Agreement will be made in accordance with the ISOP but in the event there is any contradiction between the provisions of this Option Agreement and the ISOP, the provisions of this Option Agreement will prevail.
16.	BINDING EFFECT
	This Agreement, shall be binding upon the heirs, executors, administrators, and successors of the parties hereof.
17.	NOTICES
	Any notice required or permitted under this Option Agreement shall be deemed to have been duly given if delivered, faxed or mailed, if delivered by certified or registered mail or return receipt requested, either to the Optionee at his or her address set forth above or such other address as he or she may designate in writing to the Company, or to the Company at the address set forth above or such other address as the Company may designate in writing to the Optionee. Any notice sent in accordance with this Section shall be effective (i) if mailed, seven (7) business clays after mailing, (ii) if sent by messenger, upon delivery, and (iii) if sent by facsimile or other electronic medium, upon confirmation of receipt or (if transmitted on a non business day) on the first business day following transmission and electronic confirmation of receipt.

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18.

ENTIRE AGREEMENT

This Agreement exclusively includes all the terms of the grant of Options to the Optionee under the ISOP, and, subject to the provisions of Section 21 of the ISOP, annuls and supersedes any other agreement, arrangement or understanding, whether oral or in writing, relating to the grant of Options to the Optionee. Any change of any kind to the Agreement will be valid only if made in writing and signed by both the Optionee and the Company’s authorized signatories and has received the approval of the Board.

IN WITNESS WHEREOF, the Company executed this Option Agreement in duplicate on the day and year first above written.

MELLANOX TECHNOLOGIES, LTD.

Company’s Signature:

Name: Eyal Waldman

Position: Chief Executive Officer

Signature:                                         

Optionee acknowledges receipt of a copy of the ISOP and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts this Option Agreement subject to all of the terms and provisions thereof. Optionee has reviewed the ISOP and this Option Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option Agreement and fully understands all provisions of the Option Agreement. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any question arising under the ISOP or this Option Agreement. Optionee further agrees to notify the Company upon any change in the residence address indicated above.

                                        
Optionee’s Signature

***Note: Available for grants to Israeli employees until 2003***

Mellanox Technologies Ltd.
1999 Israeli Share Option Plan

Stock Option Agreement
(3(I) Options)

     Pursuant to your Stock Option Grant Notice (“Grant Notice”) and this Stock Option Agreement, Mellanox Technologies Ltd. (the “Company”) has granted you an option under its 1999 Israeli Share Option Plan (the “Plan”) to purchase the number of the Company’s Ordinary Shares indicated in your Grant Notice at the exercise price indicated in your Grant Notice. Defined terms not explicitly defined in this Stock Option Agreement but defined in the Plan shall have the same definitions as in the Plan.

     The details of your option are as follows:

     1. Vesting. Subject to the limitations contained herein, your option will vest as provided in your Grant Notice, provided that vesting will cease upon the termination of your “Continuous Service” (as hereinafter defined). “Continuous Service” means that your employment or service with the Company or an affiliate is not interrupted or terminated. Your Continuous Service shall not be deemed to have terminated merely because of a change in the capacity in which you render service to the Company or an affiliate or a change in the entity for which you render such service, provided that there is no interruption or termination of your Continuous Service. The Company’s Board of Directors or chief executive officer of the Company, in that party’s sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by that party, including sick leave, military leave or any other personal leave.

     2. Number of Shares and Exercise Price. The number of Ordinary Shares subject to your option and your exercise price per share referenced in your Grant Notice may be adjusted from time to time for capitalization adjustments, as provided in Section 8 of the Plan.

     3. Method of Payment. Payment of the exercise price is due in full upon exercise of all or any part of your option. You may elect to make payment of the exercise price in cash or by check or in any other manner permitted by your Grant Notice, which may include one or more of the following:

          (a) In the Company’s sole discretion at the time your option is exercised and provided that at the time of exercise the Ordinary Shares are publicly traded and quoted regularly in The Wall Street Journal, pursuant to a program that, prior to the issuance of Ordinary Shares, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds.

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               (b) Provided that at the time of exercise the Ordinary Shares are publicly traded and quoted regularly in The Wall Street Journal, by delivery of already-owned Ordinary Shares either that you have held for the period required to avoid a charge to the Company’s reported earnings (generally six months) or that you did not acquire, directly or indirectly from the Company, that are owned free and clear of any liens, claims, encumbrances or security interests, and that are valued at Fair Market Value on the date of exercise. “Delivery” for these purposes, in the sole discretion of the Company at the time you exercise your option, shall include delivery to the Company of your attestation of ownership of Ordinary Shares in a form approved by the Company. Notwithstanding the foregoing, you may not exercise your option by tender to the Company of Ordinary Shares to the extent such tender would violate the provisions of any law, regulation or agreement restricting the redemption of the Company’s shares.

     4. Whole Shares. You may exercise your option only for whole Ordinary Shares.

     5. Securities Law Compliance. Notwithstanding anything to the contrary contained herein, you may not exercise your option unless the Ordinary Shares issuable upon such exercise are then registered under the securities law of applicable jurisdictions or, if such Ordinary Shares are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the applicable jurisdictions. The exercise of your option must also comply with other applicable laws and regulations governing your option, and you may not exercise your option if the Company determines that such exercise would not be in material compliance with such laws and regulations.

     6. Term. The term of your option commences on the Date of Grant and expires upon the earliest of the following:

          (a) three (3) months after the termination of your Continuous Service for any reason other than your disability or death, provided that if during any part of such three- (3-) month period your option is not exercisable solely because of the condition set forth in the preceding paragraph relating to “Securities Law Compliance,” your option shall not expire until the earlier of the Expiration Date or until it shall have been exercisable for an aggregate period of three (3) months after the termination of your Continuous Service;

          (b) twelve (12) months after the termination of your Continuous Service due to your disability;

          (c) eighteen (18) months after your death if you die either during your Continuous Service or within three (3) months after your Continuous Service terminates;

          (d) the Expiration Date indicated in your Grant Notice; or

          (e) the tenth (10th) anniversary of the Date of Grant.

     7. Exercise.

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          (a) You may exercise the vested portion of your option during its term by delivering a Notice of Exercise (in a form designated by the Company) together with the exercise price to the Secretary of the Company, or to such other person as the Company may designate, during regular business hours, together with such additional documents as the Company may then require.

          (b) By exercising your option you agree that, as a condition to any exercise of your option, the Company may require you to enter into an arrangement providing for the payment by you to the Company of any tax withholding obligation of the Company arising by reason of (1) the exercise of your option, or (2) the disposition of Ordinary Shares acquired upon such exercise.

          (c) By exercising your option you agree that the Company (or a representative of the underwriter(s)) may, in connection with the first underwritten registration of the offering of any securities of the Company under the securities laws of any jurisdiction, require that you not sell, dispose of, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, any Ordinary Shares or other securities of the Company held by you, for a period of time specified by the underwriter(s) (not to exceed one hundred eighty (180) days) following the effective date of the registration statement of the Company filed under the securities laws of any jurisdiction. You further agree to execute and deliver such other agreements as may be reasonably requested by the Company and/or the underwriter(s) that are consistent with the foregoing or that are necessary to give further effect thereto. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to your Ordinary Shares until the end of such period.

     8. Transferability. Your option is not transferable, except by will or by the laws of descent and distribution, and is exercisable during your life only by you. Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, you may designate a third party who, in the event of your death, shall thereafter be entitled to exercise your option.

     9. Right of First Refusal. Ordinary Shares that you acquire upon exercise of your option are subject to the right of first refusal that is described in the Plan.

     10. Right of Repurchase. To the extent provided in the Company’s Articles of Association as amended from time to time, the Company shall have the right to repurchase all or any part of the Ordinary Shares you acquire pursuant to the exercise of your option.

     11. Option not a Service Contract. Your option is not an employment or service contract, and nothing in your option shall be deemed to create in any way whatsoever any obligation on your part to continue in the employ of the Company or an affiliate, or of the Company or an affiliate to continue your employment. In addition, nothing in your option shall obligate the Company or an affiliate, their respective shareholders, Boards of Directors, officers or employees to continue any relationship that you might have as a director or consultant for the Company or an affiliate.

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     12. Withholding Obligations.

          (a) At the time you exercise your option, in whole or in part, or at any time thereafter as requested by the Company, you hereby authorize withholding from payroll and any other amounts payable to you, and otherwise agree to make adequate provision for (including by means of a “cashless exercise” program to the extent permitted by the Company), any sums required to satisfy any tax withholding obligations of the Company or an affiliate, if any, which arise in connection with your option.

          (b) Upon your request and subject to approval by the Company, in its sole discretion, and compliance with any applicable conditions or restrictions of law, the Company may withhold from fully vested Ordinary Shares otherwise issuable to you upon the exercise of your option a number of whole Ordinary Shares having a Fair Market Value, determined by the Company as of the date of exercise, not in excess of the minimum amount of tax required to be withheld by law. Ordinary Shares shall be withheld solely from fully vested Ordinary Shares determined as of the date of exercise of your option that are otherwise issuable to you upon such exercise. Any adverse consequences to you arising in connection with such share withholding procedure shall be your sole responsibility.

          (c) You may not exercise your option unless the tax withholding obligations of the Company and/or any affiliate are satisfied. Accordingly, you may not be able to exercise your option when desired even though your option is vested, and the Company shall have no obligation to issue a certificate for such Ordinary Shares or release such Ordinary Shares from any escrow provided for herein.

     13. Lock-Up Period. In connection with any underwritten public offering by the Company of its equity securities, including any initial public offering, you shall not directly or indirectly sell, make any short sale of, loan, hypothecate, pledge, offer, grant or sell any option or other contract for the purchase of, purchase any option or other contract for the sale of, or otherwise dispose of or transfer, or agree to engage in any of the foregoing transactions with respect to, any Options or Shares acquired under this Agreement without the prior written consent of the Company or its underwriters. Such restriction (the “Market Stand-Off”) shall be in effect for such period of time following the date of the final prospectus for the offering as may be requested by the Company or its underwriters. In the event of the declaration of a stock dividend, a spin-off, a stock split, an adjustment in conversion ratio, a recapitalization or a similar transaction affecting the Company’s outstanding securities without receipt of consideration, any new, substituted or additional securities which are by reason of such transaction distributed with respect to any Shares subject to the Market Stand-Off, or into which such Shares thereby become convertible, shall immediately be subject to the Market Stand-Off. In order to enforce the Market Stand-Off, the Company may impose stop-transfer instructions with respect to the Shares acquired under this Agreement until the end of the applicable stand-off period. The Company’s underwriters shall be beneficiaries of the agreement set forth in this Section 13.

     14. Notices. Any notices provided for in your option or the Plan shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by

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mail by the Company to you, five (5) days after deposit in the mail in Israel, postage prepaid, addressed to you at the last address you provided to the Company.

     15. Governing Plan Document. Your option is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your option, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of your option and those of the Plan, the provisions of the Plan shall control.

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NOTICE OF EXERCISE
(Standard Form)

Mellanox Technologies Ltd.
PO Box 586
Yokneam Israel, 20692

Date of Exercise:                     

Ladies and Gentlemen:

     This constitutes notice under my stock option that I elect to purchase the number of shares for the price set forth below.

     o Check here if your option was granted under Section 102 of the Income Tax Ordinance (New Version) 1961

Stock Option Number:
Stock option dated:
Number of shares as to which option is exercised:
Certificates to be issued in name of:
Address:
Total exercise price:	$
Cash payment delivered herewith:	$

     By this exercise, I agree to provide such additional documents as you may require pursuant to the terms of the 1999 Israeli Equity Incentive Plan or the 2003 Israeli Equity Incentive Plan (the “Plan).

     I hereby make the following certifications and representations with respect to the number of Ordinary Shares of the Company listed above (the “Shares”), which are being acquired by me for my own account upon exercise of the Option as set forth above:

     I acknowledge that the Shares have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and are deemed to constitute “restricted securities” under Rule 701 and “control securities” under Rule 144 promulgated under the Securities Act. I warrant and represent to the Company that I have no present intention of distributing or selling said Shares, except as permitted under the Securities Act and any applicable state securities laws.

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     I further acknowledge that I will not be able to resell the Shares for at least ninety (90) days after the stock of the Company becomes publicly traded (i.e., subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934) under Rule 701 and that more restrictive conditions apply to affiliates of the Company under Rule 144.

     I further acknowledge that all certificates representing any of the Shares subject to the provisions of the Option shall have endorsed thereon appropriate legends reflecting the foregoing limitations, as well as any legends reflecting restrictions pursuant to the Company’s Articles of Incorporation, Bylaws and/or applicable securities laws.

     I further agree that, if required by the Company (or a representative of the underwriters) in connection with the first underwritten registration of the offering of any securities of the Company under the Securities Act, I will not sell, dispose of, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, any Shares or other securities of the Company held by me, for a period of time specified by the underwriter(s) (not to exceed one hundred eighty (180) days) following the effective date of the registration statement of the Company filed under the Securities Act. I further agree to execute and deliver such other agreements as may be reasonably requested by the Company and/or the underwriter(s) that are consistent with the foregoing or that are necessary to give further effect thereto. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to my Shares until the end of such period.

     I am not a “U.S. Person” as defined by Rule 902 of Regulation S promulgated under the Securities Act. At the time of grant and exercise of the Option, I was and am outside the United States. I am acquiring the Shares for my own account, for investment purposes and not with a view towards, or for sale in connection with, any distribution of such securities. All subsequent offers and sales of the Shares will be made (i) outside the United States in compliance with Rule 903 and Rule 904 of Regulation S, (ii) pursuant to registration of the Shares under the Securities Act, or (iii) pursuant to an exemption from such registration. I will not engage in hedging transactions with regard to the Shares prior to the expiration of the distribution compliance period specified in Rule 903 of Regulation S, unless in compliance with the Securities Act.

     I acknowledge and understand that the tax consequences of exercising this Option and disposing of the Shares underlying this Option are complex, and that I have been advised by the Company to consult with my personal tax advisor before exercising this Option or disposing of the shares underlying this Option.

     Any tax consequences arising from the grant or exercise of this Option, from the payment for Shares or from any other event or act under the Plan, my option agreement or this Notice of Exercise, shall be borne solely by me. I agree to indemnify the Company and/or its subsidiaries and hold them harmless against and from any and all liability for any such tax or interest or penalty thereof, including without limitation, liabilities relating to the necessity to withhold, or to have withheld, any such tax from any payment made to me.

     Section 102. If my Options were granted pursuant to Section 102 of the Israel Income Tax Ordinance (New Version) 1961, I acknowledge that the Shares issued on exercise of the Options may be held in trust for my benefit by the Trustee pursuant to Section 102 under the terms of a trust agreement between the Company and the Trustee.

      I 

Very truly yours,

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EX-10.3

Exhibit 10.3

MELLANOX TECHNOLOGIES LTD.

THE 2003

ISRAELI SHARE OPTION PLAN

(*In compliance with Amendment No. 132 of the Israeli Tax Ordinance, 2002)

As amended effective as of September 3, 2004

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TABLE OF CONTENTS

1. NAME

2. PURPOSE OF THE ISOP

3. DEFINITIONS

4. ADMINISTRATION OF THE ISOP

5. DESIGNATION OF PARTICIPANTS

6. DESIGNATION OF OPTIONS PURSUANT TO SECTION 102

7. TRUSTEE

8. SHARES RESERVED FOR THE ISOP; RESTRICTION THEREON

9. PURCHASE PRICE

10. ADJUSTMENTS

11. TERM AND EXERCISE OF OPTIONS

12. SHARES SUBJECT TO RIGHT OF FIRST REFUSAL

13. VESTING OF OPTIONS

14. PURCHASE FOR INVESTMENT

15. DIVIDENDS

16. ASSIGNABILITY AND SALE OF OPTIONS

17. TERM OF THE ISOP

18. AMENDMENTS OR TERMINATION

19. GOVERNMENT REGULATIONS

20. CONTINUANCE OF EMPLOYMENT OR HIRED SERVICES

21. GOVERNING LAW & JURISDICTION

22. TAX CONSEQUENCES

23. NON-EXCLUSIVITY OF THE ISOP

24. MULTIPLE AGREEMENTS

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1.	NAME
	This Plan, as amended from time to time, shall be known as the Mellanox Technologies Ltd. 2003 Israeli Share Option Plan (the “ISOP”).
2.	PURPOSE OF THE ISOP
	The ISOP is intended as an incentive to retain, in the employ of Mellanox Technologies Ltd. (the “Company”) and its Affiliates (as defined below), persons of training, experience, and ability, to attract new employees, directors or consultants, whose services are considered valuable, to encourage the sense of proprietorship of such persons, and to stimulate the active interest of such persons in the development and financial success of the Company by providing them with opportunities to purchase Shares in the Company, pursuant to the ISOP approved by the board of directors of the Company. The ISOP is effective with respect to Options granted as of January 1, 2003 and shall comply with Amendment no. 132 of the Israeli Tax Ordinance.
3.	DEFINITIONS

For purposes of the ISOP and related documents, including the Option Agreement (as defined below), the following definitions shall apply:

3.1	“Affiliate” means any “employing company” within the meaning of Section 102(a) of the Ordinance.
3.2	“Approved 102 Option” means an Option granted pursuant to Section 102(b) of the Ordinance and held in trust by a Trustee for the benefit of the Optionee.
3.3	“Board” means the Board of Directors of the Company.
3.4	“Capital Gain Option (CGO)” as defined in Section 6.4 below.
3.5	“Cause” means, (i) conviction of any felony involving moral turpitude or affecting the Company; (ii) any refusal to carry out a reasonable directive of the chief executive officer, the Board or the Optionee’s direct supervisor, which involves the business of the Company or its Affiliates and was capable of being lawfully performed; (iii) embezzlement of funds of the Company or its Affiliates; (iv) any breach of the Optionee’s fiduciary duties or duties of care of the Company; including without limitation disclosure of confidential information of the Company; and (v) any conduct (other than conduct in good faith) reasonably determined by the Board to be materially detrimental to the Company.
3.6	“Chairman” means the chairman of the Committee.
3.7	“Committee” means a share option compensation committee appointed by the Board.
3.8	“Company” means Mellanox Technologies Ltd, an Israeli company.

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3.9	“Companies Law” means the Israeli Companies Law 5759-1999.
3.10	“Controlling Shareholder” shall have the meaning ascribed to it in Section 32(9) of the Ordinance.
3.11	“Date of Grant” means, the date of grant of an Option, as determined by the Board and set forth in the Optionee’s Option Agreement.
3.12	“Employee” 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, but excluding Controlling Shareholder.
3.13	“Expiration date” means the date upon which an Option shall expire, as set forth in Section 11.3 of the ISOP.
3.14	“Fair Market Value” means as of any date, the value of a Share determined as follows:

(i)	If the Shares are listed on any established stock exchange or a national market system, including without limitation the NASDAQ National Market system, or the NASDAQ SmallCap Market of the NASDAQ Stock Market, the Fair Market Value shall be the closing sales price for such Shares (or the closing bid, if no sales were reported), as quoted on such exchange or system for the last market trading day prior to time of determination, as reported in the Wall Street Journal, or such other source as the Board deems reliable. Without derogating from the above, solely for the purpose of determining the tax liability pursuant to Section 102(b)(3) of the Ordinance, 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 a Share 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;
(ii)	If the Shares are regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value shall be the mean between the high bid and low asked prices for the Shares on the last market trading day prior to the day of determination, or;
(iii)	In the absence of an established market for the Shares, the Fair Market Value thereof shall be determined in good faith by the Board.

3.15	“IPO” means the initial public offering of the Company’s shares.
3.16	“ISOP” means this 2003 Israeli Share Option Plan.
3.17	“ITA” means the Israeli Tax Authorities.

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3.18	“Non-Employee” means a consultant, adviser, service provider, Controlling Shareholder or any other person who is not an Employee.
3.19	“Ordinary Income Option (OIO)” as defined in Section 6.5 below.
3.20	“Option” means an option to purchase one or more Shares of the Company pursuant to the ISOP.
3.21	“102 Option” means any Option granted to Employees pursuant to Section 102 of the Ordinance.
3.22	“3(i) Option” means an Option granted pursuant to Section 3(i) of the Ordinance to any person who is Non- Employee.
3.23	“Optionee” means a person who receives or holds an Option under the ISOP.
3.24	“Option Agreement” means the share option agreement between the Company and an Optionee that sets out the terms and conditions of an Option.
3.25	“Ordinance” means the Israeli Income Tax Ordinance [New Version] 1961 as now in effect or as hereafter amended.
3.26	“Purchase Price” means the price for each Share subject to an Option.
3.27	“Section 102” means section 102 of the Ordinance as now in effect or as hereafter amended.
3.28	“Share” means the ordinary shares, NIS 0.01 par value each, of the Company.
3.29	“Successor Company” means any entity the Company is merged to or is acquired by, in which the Company is not the surviving entity.
3.30	“Transaction” means (i) merger, acquisition or reorganization of the Company with one or more other entities in which the Company is not the surviving entity, (ii) a sale of all or substantially all of the assets of the Company.
3.31	“Trustee” means any individual appointed by the Company to serve as a trustee and approved by the ITA, all in accordance with the provisions of Section 102(a) of the Ordinance.
3.32	“Unapproved 102 Option” means an Option granted pursuant to Section 102(c) of the Ordinance and not held in trust by a Trustee.
3.33	“Vested Option” means any Option, which has already been vested according to the Vesting Dates.
3.34	“Vesting Dates” means, as determined by the Board or by the Committee, the date as of which the Optionee shall be entitled to exercise the Options or part of the Options,

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	as set forth in section 13 of the ISOP.
4.	ADMINISTRATION OF THE ISOP
	The Board shall have the power to administer the ISOP either directly or upon the recommendation of the Committee, all as provided by applicable law and in the Company’s Articles of Association. Notwithstanding the above, the Board shall automatically have residual authority if no Committee shall be constituted or if such Committee shall cease to operate for any reason.
	The Committee shall consist of such number of members (not less than two (2) in number) as may be fixed by the Board. The Committee shall select one of its members as its Chairman and shall hold its meetings at such times and places as the Chairman shall determine. The Committee shall keep records of its meetings and shall make such rules and regulations for the conduct of its business as it shall deem advisable.
	Any member of such Committee shall be eligible to receive Options under the ISOP while serving on the Committee, unless otherwise specified herein.
	The Committee shall have full power and authority to recommend to the board (i) to designate participants; (ii) to determine the terms and provisions of respective Option Agreements (which need not be identical) including, but not limited to, the number of Shares in the Company to be covered by each Option, provisions concerning the time or times when and the extent to which the Options may be exercised, any conditions upon which the vesting of the Options may be accelerated, and the nature and duration of restrictions as to transferability or restrictions constituting substantial risk of forfeiture; (iii) to accelerate the right of an Optionee to exercise, in whole or in part, any previously granted Option; (iv) to interpret the provisions and supervise the administration of the ISOP; (v) to determine the Fair Market Value of the Shares; (vi) to make an election as to the type of Approved 102 Option; (vii) to designate the type of Options and (viii) to determine any other matter which is necessary or desirable for, or incidental to administration of the ISOP.
	The Committee shall not be entitled to grant Options to the Optionees however, it will be authorized to issue shares underlying options which have been granted by the board and duly exercised pursuant to the provisions hereof all in accordance with section 112(a)(5) of the Companies Law.
	All decisions and selections made by the Board or the Committee pursuant to the provisions of the ISOP shall be made by a majority of its members except that no member of the Board or the Committee shall vote on, or be counted for quorum purposes, with respect to any proposed action of the Board or the Committee relating to any Option to be granted to that member. Any decision reduced to writing and signed by a majority of the members who are authorized to make such decision shall be fully effective as if it had been made by a majority at a meeting duly held.

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	The interpretation and construction by the Committee of any provision of the ISOP or of any Option thereunder shall be final and conclusive unless otherwise determined by the Board.
	Subject to the Company’s decision, and to all approvals legally required, including, but not limited to the provisions of the Companies Law, each member of the Board 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 ISOP unless arising out of such member’s own fraud or bad faith, to the 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 Articles of Association, any agreement, any vote of shareholders or disinterested directors, insurance policy or otherwise.
5.	DESIGNATION OF PARTICIPANTS
	The persons eligible for participation in the ISOP as Optionees shall include any Employees and/or Non-Employees of the Company or of any Affiliates of the Company; provided, however, that (i) Employees may only be granted 102 Options; (ii) Non-Employees may only be granted 3(i) Options; and (iii) Controlling Shareholders may only be granted 3(i) Options.
	The grant of an Option hereunder shall neither entitle the recipient thereof to participate nor disqualify the recipient from participating in, any other grant of Options pursuant to the ISOP or any other option or stock plan of the Company or any of its Affiliates.
	Anything in the ISOP to the contrary notwithstanding, all grants of Options to directors and office holders (“Nosei Misra” — as such term is defined in the Companies Law) shall be authorized and implemented in accordance with the provisions of the Companies Law or any successor act or regulation, as in effect from time to time.
6.	DESIGNATION OF OPTIONS PURSUANT TO SECTION 102
6.1	The Company may designate Options granted to Employees pursuant to Section 102 as Unapproved 102 Options or Approved 102 Options.
6.2	The grant of Approved 102 Options shall be made under this ISOP adopted by the Board as described in Section 17 below, and shall be conditioned upon the approval of this ISOP by the ITA.
6.3	Approved 102 Option may either be classified as Capital Gain Option (“CGO”) or Ordinary Income Option (“OIO”).
6.4	Approved 102 Option elected and designated by the Company to qualify under the capital gain tax treatment in accordance with the provisions of Section 102(b)(2) shall be referred to herein as CGO.
6.5	Approved 102 Option elected and designated by the Company to qualify under the

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	ordinary income tax treatment in accordance with the provisions of Section 102(b)(l) shall be referred to herein as OIO.
6.6	The Company’s election of the type of Approved 102 Options as CGO or OIO granted to Employees (the “Election”), shall be appropriately filed with the ITA before the Date of Grant of an Approved 102 Option. Such Election shall become effective beginning the first Date of Grant of an Approved 102 Option under this ISOP and shall remain in effect until the end of the year following the year during which the Company first granted Approved 102 Options. The Election shall obligate the Company to grant only the type of Approved 102 Option it has elected, and shall apply to all Optionees who were granted Approved 102 Options during the period indicated herein, all in accordance with the provisions of Section 102(g) of the Ordinance. For the avoidance of doubt, such Election shall not prevent the Company from granting Unapproved 102 Options simultaneously.
6.7	All Approved 102 Options must be held in trust by a Trustee, as described in Section 7 below.
6.8	For the avoidance of doubt, the designation of Unapproved 102 Options and Approved 102 Options shall be subject to the terms and conditions set forth in Section 102 of the Ordinance and the regulations promulgated thereunder.
6.9	With regards to Approved 102 Options, the provisions of the ISOP and/or the Option Agreement shall be subject to the provisions of Section 102 and the Tax Assessing Officer’s permit, and the said provisions and permit shall be deemed an integral part of the ISOP and of the Option Agreement. Any provision of Section 102 and/or the said permit which is necessary in order to receive and/or to keep any tax benefit pursuant to Section 102, which is not expressly specified in the ISOP or the Option Agreement, shall be considered binding upon the Company and the Optionees.
7.	TRUSTEE
	Approved 102 Options which shall be granted under the ISOP and/or any Shares issued upon exercise of such Approved 102 Options and/or other shares received subsequently following any realization of rights, including without limitation bonus shares, shall be issued to a Trustee and held for the benefit of the Optionees for such period of time as required by Section 102 or any regulations, rules or orders or procedures promulgated thereunder (the “Holding Period”). If the requirements for Approved 102 Options are not met, then the Approved 102 Options may be treated as Unapproved 102 Options, all in accordance with the provisions of Section 102 and regulations promulgated thereunder.
	Anything to the contrary notwithstanding, the Trustee shall not release any Options which were not already exercised into Shares by the Optionee or release any Shares issued upon exercise of Approved 102 Options prior to the full payment of the Optionee’s tax liabilities arising from Approved 102 Options which were granted to the Optionee and/or any Shares issued upon exercise of such Options.

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	With respect to any Approved 102 Option, subject to the provisions of Section 102 and any rules or regulation or orders or procedures promulgated thereunder, an Optionee shall not sell or release from trust any Share received upon the exercise of an Approved 102 Option and/or any share received subsequently following any realization of rights, including without limitation, bonus shares, until the lapse of the Holding Period required under Section 102 of the Ordinance. Notwithstanding the above, if any such sale or release occurs during the Holding Period, the sanctions under Section 102 of the Ordinance and under any rules or regulation or orders or procedures promulgated thereunder shall apply to and shall be borne by such Optionee.
	Upon receipt of the Option, the Optionee will sign an undertaking to release the Trustee from any liability in respect of any action or decision duly taken and bona fide executed in relation with the ISOP, or any Approved 102 Option or Share granted to the Optionee thereunder.
8.	SHARES RESERVED FOR THE ISOP; RESTRICTION THEREON

8.1	The Company shall reserve Two Million Two Hundred and Seventy Thousand (2,270,000) authorized but unissued Shares for purposes of the ISOP and for the purposes of the Mellanox Technologies Ltd 2000 United States Equity Incentive Plan, subject to adjustment as set forth in paragraph 8 below. Any of such Shares which may remain unissued and which are not subject to outstanding Options at the termination of the ISOP shall cease to be reserved for the purpose of the ISOP, but until termination of the ISOP the Company shall at all times reserve sufficient number of Shares to meet the requirements of the ISOP. Should any Option for any reason expire or be canceled prior to its exercise or relinquishment in full, the Shares therefore subject to such Option may again be subjected to an Option under the ISOP or under the Mellanox Technologies Ltd. 2000.
8.2	(deleted)
8.3	Each Option granted pursuant to the ISOP shall be evidenced by a written Option Agreement between the Company and the Optionee, in such form as the Committee shall from time to time approve. Each Option Agreement shall state, inter- alia, a number of the Shares to which the Option relates and the type of Option granted thereunder (whether a CGO, OIO, Unapproved 102 Option or a 3(I) Option).

9. PURCHASE PRICE

9.1	The Purchase Price of each Share subject to an Option or any portion thereof shall be determined by the Committee in its sole and absolute discretion in accordance with applicable law, subject to any guidelines as may be determined by the Board from time to time. Each Option Agreement will contain the Purchase Price determined for each Optionee.
9.2	The Purchase Price shall be payable upon the exercise of the Option in a form satisfactory to the Committee, including without limitation, by cash or cheque.

10. ADJUSTMENTS

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Upon the occurrence of any of the following described events, Optionee’s rights to purchase Shares under the ISOP shall be adjusted as hereafter provided:

10.1	In the event of a Transaction the unexercised Options then outstanding under the ISOP, shall be assumed or substituted for the Shares subject to the unexercised portions of such outstanding Options for an appropriate number of shares of each class of shares or other securities of the Successor Company (or a parent or subsidiary of the Successor Company) which were distributed to the shareholders of the Company in respect of such shares, and appropriate adjustments shall be made in the Purchase Price per share to reflect such action, all as will be determined by the Committee whose determination shall be final.
10.2	Notwithstanding the above and subject to any applicable law, the Board or the Committee may determine with respect to certain Option Agreements that, (a) there shall be a clause instructing that, if in any such Transaction as described in section 10.1 above, the Successor Company (or parent or subsidiary of the Successor Company) does not agree to assume or substitute for the Options, the Vesting Dates shall be accelerated so that any unvested Option shall be immediately vested in full as of the date ten (10) days prior to the effective date of such Transaction.
10.3	For the purposes of section 10.1 above, the Option shall be considered assumed or substituted if, following the Transaction, the Option confers the right to purchase or receive, for each Share underlying an Option immediately prior to the Transaction, the consideration (whether shares, options, cash, or other securities or property) received in the Transaction by holders of Shares for each Share held on the effective date of the Transaction (and if such holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares); provided, however, that if such consideration received in the Transaction is not solely ordinary shares (or their equivalent) of the Successor Company or its parent or subsidiary, the Committee may, with the consent of the Successor Company, provide for the consideration to be received upon the exercise of the Option to be solely ordinary shares (or their equivalent) of the Successor Company or its parent or subsidiary equal in Fair Market Value to the per Share consideration received by holders of a majority of the outstanding Shares in the Transaction; and provided further that the Committee may determine, in its discretion, that in lieu of such assumption or substitution of Options for options of the Successor Company or its parent or subsidiary, such Options will be substituted for any other type of asset or property including cash which is fair under the circumstances.
10.4	If the Company is liquidated or dissolved while unexercised Options remain outstanding under the ISOP, then the Company shall immediately notify all unexercised Option holders of such liquidation, and the Option holders shall then have ten (10) days to exercise any unexercised Vested Option held by them at that time, in accordance with the exercise procedure set forth herein. Upon the expiration of such ten-days period, all remaining outstanding Options will terminate immediately.

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10.5	If the outstanding shares of the Company shall at any time be changed or exchanged by declaration of a stock dividend (bonus shares), stock split, combination or exchange of shares, recapitalization, or any other like event by or of the Company, and as often as the same shall occur, then the number, class and kind of Shares subject to the ISOP or subject to any Options therefore granted, and the Purchase Prices, shall be appropriately and equitably adjusted so as to maintain the proportionate number of Shares without changing the aggregate Purchase Price, provided, however, that no adjustment shall be made by reason of the distribution of subscription rights (rights offering) on outstanding shares. Upon happening of any of the foregoing, the class and aggregate number of Shares issuable pursuant to the ISOP (as set forth in paragraph 6 hereof), in respect of which Options have not yet been exercised, shall be appropriately adjusted, all as will be determined by the Board whose determination shall be final.
10.6	Anything herein to the contrary notwithstanding, if prior to the completion of an IPO all or substantially all of the shares of the Company are to be sold, or in case of a Transaction, all or substantially all of the shares of the Company are to be exchanged for securities of another company , then each Optionee shall be obliged to sell or exchange, as the case may be, any Shares such Optionee purchased under the ISOP, in accordance with the instructions issued by the Board in connection with the Transaction, whose determination shall be final.
10.7	The Optionee acknowledges that in the event that the Company’s shares shall be registered for trading in any public market, Optionee’s rights to sell the Shares may be subject to certain limitations (including a lock-up period), as will be requested by the Company or its underwriters, and the Optionee unconditionally agrees and accepts any such limitations.

11. TERM AND EXERCISE OF OPTIONS

11.1	Options shall be exercised by the Optionee by giving written notice to the Company, in such form and method as may be determined by the Company and the Trustee and when applicable, in accordance with the requirements of Section 102, which exercise shall be effective upon receipt of such notice and the Purchase Price by the Company at its principal office. The notice shall specify the number of Shares with respect to which the Option is being exercised.
11.2	Each Option granted under the ISOP shall be exercisable following the Vesting Dates and for the number of Shares as shall be provided in Exhibit B to the Option Agreement. However no Option shall be exercisable after the Expiration Date.
11.3	Options, to the extent not previously exercised, shall terminate forthwith upon the earlier of: (i) the date set forth in the Option Agreement; and (ii) the expiration of any extended period in any of the events set forth in section 11.6 below.
11.4	The Options may be exercised by the Optionee in whole at any time or in part from time to time, to the extent that the Options become vested and

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	excercisable, prior to the Expiration Date, and provided that, subject to the provisions of Section 11.6 below, the Optionee is employed by or providing services to the Company or any of its Affiliates, at all times during the period beginning with the granting of the Option and ending upon the date of exercise.
11.5	Subject to the provisions of Section 11.6 below, in the event of termination of Optionee’s employment or service with the Company or any of its Affiliates, all Options granted to him will immediately be expired. A notice of termination of employment or service shall be deemed to constitute termination of employment. For the avoidance of doubt, in case of such termination of employment or service, the unvested portion of the Optionee’s Option shall not vest and shall not become exercisable.
11.6	Notwithstanding anything to the contrary hereinabove, an Option may be exercised after the date of termination of Optionee’s employment or service with the Company or any Affiliate of the Company during an additional period of time beyond the date of such termination, but only with respect to the number of Options already vested at the time of such termination according to the Vesting Dates, if: (i) termination is without Cause, in which event any Options still in force and unexpired may be exercised within a period of three (3) months from the date of such termination, (ii) termination is the result of death or disability of the Optionee, in which event any Options still in force and unexpired may be exercised within a period of 18 (eighteen) months from the date of termination in the event of death and 12 (twelve) months from the date of termination in the event of disability, or (iii) prior to the date of such termination, the Committee shall authorize an extension of the terms of all or part of the Options beyond the date of such termination for a period not to exceed the period during which the Options by their terms would otherwise have been exercisable.
	For avoidance of any doubt, if termination of employment or service is for Cause, any outstanding unexercised Option (whether vested or non-vested), will immediately expire and terminate, and the Optionee shall not have any right in connection to such outstanding Options.
11.7	To avoid doubt, the holders of Options shall not have any of the rights or privileges of shareholders of the Company in respect of any Shares purchasable upon the exercise of any part of an Option, nor shall they be deemed to be a class of shareholders or creditors of the Company for purpose of the operation of sections 350 and 351 of the Companies Law or any successor to such section, until registration of the Optionee as holder of such Shares in the Company’s register of shareholders upon exercise of the Option in accordance with the provisions of the ISOP.
11.8	Any form of Option Agreement authorized by the ISOP may contain such other provisions as the Committee may, from time to time, deem advisable.
11.9	With respect to Unapproved 102 Option, if the Optionee ceases to be employed by the Company or any Affiliate, the Optionee shall extend to the

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Company and/or its Affiliate a security or guarantee for the payment of tax due at the time of sale of Shares, all in accordance with the provisions of Section 102 and the rules, regulation or orders promulgated thereunder.

12. SHARES SUBJECT TO RIGHT OF FIRST REFUSAL

12.1	Notwithstanding anything to the contrary in the Articles of Association of the Company, none of the Optionees shall have a right of first refusal in relation with any sale of shares in the Company.
12.2	Unless otherwise determined by the Committee, until such time as the Company shall complete an IPO, an Optionee shall not have the right to sell Shares issued upon the exercise of an Option within six (6) months and one day of the date of exercise of such Option or issuance of such Shares. The sale of Shares by the Optionees shall be subject to the right of first refusal of other shareholders as set forth in the Articles of Association of the Company. In the event that the Articles of Association of the Company shall not contain any provision regarding rights of first refusal, then, unless otherwise provided by the Board, until such time as the Company shall effectuate an IPO, the sale of Shares issuable upon exercise of an Option, shall be subject to a right of first refusal on the part of the Repurchaser(s).
	Repurchaser(s) means (i) the Company, if permitted by applicable laws; (ii) if the Company is not permitted by applicable laws, then any Affiliate of the Company designated by a unanimous decision is reached by the Board; or (iii) if no unanimous decision is reached by the Board, then the Company’s existing shareholders (save, for avoidance of doubt, for other Optionees who already exercised their Options), pro rata in accordance with their shareholding. The Optionee shall give a notice of sale (the “Notice”) to the Company in order to offer the Shares to the Repurchaser(s).
	The Notice shall specify the name of each proposed purchaser or other Transferee (“Proposed Transferee”), the number of Shares offered for sale, the price per Share and the payment terms. The Repurchase(s) will be entitled for 30 days from the day of receipt of the Notice (the “30 Days Period”), to purchase all or part of the offered Shares. If by the end of the 30 Days Period not all of the offered Shares have been purchased by the Repurchaser(s), the Optionee will be entitled to sell such Shares at any time during the 90 days following the end of the 30 Days Period on terms not more favorable than those set out in the Notice, provided that the Proposed Transferee agrees in writing that the provisions of this section shall continue to apply to the Shares in the hands of such Proposed Transferee.

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13.	VESTING OF OPTIONS
	Subject to the provisions of the ISOP, Options shall vest (i.e., Options shall become exercisable) following the Vesting Dates and for the number of Shares as shall be provided in the Option Agreement which shall be signed between the Company and each of the Optionees. However, no Option shall be exercisable after the Expiration Date.
	An Option may be subject to such other terms and conditions on the time or times when it may be exercised as the Board may deem appropriate. The vesting provisions of individual Options may vary.
14.	PURCHASE FOR INVESTMENT
	The Company’s obligation to issue or allocate Shares upon exercise of an Option granted under the ISOP is expressly conditioned upon (a) the Company’s completion of any registration or other qualifications of such Shares under all applicable laws, rules and regulations or (b) representations and undertakings by the Optionee (or his legal representative, heir or legatee, in the event of the Optionee’s death) to assure that the sale of the Shares complies with any registration exemption requirements which the Company in its sole discretion shall deem necessary or advisable. Such required representations and undertakings may include representations and agreements that such Optionee (or his legal representative, heir, or legatee): (a) is purchasing such Shares for investment and not with any present intention of selling or otherwise disposing thereof; and (b) agrees to have placed upon the face and reverse of any certificates evidencing such Shares a legend setting forth (i) any representations and undertakings which such Optionee has given to the Company or a reference thereto and (ii) that, prior to effecting any sale or other disposition of any such Shares, the Optionee must furnish to the Company an opinion of counsel, satisfactory to the Company, that such sale or disposition will not violate the applicable laws, rules, and regulations, whether of the State of Israel or of the United States or any other State having jurisdiction over the Company and the Optionee.

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15.	DIVIDENDS
	With respect to all Shares (in contrary to unexercised Options) issued upon the exercise of Options purchased by the Optionee and held by the Optionee or by the Trustee, as the case may be, the Optionee shall be entitled to receive dividends in accordance with the quantity of such Shares, and subject to any applicable taxation on distribution of dividends, and when applicable subject to the provisions of Section 102 and the rules, regulations or orders promulgated thereunder.
16.	ASSIGNABILITY AND SALE OF OPTIONS
	No Option, purchasable hereunder, whether fully paid or not, shall be assignable, transferable or given as collateral or any right with respect to them given to any third party whatsoever, and during the lifetime of the Optionee each and all of such Optionee’s rights to purchase Shares hereunder shall be exercisable only by the Optionee.
	As long as the Shares are held by the Trustee in favor of the Optionee, then all rights the last possesses over the Shares are personal, can not be transferred, assigned, pledged or mortgaged, other than by will or laws of descent and distribution.
17.	TERM OF THE ISOP
	The ISOP shall be effective as of the day it was adopted by the Board and shall terminate at the end of 10 (ten) years from such day of adoption.
18.	AMENDMENTS OR TERMINATION
	The Board may at any time, but after consultation with the Trustee, amend, alter, suspend or terminate the ISOP. No amendment, alteration, suspension or termination of the ISOP shall impair the rights of any Optionee, unless mutually agreed otherwise between the Optionee and the Committee, which agreement must be in writing and signed by the Optionee and the Company. Termination of the ISOP shall not affect the Committee’s ability to exercise the powers granted to it hereunder with respect to Options granted under the ISOP prior to the date of such termination.
19.	GOVERNMENT REGULATIONS
	The ISOP, and the granting and exercise of Options hereunder, and the obligation of the Company to sell and deliver Shares under such Options, shall be subject to all applicable laws, rules, and regulations, whether of the State of Israel or of the United States or any other State having jurisdiction over the Company and the Optionee, including the registration of the Shares under the United States Securities Act of 1933, and to such approvals by any governmental agencies or national securities exchanges as may be required. Nothing herein shall be deemed to require the Company to register the Shares under the securities law of any jurisdiction.
20.	CONTINUANCE OF EMPLOYMENT OR HIRED SERVICES
	Neither the ISOP nor the Option Agreement with the Optionee shall impose any obligation on the Company or a Affiliate thereof, to continue any Optionee in its

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	employ or service, and nothing in the ISOP or in any Option granted pursuant thereto shall confer upon any Optionee any right to continue in the employ or the service of the Company or a Affiliate thereof or restrict the right of the Company or a Affiliate thereof to terminate such employment or service at any time.
21.	GOVERNING LAW & JURISDICTION
	The ISOP shall be governed by and construed and enforced in accordance with the laws of the State of Israel applicable to contracts made and to be performed therein, without giving effect to the principles of conflict of laws. The competent courts of Tel-Aviv, Israel shall have sole jurisdiction in any matters pertaining to the ISOP.
22.	TAX CONSEQUENCES
	Any tax consequences arising from the grant or exercise of any Option, from the payment for Shares covered thereby or from any other event or act (of the Company and/or its Affiliates, the Trustee or the Optionee), hereunder, shall be borne solely by the Optionee. 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 Optionee shall agree to indemnify the Company and 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 Optionee.
	The Company and/or the Trustee shall not be required to release any Share certificate to an Optionee until all required payments have been fully made.
23.	NON-EXCLUSIVITY OF THE ISOP
	The adoption of the ISOP by the Board shall not be construed as amending, modifying or rescinding any previously approved incentive arrangements or as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of stock Options otherwise then under the ISOP, and such arrangements may be either applicable generally or only in specific cases. For the avoidance of doubt, prior grant of options to Optionees of the Company under their employment agreements, and not in the framework of any previous option plan, shall not be deemed an approved incentive arrangement for the purpose of this Section.
24.	MULTIPLE AGREEMENTS
	The terms of each Option may differ from other Options granted under the ISOP at the same time, or at any other time. The Committee may also grant more than one Option to a given Optionee during the term of the ISOP, either in addition to, or in substitution for, one or more Options previously granted to that Optionee.

MELLANOX TECHNOLOGIES LTD.

OPTION AGREEMENT

Made as of the ___day of                      200_

BETWEEN:	MELLANOX TECHNOLOGIES LTD.
	(hereinafter the “Company”)
		on the one part
AND:	Name
	I.D. No.
	Address:
	(hereinafter the “Optionee”)
		on the other part

WHEREAS	On November 18, 2003, the Company duly adopted and the Board approved the Mellanox Technologies Ltd. 2003 Israeli Share Option Plan, which plan was duly amended on September 3, 2004, and a copy of which is attached as Exhibit A hereto, forming an integral part hereof (the “ISOP”); and -
WHEREAS	Pursuant to the ISOP, the Company has decided to grant Options to purchase Shares of the Company to the Optionee, and the Optionee has agreed to such grant, subject to all the terms and conditions as set forth in the ISOP and as provided herein;

NOW, THEREFORE, it is agreed as follows:

1. Preamble and Definitions

1.1	The preamble to this agreement constitutes an integral part hereof.
1.2	Unless otherwise defined herein, capitalized terms used herein shall have the meaning ascribed to them in the ISOP.

2. Grant of Options

2.1	The Company hereby grants to the Optionee the number of Options as set forth in Exhibit B hereto, each Option shall be exercisable for one Share, upon payment of the Purchase Price as set forth in Exhibit B, subject to the terms and the conditions as set forth in the ISOP and as provided herein.
2.2	The Purchase Price will be paid in NIS in accordance with the representative rate of exchange of the U.S. dollar, published by the Bank of Israel and known on the date of giving a notice of exercise.

2.3 The Optionee is aware that the Company intends in the future to issue additional shares and to grant additional options to various entities and individuals, as the Company in its sole discretion shall determine.

3. Period of Option and Conditions of Exercise

3.1	The terms of this Option Agreement shall commence on the Date of Grant and terminate at the Expiration Date, or at the time at which the Option expires pursuant to the terms of the ISOP or pursuant to this Option Agreement.
3.2	Options may be exercised only to purchase whole Shares, and in no case may a fraction of a Share be purchased. If any fractional Share would be deliverable upon exercise, such fraction shall be rounded up one-half or less, or otherwise rounded down, to the nearest whole number.

4. Adjustments

Notwithstanding anything to the contrary in Section 10.1 of the ISOP and in addition thereto, if in any such Transaction as described in Section 10.1 of the ISOP, the Successor Company (or parent or subsidiary of the Successor Company) does not agree to assume or substitute for the Options, the Vesting Dates shall be accelerated so that any unvested Option shall be immediately vested in full as of the date which is ten (10) days prior to the effective date of the Transaction, and the Committee shall notify the Optionee that the unexercised Options are fully exercisable for a period often (10) days from the date of such notice, and that any unexercised Options shall terminate upon the expiration of such period.

5. Vesting; Period of Exercise

Subject to the provisions of the ISOP, Options shall vest and become exercisable according to the Vesting Dates set forth in Exhibit B hereto, provided that the Optionee is an Employee of or providing services to the Company and /or its Affiliates on the applicable Vesting Date.

All unexercised Options granted to the Optionee shall terminate and shall no longer be exercisable on the Expiration Date, as described in Section 3.13 of the ISOP.

6. Exercise of Options

6.1	Options may be exercised in accordance with the provisions of Section 11.1 of the ISOP.
6.2	In order for the Company to issue Shares upon the exercise of any of the Options, the Optionee hereby agrees to sign any and all documents required by any applicable law and/or by the Company’s Articles of Association.
6.3	(deleted)
6.4	The Company shall not be obligated to issue any Shares upon the exercise of an Option if such issuance, in the opinion of the Company, might constitute a violation by the Company of any provision of law.

7. Restrictions on Transfer of Options and Shares

7.1	The transfer of Options and the transfer of Shares to be issued upon exercise of the Options shall be subject to the limitations set forth in the ISOP and in the Company’s Articles of Association and any shareholders’ agreement to which the holders of ordinary shares of the Company are bound.
7.2	With respect to any Approved 102 Option, subject to the provisions of Section 102 and any rules or regulation or orders or procedures promulgated thereunder, an Optionee shall not sell or release from trust any Share received upon the exercise of an Approved 102 Option and/or any share received subsequently following any realization of rights, including without limitation, bonus shares, until the lapse of the Holding Period required under Section 102 of the Ordinance. Notwithstanding the above, if any such sale or release occurs during the Holding Period, the sanctions under Section 102 of the Ordinance and under any rules or regulation or orders or procedures promulgated thereunder shall apply to and shall be borne by such Optionee.
7.3	With respect to Unapproved 102 Option, if the Optionee ceases to be employed by the Company or any Affiliate, the Optionee 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, all in accordance with the provisions of Section 102 and the rules, regulation or orders promulgated thereunder.
7.4	By exercising your option you agree that the Company (or a representative of the underwriter(s)) may, in connection with the first underwritten registration of the offering of any securities of the Company under the Securities Act, require that you not sell, dispose of, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, any Ordinary Shares or other securities of the Company held by you, for a period of time specified by the underwriter(s) (not to exceed one hundred eighty (180) days) following the effective date of the registration statement of the Company filed under the Securities Act. You further agree to execute and deliver such other agreements as may be reasonably requested by the Company and/or the underwriter(s) that are consistent with the foregoing or that are necessary to give further effect thereto. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to your Ordinary Shares until the end of such period.
7.5	The Optionee shall not dispose of any Shares in transactions which violate, in the opinion of the Company, any applicable laws, rules and regulations.
7.6	The Optionee agrees that the Company shall have the authority to endorse upon the certificate or certificates representing the Shares such legends referring to the foregoing restrictions, and any other applicable restrictions as it may deem appropriate (which do not violate the Optionee’s rights according to this Option Agreement).

8. Taxes; Indemnification

8.1 Any tax consequences arising from the grant or exercise of any Option, from the payment for Shares covered thereby or from any other event or act (of the Company and/or its Affiliates, the Trustee or the Optionee), hereunder, shall be

	borne solely by the Optionee. 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 Optionee hereby agrees 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 Optionee.
8.2	The Optionee will not be entitled to receive from the Company and/or the Trustee any Shares allocated or issued upon the exercise of Options prior to the full payments of the Optionee’s tax liabilities arising from Options which were granted to him and/or Shares issued upon the exercise of Options. For the avoidance of doubt, neither the Company nor the Trustee shall be required to release any share certificate to the Optionee until all payments required to be made by the Optionee have been fully satisfied.
8.3	The receipt of the Options and the acquisition of the Shares to be issued upon the exercise of the Options may result in tax consequences. THE OPTIONEE IS ADVISED TO CONSULT A TAX ADVISER WITH RESPECT TO THE TAX CONSEQUENCES OF RECEIVING OR EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
8.4	With respect to Approved 102 Options, the Optionee hereby acknowledges that he is familiar with the provisions of Section 102 and the regulations and rules promulgated thereunder, including without limitations the type of Option granted hereunder and the tax implications applicable to such grant. The Optionee accepts the provisions of the trust agreement signed between the Company and the Trustee, a copy of which is attached as Exhibit C hereto or will be separately provided to the Optionee, and agrees to be bound by its terms.

9. Miscellaneous

9.1	No Obligation to Exercise Options. The grant and acceptance of these Options imposes no obligation on the Optionee to exercise it.
9.2	Confidentiality. The Optionee shall regard the information in this Option Agreement and its exhibits attached hereto as confidential information and the Optionee shall not reveal its contents to anyone except when required by law or for the purpose of gaining legal or tax advice.
9.3	Continuation of Employment or Service. Neither the ISOP nor this Option Agreement shall impose any obligation on the Company or an Affiliate to continue the Optionee’s employment or service and nothing in the ISOP or in this Option Agreement shall confer upon the Optionee any right to continue in the employ or service of the Company and/or an Affiliate or restrict the right of the Company or an Affiliate to terminate such employment or service at any time.
9.4	Entire Agreement. Subject to the provisions of the ISOP, to which this Option Agreement is subject, this Option Agreement, together with the exhibits hereto, constitute the entire agreement between the Optionee and the Company with respect to

Options granted hereunder, and supersedes all prior agreements, understandings and arrangements, oral or written, between the Optionee and the Company with respect to the subject matter hereof.

9.5	Failure to Enforce — Not a Waiver. The failure of any party to enforce at any time any provisions of this Option Agreement or the ISOP shall in no way be construed to be a waiver of such provision or of any other provision hereof.
9.6	Provisions of the ISOP. The Options provided for herein are granted pursuant to the ISOP and said Options and this Option Agreement are in all respects governed by the ISOP and subject to all of the terms and provisions of the ISOP.
	Any interpretation of this Option Agreement will be made in accordance with the ISOP but in the event there is any contradiction between the provisions of this Option Agreement and the ISOP, the provisions of the Option Agreement will prevail.
9.7	Binding Effect. The ISOP and this Option Agreement shall be binding upon the heirs, executors, administrators and successors of the parties hereof.
9.8	Notices. All notices or other communications given or made hereunder shall be in writing and shall be delivered or mailed by registered mail or delivered by email or facsimile with written confirmation of receipt to the Optionee and/or to the Company at the addresses shown on the letterhead above, or at such other place as the Company may

designate by written notice to the Optionee. The Optionee is responsible for notifying the Company in writing of any change in the Optionee’s address, and the Company shall be deemed to have complied with any obligation to provide the Optionee with notice by sending such notice to the address indicated below.

Company’s Signature:

Name: Michael Gray

Position: Chief Financial Officer

Signature:                     

I, the undersigned, hereby acknowledge receipt of a copy of the ISOP and accept the Options subject to all of the terms and provisions thereof. I have reviewed the ISOP and this Option Agreement in its entirety, have had an opportunity to obtain the advice of counsel prior to executing this Option Agreement, and fully understand all provisions of this Option Agreement. I agree to notify the Company upon any change in the residence address indicated above.

Optionee’s Signature

Exhibit A: Mellanox Technologies Ltd. 2003 Israeli Share Option Plan

Exhibit B: Terms of the Option (including Notice of Grant)

Exhibit C: Trust Agreement

EXHIBIT A

See Mellanox Technologies, Ltd. 2003

Israel: Share Option Plan

EXHIBIT B

Mellanox Technologies Ltd.
Stock Option Grant Notice
(2003 Israeli Equity Incentive Plan)

Mellanox Technologies Ltd. (the “Company”), pursuant to its 2003 Israeli Equity Incentive Plan (the “Plan”), hereby grants to Optionholder an option to purchase the number of the Company’s Ordinary Shares set forth below. This option is subject to all of the terms and conditions as set forth herein and in the Stock Option Agreement, the Plan and the Notice of Exercise, all of which are attached hereto and incorporated herein in their entirety.

Optionholder:

Date of Grant:

Vesting Commencement Date:

Number of Shares Subject to Option:

Exercise Price (Per Share):

Total Exercise Price:

Expiration Date:

Type of Grant:	102 Capital Gains Track Options
Vesting Schedule:	1/4th of the shares vest one year after the Vesting Commencement Date.
	l/48th of the shares vest monthly thereafter over the next three years.
	If, in the event of a “Change of Control”, and within twelve (12) months thereafter, the Company terminates Optionholder’s employment without “Cause” or if Optionholder resigns for “Good Reason,” fifty percent (50%) of the shares subject to this option to purchase Ordinary Shares of the Company that are unvested on the date of such termination or resignation shall vest immediately upon such termination or resignation.
	A “Change of Control” shall mean (i) a merger or consolidation of the Company, whether or not approved by the Board of Directors, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (ii) a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets, approved by the shareholders of the Company.
	“Cause” shall mean (1) Optionholder’s willful refusal or willful failure to comply with a lawful instruction of the Board, or (2) Optionholder’s conviction of any felony involving an act of moral turpitude. The Company may not terminate Optionholder for Cause unless the Company gives Optionholder written notice of its intent to terminate Optionholder for Cause with an explicit written explanation for all reasons for the for-Cause termination, and the Company, in good faith, permits Optionholder thirty (30) days to cure the alleged wrongs. If Optionholder cures the alleged wrongs, within thirty (30) days of such notice, Optionholder cannot be terminated for Cause.
	“Good Reason” shall mean any of the following events which is not cured by the Company within 15 days after Optionholder gives written notice thereof to the Company: (i) any reduction of or failure to pay Optionholder’s base salary in effect immediately prior to the Change of Control; (ii) any other material breach by the Company of any material term of Optionholder’s employment with the Company; (iii) any material adverse change in Optionholder’s job titles, duties, responsibilities, status, reporting responsibilities or perquisites granted hereunder, without Optionholder’s consent; or (iv) any change in Optionholder’s principal work location which increases Optionholder’s one-way commute from home to the office by more than 50 miles. “Good Reason” shall cease to exist for an

	event on the 30th day following the later of its occurrence or Optionholder’s knowledge thereof, unless Optionholder has given the Company notice thereof prior to such date.
Payment:	By one or a combination of the following items (described in the Stock Option Agreement):

By cash or check

Additional Terms/Acknowledgements: The undersigned Optionholder acknowledges receipt of, and understands and agrees to, this Stock Option Grant Notice, the Stock Option Agreement and the Plan. The undersigned Optionholder further acknowledges acceptance of the terms of Section 102 of the Israeli Income Tax Ordinance and the rules promulgated thereunder. Optionholder further acknowledges that as of the Date of Grant, this Grant Notice, the Stock Option Agreement and the Plan set forth the entire understanding between Optionholder and the Company regarding the acquisition of stock in the Company and supersede all prior oral and written agreements on that subject with the exception of (i) options previously granted and delivered to Optionholder under the Plan, and (ii) the following agreements only:

Other Agreements:

Mellanox Technologies Ltd.		Optionholder:
By:
	Signature	Signature
Title:		Date:
Date:

Attachments: Stock Option Agreement, 2003 Israeli Equity Incentive Plan and Notice of Exercise

NOTICE OF EXERCISE
(Standard Form)

Mellanox Technologies Ltd.
PO Box 586
Yokneam Israel, 20692

Date of Exercise:                     

Ladies and Gentlemen:

     This constitutes notice under my stock option that I elect to purchase the number of shares for the price set forth below.

     o Check here if your option was granted under Section 102 of the Income Tax Ordinance (New Version) 1961

Stock Option Number:
Stock option dated:
Number of shares as to which option is exercised:
Certificates to be issued in name of:
Address:
Total exercise price:	$
Cash payment delivered herewith:	$

     By this exercise, I agree to provide such additional documents as you may require pursuant to the terms of the 1999 Israeli Equity Incentive Plan or the 2003 Israeli Equity Incentive Plan (the “Plan).

     I hereby make the following certifications and representations with respect to the number of Ordinary Shares of the Company listed above (the “Shares”), which are being acquired by me for my own account upon exercise of the Option as set forth above:

     I acknowledge that the Shares have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and are deemed to constitute “restricted securities” under Rule 701 and “control securities” under Rule 144 promulgated under the Securities Act. I warrant and represent to the Company that I have no present intention of distributing or selling said Shares, except as permitted under the Securities Act and any applicable state securities laws.

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     I further acknowledge that I will not be able to resell the Shares for at least ninety (90) days after the stock of the Company becomes publicly traded (i.e., subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934) under Rule 701 and that more restrictive conditions apply to affiliates of the Company under Rule 144.

     I further acknowledge that all certificates representing any of the Shares subject to the provisions of the Option shall have endorsed thereon appropriate legends reflecting the foregoing limitations, as well as any legends reflecting restrictions pursuant to the Company’s Articles of Incorporation, Bylaws and/or applicable securities laws.

     I further agree that, if required by the Company (or a representative of the underwriters) in connection with the first underwritten registration of the offering of any securities of the Company under the Securities Act, I will not sell, dispose of, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, any Shares or other securities of the Company held by me, for a period of time specified by the underwriter(s) (not to exceed one hundred eighty (180) days) following the effective date of the registration statement of the Company filed under the Securities Act. I further agree to execute and deliver such other agreements as may be reasonably requested by the Company and/or the underwriter(s) that are consistent with the foregoing or that are necessary to give further effect thereto. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to my Shares until the end of such period.

     I am not a “U.S. Person” as defined by Rule 902 of Regulation S promulgated under the Securities Act. At the time of grant and exercise of the Option, I was and am outside the United States. I am acquiring the Shares for my own account, for investment purposes and not with a view towards, or for sale in connection with, any distribution of such securities. All subsequent offers and sales of the Shares will be made (i) outside the United States in compliance with Rule 903 and Rule 904 of Regulation S, (ii) pursuant to registration of the Shares under the Securities Act, or (iii) pursuant to an exemption from such registration. I will not engage in hedging transactions with regard to the Shares prior to the expiration of the distribution compliance period specified in Rule 903 of Regulation S, unless in compliance with the Securities Act.

     I acknowledge and understand that the tax consequences of exercising this Option and disposing of the Shares underlying this Option are complex, and that I have been advised by the Company to consult with my personal tax advisor before exercising this Option or disposing of the shares underlying this Option.

     Any tax consequences arising from the grant or exercise of this Option, from the payment for Shares or from any other event or act under the Plan, my option agreement or this Notice of Exercise, shall be borne solely by me. I agree to indemnify the Company and/or its subsidiaries and hold them harmless against and from any and all liability for any such tax or interest or penalty thereof, including without limitation, liabilities relating to the necessity to withhold, or to have withheld, any such tax from any payment made to me.

     Section 102. If my Options were granted pursuant to Section 102 of the Israel Income Tax Ordinance (New Version) 1961, I acknowledge that the Shares issued on exercise of the Options may be held in trust for my benefit by the Trustee pursuant to Section 102 under the terms of a trust agreement between the Company and the Trustee.

     I

Very truly yours,

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EXHIBIT C

Addendum B

(Section 2(A))

Deed of Trust (between Trustee and allocating company)

Signed in                                         

     Between:                (hereinafter — the Trustee).

As the first party

     And between:      Mellanox Technologies Ltd. (hereinafter — the Allocating Company)

As the second party

Whereas:

     On November 18, 2003, the Company adopted an employee share allocation plan, as defined in Section 102 of the Ordinance (hereinafter — the Plan);

And whereas:

     According to the Plan, the Company will allocate from time to time shares or rights to shares to employees under a share allocation by way of a Trustee;

And whereas:

     According to the Plan, all the shares shall be allocated under an allocation to a Trustee so that he may hold them in trust until the end of the period, as set out in the Ordinance, in the Income Tax Rules (Tax Relief for Share Allocations to Employee), 5763 — 2003 (hereinafter — the Rules), and in the Plan and in this deed of trust;

And whereas:

     The Company has appointed                            to serve as a Trustee for the purpose of said employee share allocation plan and he has expressed his consent to serve as Trustee for all the employing companies and their employees.

Therefore it is agreed between the parties as follows:

1.	The preamble to this deed of trust constitutes an integral part thereof.
2.	According to the Plan, shares shall not be allocated to the Company’s employees unless allocated on the Trustee’s name and held by him until the end of the Period, as defined in Section 102 of the Ordinance.
3.	Prior to payment of the applicable tax as set out in Section 7 of the Rules, the shares will not be transferred, assigned, pledged, confiscated, or otherwise willingly mortgaged, and no power of attorney or deed of transfer regarding them will be given, whether the validity of any of the same is immediate or future, save for a transfer under a will or operation of law; if shares are transferred under said will or operation of law, the provisions of Section 102 and of the Rules shall apply to the heirs or transferees of that same employee.

4. After the end of the period, each employee shall be entitled at any time to request that the Trustee transfer to his name the shares to which he is entitled, provided that the Trustee shall not transfer said shares until after the applicable tax under Section 102 of the Ordinance and these Rules (hereinafter — the Applicable Tax) has been paid and the Trustee is in possession of an approval of such from the assessing officer.

5. If according to the conditions of the plan, the employee is granted rights to purchase shares, or bonus shares are allocated to him for the shares, the rights or bonus shares shall be allocated on the Trustee’s name. The employee shall be entitled to instruct the Trustee to realize the rights or the bonus shares after the end of the period as determined in the Plan. The shares bearing the rights shall be allocated to the Trustee in accordance with that set out in Section 2 of the Rules and the provisions of the plan shall apply thereunto, including the choice of the tax track and the provisions of this Deed of Trust, however, the period of time until the end of the period shall be counted from the date of allocation of the shares for which the rights or bonus shares were allocated.

6. The Company undertakes to the Trustee that it will not allocate shares to an employee in the framework of the allocation plan, if the employee has not declared that he is aware of the provisions of Section 102 of the Ordinance and the tax track that applies to him, and of his written consent to that set out in this Deed of Trust and his undertaking not to realize the shares prior to the end of the Period, as defined in Section 102 of the Ordinance.

In witness whereof we affix out signatures hereto:

[signed]	[signed]
	[Mellanox Stamp]
The Trustee	The Company

EX-10.4

Exhibit 10.4

INDEMNIFICATION UNDERTAKING

dated as of May __, 2006

from Mellanox Technologies Ltd. to [________________]
(the “Office Holder”)

     In respect of your service as a director or office holder of Mellanox Technologies Ltd. (the “Company”), the Company desires to provide for your indemnification to the fullest extent permitted by law. To that end, the Company hereby agrees as follows:

     1.     The Company hereby undertakes to indemnify you to the maximum extent permitted by the Companies Law — 1999 (the “Companies Law”) in respect of the following:

          1.1     any financial obligation imposed on you in favor of another person by, or expended by you as a result of, a court judgment, including a settlement or an arbitrator’s award approved by court, in respect of any act or omission (“action”) taken or made by you in your capacity as a director or office holder of the Company;

          1.2     all reasonable litigation expenses, including reasonable attorneys’ fees, expended by you or charged to you by a court, in a proceeding instituted against you by the Company or on its behalf or by another person, or in any criminal proceedings in which you are acquitted, or in any criminal proceedings of a crime which does not require proof of mens rea (criminal intent) in which you are convicted, all in respect of actions taken by you in your capacity as a director or officer of the Company; and

          1.3     all reasonable litigation expenses, including reasonable attorneys’ fees, expended by you due to an investigation or a proceeding instituted against you by an authority qualified to conduct such investigation or proceeding, where such investigation or proceeding is concluded without the filing of an indictment against you (as defined in the Companies Law) and without any financial obligation imposed on you in lieu of criminal proceedings (as defined in the Companies Law), or that is concluded without your indictment but with a financial obligation imposed on you in lieu of criminal proceedings with respect to a crime that does not require proof of mens rea (criminal intent), all in respect of actions taken by you in your capacity as a director or office holder of the Company;

     2.     The Company will not indemnify you for any amount you may be obligated to pay in respect of:

          2.1     a breach of your duty of loyalty to the Company, except, to the extent permitted by the Companies Law, for a breach of a duty of loyalty to the Company while acting in good faith and having reasonable cause to assume that such act would not prejudice the interests of the Company;

          2.2     a willful or reckless breach of the your duty of care to the Company;

          2.3     an action taken or omission by you with the intent of unlawfully realizing personal gain;

          2.4     a fine or penalty imposed upon you for an offense; and

          2.5     a counterclaim brought by the Company or in its name in connection with a claim against the Company filed by you, other than by way of defense or by way of third party notice in connection with a claim brought against you by the Company, or in

specific cases in which the Company’s Board of Directors has approved the initiation or bringing of such suit by you, which approval shall not be unreasonably withheld.

     3.     The Company will make available all amounts payable to you in accordance with Section 1 above on the date on which such amounts are first payable by you (“Time of Indebtedness”), including with respect to any claim against you initiated by the Company or in its right, and with respect to items referred to in Sections 1.2 and 1.3 above, not later than the date on which the applicable court renders its decision. Advances given to cover legal expenses in criminal proceedings will be repaid by you to the Company if you are found guilty of a crime which requires proof of criminal intent. Other advances will be repaid by you to the Company if it is determined that you are not lawfully entitled to such indemnification. As part of the aforementioned undertaking, the Company will make available to you any security or guarantee that you may be required to post in accordance with an interim decision given by a court or an arbitrator, including for the purpose of substituting liens imposed on your assets.

     4.     The Company will indemnify you even if at the relevant Time of Indebtedness you are no longer a director or office holder of the Company provided that the obligations with respect to which you will be indemnified hereunder are in respect of actions taken by you while you were a director or office holder of the Company as aforesaid, and in such capacity.

     5.     The indemnification will be limited to the expenses mentioned in Sections 1.2 and 1.3 (pursuant and subject to Section 3 and insofar as indemnification with respect thereto is not restricted by law or by the provisions of Section 2 above) and to the expenses mentioned in Section 1.1 above insofar as they result from, or are connected to, events and circumstances set forth in Schedule A hereto, which are deemed by the Company’s Board of Directors, based on the current activity of the Company, to be foreseeable as of the date hereof.

     6.     The indemnification that the Company undertakes towards all persons whom it has resolved to indemnify for the matters and in the circumstances described herein, jointly and in the aggregate, shall not exceed the maximum assets of the Company available as permitted by law (the “Maximum Liability Amount”), provided that if the Maximum Liability Amount is insufficient to cover all amounts to which such persons are entitled pursuant to such undertaking of the Company, the Maximum Liability Amount shall be allocated among such persons pro rata to the amounts to which they are so entitled. You acknowledge that you have been advised by the Company of the current Maximum Liability Amount.

     7.     The Company will not indemnify you for any liability with respect to which you have received payment by virtue of an insurance policy or another indemnification agreement other than for amounts which are in excess of the amounts actually paid to you pursuant to any such insurance policy or other indemnity agreement (including deductible amounts not covered by insurance policies), within the limits set forth in Section 6 above.

     8.     Subject to the provisions of Sections 6 and 7 above, the indemnification hereunder will, in each case, cover all sums of money that you will be obligated to pay, in those circumstances for which indemnification is permitted under the law and under this Indemnification Undertaking.

     9.     The Company will be entitled to any amount collected from a third party in connection with liabilities indemnified hereunder.

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     10.     In all indemnifiable circumstances, indemnification will be subject to the following:

          10.1     You shall promptly notify the Company of any legal proceedings initiated against you and of all possible or threatened legal proceedings without delay following your first becoming aware thereof, however, your failure to notify the Company as aforesaid shall not derogate from your right to be indemnified as provided herein (except to the extent that such failure to notify causes the Company damages). You shall deliver to the Company, or to such person as it shall advise you, without delay all documents you receive in connection with these proceedings. Similarly, you must advise the Company on an ongoing and current basis concerning all events which you suspect may give rise to the initiation of legal proceedings against you in connection with your actions or omissions as a director or office holder of the Company.

          10.2     Other than with respect to proceedings that have been initiated against you by the Company or in its name, the Company shall be entitled to undertake the conduct of your defense in respect of such legal proceedings and/or to hand over the conduct thereof to any attorney which the Company may choose for that purpose, except to an attorney who is not, upon reasonable grounds, acceptable to you. The Company shall notify you of any such decision to defend with ten (10) calendar days of receipt of notice of any such proceeding. The Company and/or the attorney as aforesaid shall be entitled, within the context of the conduct as aforesaid, to conclude such proceedings, all as it shall see fit, including by way of settlement. At the request of the Company, you shall execute all documents required to enable the Company and/or its attorney as aforesaid to conduct your defense in your name, and to represent you in all matters connected therewith, in accordance with the aforesaid. For the avoidance of doubt, in the case of criminal proceedings the Company and/or the attorneys as aforesaid will not have the right to plead guilty in your name or to agree to a plea-bargain in your name without your consent. However, the aforesaid will not prevent the Company and/or its attorneys as aforesaid, with the approval of the Company, to come to a financial arrangement with a plaintiff in a civil proceeding without your consent so long as such arrangement will not be an admittance of an occurrence not indemnifiable pursuant to this Indemnification Undertaking and/or pursuant to law. The Company shall not, without your prior written consent, consent to the entry of any judgment against you or enter into any settlement or compromise which (i) includes an admission of your fault, (ii) does not include, as an unconditional term thereof, the full release of you from all liability in respect of such proceeding or (iii) is not fully indemnifiable pursuant to this Indemnification Undertaking and/or pursuant to law. This paragraph shall not apply to a proceeding brought by you under Section 10.7 below.

          10.3     You will fully cooperate with the Company and/or any attorney as aforesaid in every reasonable way as may be required of you within the context of their conduct of such legal proceedings, including but not limited to the execution of power(s) of attorney and other documents, provided that the Company shall cover all costs incidental thereto such that you will not be required to pay the same or to finance the same yourself.

          10.4     Notwithstanding the provisions of Sections 10.2 and 10.3 above, (i) if in a proceeding to which you are a party by reason of your status as a director or officer of the Company and the named parties to any such proceeding include both you and the Company or any subsidiary of the Company, a conflict of interest or potential conflict of interest (including the availability to the Company and its subsidiary, on the one hand, and you, on the other hand, of different or inconsistent defenses or counterclaims) exists between you and the Company, or (ii) if the Company fails to assume the defense of such proceeding in a

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timely manner, you shall be entitled to be represented by separate legal counsel, which shall represent other persons similarly situated, of the Company’s choice and reasonably acceptable to you and other person’s choice, at the expense of the Company. In addition, if the Company fails to comply with any of its material obligations under this Indemnification Undertaking or in the event that the Company or any other person takes any action to declare this Indemnification Undertaking void or unenforceable, or institutes any action, suit or proceeding to deny or to recover from you the benefits intended to be provided to you hereunder, except with respect to such actions, suits or proceedings brought by the Company that are resolved in favor of the Company, you shall have the right to retain counsel of your choice, and reasonably acceptable to the Company and at the expense of the Company, to represent you in connection with any such matter.

          10.5     If, in accordance with Section 10.2 (but subject to Section 10.4), the Company has taken upon itself the conduct of your defense, the Company will have no liability or obligation pursuant to this Indemnification Undertaking or the above resolutions to indemnify you for any legal expenses, including any legal fees, that you may expend in connection with your defense, unless (i) the Company shall not have assumed the conduct of your defense as contemplated, (ii) the Company refers the conduct of your defense to an attorney who is not, upon reasonable grounds, acceptable to you, (iii) the named parties to any such action (including any impleaded parties) include both you and the Company, and joint representation is inappropriate under applicable standards of professional conduct due to a conflict of interest between you and the Company, or (iv) the Company shall agree to such expenses in either of which events all reasonable fees and expenses of your counsel shall be borne by the Company.

          10.6     The Company will have no liability or obligation pursuant to this Indemnification Undertaking to indemnify you for any amount expended by you pursuant to any compromise or settlement agreement reached in any suit, demand or other proceeding as aforesaid without the Company’s consent to such compromise or settlement.

          10.7     If required by law, the Company’s authorized organs will consider the request for indemnification and the amount thereof and will determine if you are entitled to indemnification and the amount thereof. In the event that you make a request for payment of an amount of indemnification hereunder or a request for an advancement of indemnification expenses hereunder and the Company fails to determine your right to indemnification hereunder or fails to make such payment or advancement, you may petition any court which has jurisdiction to enforce the Company’s obligations hereunder. The Company agrees to reimburse you in full for any reasonable expenses incurred by you in connection with investigating, preparing for, litigating, defending or settling any action brought by you under the immediately preceding sentence, except where such action or any claim or counterclaim in connection therewith is resolved in favor of the Company.

     11.     The Company hereby exempts you, to the fullest extent permitted by law, from any liability for damages caused as a result of a breach of your duty of care to the Company, provided that in no event shall you be exempt with respect to any actions listed in Section 2 above or breach of your duty of care in connection with distribution of Company’s assets.

     12.     The Company undertakes that in the event of a Change in Control (as defined below) of the Company, the Company’s obligations under this Indemnification Undertaking shall continue to be in effect following such Change in Control, and the Company shall take all reasonable necessary action to ensure that the party acquiring control of the Company shall independently undertake to continue in effect such Indemnification Undertaking, to

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maintain the provisions of the Articles of Association allowing indemnification and to indemnify you in the event that the Company shall not have sufficient funds or otherwise shall not be able to fulfill its obligations hereunder. For purposes of this Indemnification Undertaking, a “Change in Control” shall be deemed to have occurred if: (i) any “Person” (as such term is used in Sections 13(d) and 14(d) of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned directly or indirectly by the shareholders of the Company in substantially the same proportions as their ownership of shares of the Company, is or becomes the “Beneficial Owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 15% or more of the total voting power represented by the Company’s then outstanding voting securities; or (ii) during any period of two consecutive years (not including any period prior to the execution of this Indemnification Undertaking), individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (i), (iii) or (iv) of this Section 12) 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 period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority of the members of the Board of Directors; or (iii) a merger or consolidation of the Company with any other entity, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 51% of the combined voting power of the voting securities of the surviving entity outstanding immediately after such merger or consolidation and with the power to elect at least a majority of the Board of Directors or other governing body of such surviving entity; or (iv) the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company’s assets; or (v) there occurs any other event of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or a response to any similar item on any similar schedule or form) promulgated under the Exchange Act, whether or not the Company is then subject to such reporting requirement.

     13.     The Company undertakes that if there is a Change in Control of the Company then with respect to all matters thereafter arising concerning your rights to payments under this Indemnification Undertaking or any other agreement or under the Company’s Articles of Association as now or hereafter in effect, the Company shall seek legal advice only from Independent Legal Counsel (as defined below) selected by the Company and approved by you (which approval shall not be unreasonably withheld). Such counsel, among other things, shall render its written opinion to the Company and you as to whether and to what extent you would be permitted to be indemnified under applicable law and the Company agrees to abide by such opinion. The Company agrees to pay the reasonable fees of the Independent Legal Counsel referred to above and to fully indemnify such counsel against any and all expenses (including attorneys’ fees), claims, liabilities and damages arising out of or relating to this Indemnification Undertaking or its engagement pursuant hereto. For purposes of this Indemnification Undertaking, “Independent Legal Counsel” shall mean an attorney or firm of attorneys who shall not have otherwise performed services for the Company or you within the last three years (other than with respect to matters concerning your rights under this

5

Indemnification Undertaking, or of other indemnitees under similar indemnification undertakings).

     14.     If for the validation of any of the undertakings in this Indemnification Undertaking any act, resolution, approval or other procedure is required, the Company undertakes to cause them to be done or adopted in a manner which will enable the Company to fulfill all its undertakings as aforesaid.

     15.     For the avoidance of doubt, it is hereby clarified that nothing contained in this Indemnification Undertaking derogates from the Company’s right to indemnify you post factum for any amounts which you may be obligated to pay as set forth in Section 1 above without the limitations set forth in Sections 5 and 6 above.

     16.     If any undertaking included in this Indemnification Undertaking is held invalid or unenforceable, such invalidity or unenforceability will not affect any of the other undertakings which will remain in full force and effect. Furthermore, if such invalid or unenforceable undertaking may be modified or amended so as to be valid and enforceable as a matter of law, such undertaking will be deemed to have been modified or amended, and any competent court or arbitrator are hereby authorized to modify or amend such undertaking, so as to be valid and enforceable to the maximum extent permitted by law.

     17.     This Indemnification Undertaking and the agreements herein shall be governed by and construed and enforced in accordance with the laws of the State of Israel.

     18.     This Indemnification Undertaking cancels any preceding letter of indemnification or arrangement for indemnification that may have been issued to you by the Company.

     19.     Neither the settlement or termination of any proceeding nor the failure of the Company to award indemnification or to determine that indemnification is payable shall create an adverse presumption that you are not entitled to indemnification hereunder. In addition, the termination of any proceeding by judgment or order (unless such judgment or order provides so specifically) or settlement, shall not create a presumption that you did not act in good faith and in a manner which you reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal action or proceeding, had reasonable cause to believe that your action was unlawful.

     20.     This Indemnification Undertaking shall be (a) binding upon all successors and assigns of the Company (including any transferee of all or a substantial portion of the business, stock and/or assets of the Company and any direct or indirect successor by merger or consolidation or otherwise by operation of law), and (b) binding on and shall inure to the benefit of your heirs, personal representatives, executors and administrators. This Indemnification Undertaking shall continue for your benefit and your heirs’, personal representatives’, executors’ and administrators’ benefit after you cease to be a director or office holder of the Company.

     21.     Except with respect to changes in the governing law which expand your right to be indemnified by the Company, no supplement, modification or amendment of this Indemnification Undertaking shall be binding unless executed in writing by each of the parties hereto. No waiver of any of the provisions of this Indemnification Undertaking shall be deemed or shall constitute a waiver of any other provisions of this Indemnification Undertaking (whether or not similar), nor shall such waiver constitute a continuing waiver.

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     This Indemnification Undertaking is being issued to you pursuant to the resolutions adopted by the Board of Directors of the Company on May ___, 2006 and by the shareholders of the Company on [May ___, 2006]. The Board of Directors has determined, based on the current activity of the Company, that the amount stated in Section 6 is reasonable and that the events listed in Schedule A are reasonably anticipated.

     Kindly sign and return the enclosed copy of this letter to acknowledge your agreement to the contents hereof.

Very truly yours, Mellanox Technologies Ltd.
By:
Name:
Title:	Chief Executive Officer
Date:	May __, 2006

Accepted and agreed to:
Name:
Date:	May ___, 2006

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Schedule A

1.	Negotiations, execution, delivery and performance of agreements on behalf of the Company and any subsidiary thereof (“Subsidiary”) including, inter alia, any claim or demand made by a customer, supplier, contractor or other third party transacting any form of business with the Company, its Subsidiaries or affiliates relating to the negotiations or performance of such transactions, representations or inducements provided in connection thereto or otherwise.
2.	Any claim or demand made in connection with any transaction which is not within the ordinary course of business of either the Company, its subsidiaries or affiliates, including the sale, lease or purchase of any assets or businesses.
3.	Anti-competitive acts and acts of commercial wrongdoing.
4.	Acts in regard of invasion of privacy including with respect to databases and acts in regard of slander.
5.	Any claim or demand made for actual or alleged infringement, misappropriation or misuse of any third party’s intellectual property rights including, but not limited to confidential information, patents, copyrights, design rights, service marks, trade secrets, copyrights, misappropriation of ideas by the Company, its Subsidiaries or affiliates.
6.	Actions taken in connection with the intellectual property of the Company and any Subsidiary and its protection, including the registration or assertion of rights to intellectual property and the defense of claims relating thereof.
7.	Participation and/or non-participation at the Company’s board meetings, bona fide expression of opinion and/or voting and/or abstention from voting at the Company’s board meetings.
8.	Approval of corporate actions including the approval of the acts of the Company’s management, their guidance and their supervision.
9.	Claims of failure to exercise business judgement and a reasonable level of proficiency, expertise and care in regard of the Company’s business.
10.	Violations of securities laws of any jurisdiction, including without limitation, fraudulent disclosure claims, failure to comply with SEC and/or the Israeli Securities Authority and/or any stock exchange disclosure or other rules and any other claims relating to relationships with investors, shareholders and the investment community and any claims related to the Sarbanes-Oxley Act of 2002, as amended from time to time.
11.	Any claim or demand made under any securities laws or by reference thereto, or related to the failure to disclose any information in the manner or time such information is required to be disclosed pursuant to such laws, or related to inadequate or improper disclosure of information to shareholders, or prospective shareholders, or related to the purchasing, holding or disposition of securities of the Company or any other investment activity involving or affected by such securities, including any actions relating to an offer or issuance of securities of the Company or of its subsidiaries and/or affiliates to the public by prospectus or privately by private placement, in Israel or abroad, including the details that shall be set forth in the documents in connection with execution thereof.

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12.	Violations of laws requiring the Company to obtain regulatory and governmental licenses, permits and authorizations or laws related to any governmental grants in any jurisdiction.
13.	Claims in connection with publishing or providing any information, including any filings with any governmental authorities, on behalf of the Company in the circumstances required under any applicable laws
14.	Any claim or demand made by employees, consultants, agents or other individuals or entities employed by or providing services to the Company relating to compensation owed to them or damages or liabilities suffered by them in connection with such employment or service.
15.	Resolutions and/or actions relating to employment matters of the Company and/or its Subsidiaries and/or affiliates.
16.	Events, pertaining to the employment conditions of employees and to the employer-employee relations, including the promotion of workers, handling pension arrangements, insurance and saving funds, options and other benefits.
17.	Any claim or demand made by any lenders or other creditors or for moneys borrowed by, or other indebtedness of, the Company, its Subsidiaries or affiliates.
18.	Any claim or demand made by any third party suffering any personal injury and/or bodily injury and/or property damage to business or personal property through any act or omission attributed to the Company, its Subsidiaries or affiliates, or their respective employees, agents or other persons acting or allegedly acting on their behalf.
19.	Any claim or demand made directly or indirectly in connection with complete or partial failure, by the Company or any Subsidiary or affiliate thereof, or their respective directors, officers and employees, to pay, report, keep applicable records or otherwise, of any foreign, federal, state, country, local, municipal or city taxes or other compulsory payments of any nature whatsoever, including without limitation, income, sales, use, transfer, excise, value added, registration, severance, stamp, occupation, customs, duties, real property, personal property, capital stock, social security, unemployment, disability, payroll or employee withholding or other withholding, including any interest, penalty or addition thereto, whether disputed or not.
20.	Any claim or demand made by purchasers, holders, lessors or other users of products or assets of the Company, or individuals treated with such products, for damages or losses related to such use or treatment, and actions in connection with the testing of products developed by the Company and/or its Subsidiaries or in connection with the distribution, sale, license or use of such products.
21.	Any administrative, regulatory or judicial actions, orders, decrees, suits, demands, demand letters, directives, claims, liens, investigations proceedings or notices of noncompliance or violation by any governmental entity or other person alleging potential responsibility or liability (including potential responsibility or liability for costs of enforcement, investigation, cleanup, governmental response, removal or remediation, for natural resources damages, property damage, personal injuries, or penalties or contribution, indemnification, cost recovery, compensation, or injunctive relief) arising out of, based on or related to (x) the presence of, release spill, emission, leaking, dumping, pouring, deposit, disposal , discharge, leaching or migration into the environment (each a “Release”) or threatened Release of, or exposure to, any

9

	hazardous, toxic, explosive or radioactive substance, wastes or other substances or wastes of any nature regulated pursuant to any environmental law, at any location, whether or not owned, operated, leased or managed by the Company or any of its subsidiaries, or (y) circumstances forming the basis of any violation of any environmental law, environmental permit, license, registration or other authorization required under applicable environmental and/or public health law.
22.	Actions in connection with the Company’s development, use, sale, licensing, distribution, marketing or offer of products and/or services.
23.	Resolutions and/or actions relating to a merger of the company and/or of its subsidiaries and/or affiliates, the issuance of shares or securities exercisable into shares of the Company, changing the share capital of the Company, formation of subsidiaries, reorganization, winding up or sale of all or part of the business, operations or shares the Company.
24.	Resolutions and/or actions relating to investments in the Company and/or its subsidiaries and/or affiliated companies and/or the purchase or sale of assets, including the purchase or sale of companies and/or businesses, and/or investments in corporate or other entities and/or investments in traded securities and/or any other form of investment.
25.	Any administrative, regulatory or judicial actions, orders, decrees, suits, demands, demand letters, directives, claims, liens, investigations, proceedings or notices of noncompliance or violation by any governmental entity or other person alleging the failure to comply with any statute, law, ordinance, rule, regulation, order or decree of any of its subsidiaries and/or affiliates, or any of their respective business operations.
26.	Actions relating to the operations and management of the Company and/or its Subsidiaries.
27.	Actions taken in connection with the approval and execution of financial reports and business reports and the representations made in connection therewith.
28.	Any claim or demand, not covered by any of the categories of events described above, which, pursuant to any applicable law, a director or officer of the Company may be held liable to any government or agency thereof, or any person or entity, in connection with actions taken by such director or officer in such capacity.

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EX-10.5

Exhibit 10.5

[*] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

LICENSE AGREEMENT

This Agreement (“Agreement”) between Vitesse Semiconductor Corporation (“Vitesse”), a Delaware corporation with its principal office at 741 Calle Plano, Camarillo, California 93012, U.S.A. and Mellanox Technologies, Ltd. (“Mellanox”), an Israeli Company with its principal office at _PO Box 586 Yokneam, Israel 20692, is dated as of September 10, 2001.

Background.

     Vitesse is a leading provider of high-speed physical layer semiconductor products for the Communications Market. Mellanox is a fabless semiconductor company with special knowledge of Infiniband technology for switching and routing applications. Mellanox desires to license certain intellectual property of Vitesse to produce and market certain devices and Vitesse is willing to license such intellectual property to Mellanox on the terms and conditions set forth in this Agreement.

     In consideration of the mutual covenants contained in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. License:

1.1 Subject to the payment of Royalties to Vitesse by Mellanox (described in Section 2), Vitesse hereby grants to Mellanox a non-exclusive, worldwide, perpetual right and license (the “License”) to:

1.1.1.	use the Vitesse Technology, more specifically described on Exhibit A, and all patents, copyrights, trade secrets, and documentation related thereto, in existence or hereafter created, modified or developed, that comprise the Vitesse Technology (collectively, the “Technology”) for the development of the Mellanox devices specified in Exhibit B and upgrades to those devices (the “Products”) and,
1.1.2.	use, make, have made, distribute, market, transfer and sell the Products that incorporate the Technology.

1.2 Vitesse agrees to provide the following to Mellanox:

1.2.1.	The 2.5Gb/s SerDes macro cell embodying the Vitesse Technology implemented in TSMC 0.18 micron CMOS process.
1.2.2.	Access to future versions of the 2.5Gb/s SerDes macro implemented in more advanced CMOS technologies as they become available.
1.2.3.	Technical support on issues related to functionality as reasonably requested by Mellanox.
1.2.4.	Sufficient documentation to enable Mellanox to utilize the Vitesse Technology.
1.2.5.	Technical and performance information as developed by Vitesse.
1.2.6.	Access to prototypes of the VSC7226 2.5Gb/s SerDes.

2. Royalty Payment:

2.1	Royalty payments for products sold by Mellanox that use the Vitesse Technology will be based on a per SerDes Port basis per the following table.
2.2	Royalty Calculation:
	Total number of devices sold is defined as the aggregate sum of all Mellanox products sold containing Vitesse Technology, measured in thousands of units (“KU”).
	For each Product sold, Royalties shall be paid as follows:

	Royalty per SerDes Port		Royalty per SerDes Port
Total number of devices sold	(Products with [*] Ports)		(Products with [*] Ports)
[*]		[*]		[*]
[*]		[*]		[*]
[*]		[*]		[*]

2.3	Royalties shall be paid quarterly on or before 30 days after the end of the quarter in which sales of Products giving rise to the Royalty payment obligation occurred. Each Royalty payment shall be accompanied by a report (the “Report”) setting forth the number of Mellanox products sold, the number of SerDes ports per product, and the calculation of the Royalty due thereon.
2.4	Mellanox shall each keep accurate and correct records of Products sold under this Agreement appropriate to determine the amount of royalties due to Vitesse. Such records shall be retained for at least five (5) years from their creation and shall be available for audit at the expense of the questioning party by an independent accountant, approved by both parties, for the sole purpose of verifying royalty payments hereunder. The selected accountant shall only disclose to the questioning party information relating to the accuracy of reports and payments made under this Agreement. If an audit shows a discrepancy in excess of five percent (5%) for any twelve (12) month period, then the party in error shall reimburse the other for the cost of the audit plus any funds owed (including an interest rate that equals U.S. federal funds rate plus 5 % on a yearly basis), such payment to be due within thirty (30) days from the notice of payment due. An audit may be requested on thirty (30) days prior written notice and not more than once in any calendar year. Any audit shall be conducted from 9 a.m. to 5 p.m. Monday through Friday other than on holidays generally recognized by government agencies in the location where the audited records are located.
2.5	Other Considerations

2.5.1.	Mellanox agrees that it will only use Vitesse Technology for integrated SerDes applications during the term of this Agreement.
2.5.2.	Mellanox will recommend Vitesse products to customers.

[*] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

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3. Intellectual Property.

3.1	Without written approval by Vitesse, Mellanox has no right to reverse engineer, copy, duplicate in any way, disassemble, de-compile, or use in any way not specified by this Agreement, any form of the Technology which is provided to Mellanox under this Agreement.
3.2	Title to all materials and all documentation furnished by Vitesse to Mellanox will remain in Vitesse. Mellanox will deliver to Vitesse any and all materials, documentation and property, including all copies thereof on whatever media rendered, upon the first to occur of:

3.2.1.	Vitesse’s request;
3.2.2.	termination of this Agreement.

4. Warranties.

4.1 Vitesse represents and warrants to Mellanox as follows:

4.1.1.	Vitesse has the authority to grant the rights and License describe herein.
4.1.2.	Vitesse owns or has rights to use and exploit the Technology. No material claims have been made against Vitesse asserting the invalidity or unenforceability of, or with respect to Technology, the misuse of, the Technology, nor is Vitesse aware that any such claims exist. Vitesse has not received a notice of conflict of the Technology with the asserted rights of others, or otherwise challenging its rights to use any of the Technology. None of the rights of Vitesse under the Technology will be adversely affected by the execution, delivery or performance of this Agreement, or the consummation of the transactions contemplated herein.
4.1.3.	The Technology will in all relevant ways conform with the Function Data Sheet, of which a preliminary version is attached hereto as Exhibit A (collectively, the “Specifications”).
4.1.4.	If the Technology fails to conform to the Specifications in Exhibit A, Vitesse shall seek to correct such defect or deficiency as soon as reasonably practicable following receipt of a notice of such defect or deficiency. If Vitesse does not or cannot correct the defect or deficiency Mellanox shall have the option of terminating this Agreement in accordance with Section 8.

5. Confidential Information.

5.1 Both parties agree that all confidential and proprietary information will be subject to the terms and conditions contained in the Non-Disclosure Agreement executed by the parties, dated as of August 31, 2001 (the “NDA”), which is incorporated herein by reference as Exhibit C. Both parties shall take all necessary and appropriate steps to maintain the confidentiality of the intellectual property and trade secrets comprising the Technology and to keep such from entering the public domain. Mellanox will promptly notify Vitesse of all

3

names of employees, consultants or any other who has been given access to the Technology by Mellanox.

5.2 Neither party will, without the prior written consent of the other party in each instance:

5.2.1.	use in advertising, publicity or otherwise the other’s name or the names of the other’s personnel, nor any trade name, trademark or logo owned by the other or
5.2.2.	make any disclosure of the existence or terms of this Agreement other than to a party’s attorneys, accountants, auditors, investment bankers and other similar advisers who (a) need to know the information, (b) are informed by you of the confidential nature of the information and (c) agree to keep the information confidential.

6. Indemnity

6.1	Vitesse will indemnify, defend and hold Mellanox harmless from and against any and all claims, demands, liabilities, losses, damages, judgments or settlements, including all reasonable costs and expenses related thereto, including attorneys’ fees (“Losses”), to the extent arising from a claim that the Technology infringes or violates any patent, copyright, mask work right, trade secret or other intellectual property right of a third party.
6.2	Mellanox will indemnify, defend and hold Vitesse harmless from and against any and all claims, demands, liabilities, losses, damages, judgments or settlements, including all reasonable costs and expenses related thereto, including attorney’s fees (“Losses”) to the extent the Products cause damage to property, personal injury and losses resulting therefrom, and Mellanox is liable for such damage.
6.3	Each party will provide the other with reasonable written notice of claims that might trigger the indemnification obligations above. Vitesse and Mellanox each agrees to provide reasonable assistance to and cooperate with the other in the defense of any claims of infringement or violation. The obligations of each party to indemnify the other pursuant to this Agreement apply only if the party seeking indemnification provides reasonable notice of and reasonable assistance in defense of any claim or violation as provided above. Further, the obligations of an indemnifying party to indemnify the indemnified party pursuant to this Agreement will apply only if, at the indemnifying party’s request, the indemnifying party is given sole and exclusive control of the defense of such claim or violation and any and all negotiations relating to such claim or violation. Notwithstanding the foregoing, (a) the indemnified party may, at its own cost and expense, participate, through attorneys or otherwise, in such investigation, study and defense of such claim or violation and any appeal arising therefrom and (b) no settlement of such claim or violation that involves a remedy other than the payment of money by the indemnifying party will be entered into by the indemnifying party without the prior written consent of the indemnified party, which consent will not be unreasonably withheld.

7. Disclaimer of Damages.

7.1 Except for its obligations under Section 6, neither party will be liable to the other for indirect, punitive, special or consequential damages of any nature.

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8. Term and Termination.

8.1	This Agreement shall terminate on the failure of a party to cure any material default under this Agreement within ninety (90) days from the giving of written notice of such default by the other party (or, if cure cannot be accomplished within ninety days, then failure to use its best efforts to cure the default within such period).
8.2	Effective immediately and without any requirement of notice, either party may, at its option, terminate this Agreement and/or suspend its performance in the event that:

8.2.1.	the other party files a petition in bankruptcy, files a petition seeking any reorganization, arrangement, composition, or similar relief under any law regarding insolvency or relief for debtors, or makes an assignment for the benefit of creditors;
8.2.2	a receiver, trustee or similar officer is appointed for all or substantially all of the business or property of such party;
8.2.3.	any involuntary petition or proceeding under bankruptcy or insolvency laws is instituted against such party and not stayed, enjoined or discharged within sixty days; or
8.2.4.	the other party adopts a resolution for discontinuance of its business or for dissolution.

8.3 Upon termination of this Agreement by Mellanox without cause, Mellanox shall have the right thereafter and for a period of one year from the effective date of the termination, to:

8.3.1	market or have marketed the Products in stock or production as of the effective date of termination; and,
8.3.2.	complete or have completed all orders and firm commitments for Products accepted or made prior to the effective date of termination, subject to the payment by Mellanox to Vitesse of Royalties.

8.4 In the event Mellanox ceases to market the Products or fails to keep the Products reasonably available in the market, Vitesse shall have the right to terminate this Agreement, and all rights in the Technology shall revert back to Vitesse, subject to Mellanox’s rights to continue to:

8.4.1.	market or have marketed the Products for a period of one year from the effective date of termination; and
8.4.2.	complete or have completed all orders and firm commitments for Products accepted or made prior to the effective date of termination, subject to the payment by Mellanox to Vitesse of Royalties.

8.5	Termination pursuant to this Agreement shall be without prejudice to any rights or remedies of the parties at law or in equity and shall not relieve any party from any liabilities arising prior to such termination.
8.6	Royalties are non-refundable and cannot be claimed back by Mellanox upon termination.

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9. Miscellaneous.

9.1	Neither party may assign or transfer any interest in this Agreement without the prior written consent of the other, provided, however, that either party may assign its rights and obligations to an affiliate or to a successor in interest to substantially all of that party’s business and assets. This Agreement is binding upon and will inure to the benefit of the parties and their respective successors, assigns, and legal representatives.
9.2	The parties are independent contractors and not partners, agents, or employees of each other.
9.3	This Agreement, the NDA and the Exhibits hereto contain the entire agreement between the parties relating to their subject matter and there are no agreements or understandings except as set forth herein and therein.
9.4	This Agreement will be governed by and construed in accordance with the laws of California. Contractor agrees that, at Vitesse’s election, all actions and proceedings arising from or related to this Agreement will be litigated in courts within Los Angeles, California. Contractor consents and submits to the jurisdiction and venue of any local, state or federal court located within Los Angeles, California.
9.5	If either party employs attorneys to enforce any rights arising out of or relating to this Agreement, the prevailing party shall be entitled to recover reasonable attorneys’ fees and costs.
9.6	This Agreement may not be modified or amended except by a writing signed by both parties.

9.6.1.

Any notice required or permitted to be given hereunder shall, except where specifically provided otherwise, be given in writing to the person listed below by personal delivery, registered or certified mail, return receipt requested, express delivery service or facsimile. The date upon which any such notice is personally delivered, (or if the notice is given by registered or certified mail, three (3) business days from sending, or if by express delivery service or facsimile upon receipt) shall be deemed to be the date of such notice, irrespective of the date appearing therein.

If to Vitesse:            Vitesse Semiconductor Corporation

          741 Calle Plano
          Camarillo, California 93012
          USA
          Attention: Lynn Jones, Manager of Legal Relations

If to Mellanox:            Mellanox Technologies Inc,

          2900 Stender Way
          Santa Clara, CA 95054
          USA
          Attention: Rachel Voorhees

or addressed to a person or party at such other address as that party may have given by written notice in accordance with this provision.

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9.7	In the event of a breach or threatened breach of the provisions of Section 5, the non-breaching party will be entitled to an injunction restraining such breach or threatened breach without having to prove actual damages or threatened irreparable harm. Such injunctive relief as the non-breaching party may obtain will be in addition to all of the rights and remedies available at law and in equity.
9.8	The invalidity in whole or in part of any provision of this Agreement shall not affect the validity of other provisions.
9.9	Either party’s failure to insist on performance of any provision of this Agreement, or to exercise any right herein conferred, will not be construed as a waiver of the other party’s right to assert or rely on that provision or right, or any similar provision or right, in any later instance.
9.10	This Agreement may be signed in counterparts and all signed copies of this Agreement will together constitute one original of this Agreement.

10.	The parties shall perform such further acts and shall execute and deliver such further instruments as are reasonably necessary to carry out the purposes of this Agreement.
11.	If Mellanox desires to produce devices with additional or other functionality containing Vitesse’s intellectual property the parties will negotiate, in good faith, the terms and conditions of a separate agreement.
12.	Sections 2, 3, 4, 5, 6, 7, 8.3, 8.4, 8.5, and 9 will survive the expiration or termination of this Agreement.

VITESSE SEMICONDUCTOR CORPORATION		MELLANOX TECHNOLOGIES, LTD.
BY:	Michael Millhollen	BY:	E. Waldman
Title:	Vice President & General Manager	Title:	CEO
	Data Communications
Date:	9/10/01	Date:	Sept 11, 2001

Exhibits:
A: Specification of Vitesse Technology
B: Definition of Mellanox Products Using the Technology
C: NDA

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Exhibit A

The “Technology”

Summary of Vitesse 2.5 Gbs SerDes IP for Mellanox

1. Overview
2. [*]
3. [*]
4. [*]

1. Overview

This summary outlines the salient features of the SerDes intellectual properties (IP’s) developed by Vitesse Corp. for Mellanox Technologies. The goal is to [*] [*] with [*] as [*]. The immediate application is targeted for [*] [*] at [*] data rate. There are [*] to complete the full SerDes [*] with their [*] name in parentheses:

•	[*]
	This is the core of the SerDes IP’s which performs basic [*].
•	[*]
	The [*] of the each [*] is controlled by [*] an [*] in this [*] This [*] is also known as the [*] block.
•	[*]
	The [*] generates [*] for me SerDes, the [*], and the [*].

The majority of the building blocks in these [*] have been implemented in [*] [*] at the data rate of [*].

2. [*]

The [*] [*] and [*] data stream from and to the [*] through [*] wide [*] interfaces. In most applications where [*] are required, the [*] is handled in the [*].

•	[*]
	The[*] [*] the [*] into [*].
•	[*]
	The [*] recovers both the [*] and [*] components of the [*] and [*] the [*] into [*]. [*] can be enabled to [*] the [*].
•	[*]
	The [*] the [*] of the [*] into a [*] for [*] Constrained by [*] the [*] [*] of the [*] require special [*] of both the [*] and [*] to be [*] in a [*].
•	[*]
	The [*] is [*] by a [*] from the [*]. The [*] also includes [*] for [*] [*]. Both [*] and [*] are [*] as part of [*].

[*] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

8

3. [*]

The [*] [*] also known as the [*] [*] provides [*] to each [*]. It requires an [*] that is [*] the [*] [*]. For example, a [*] of [*] requires a [*] [*]. The [*] compares the [*] with [*] and provides [*] pattern to each [*] the [*]. This [*] is done [*] and [*] any [*] and [*] of [*].

4. [*]

The [*] provides the [*] sources from an [*], Including

• [*]

• [*]

• [*]

• [*].

[*] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

9

[*] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

10

Exhibit B

The “Products”

     Mellanox Infiniband products

     [*]

[*] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

11

Exhibit C

Bi-Lateral Confidentiality and Non-Disclosure Agreement

This Bi-Lateral Confidentiality and Non-Disclosure Agreement is entered into and effective on September 7, 2001 by and between Mellanox Technologies, Ltd. having a principal place of business at an Israeli Company with its principal office at _PO Box 586 Yokneam, Israel 20692, and Vitesse Semiconductor Corporation, a Delaware, U.S.A. corporation with a principal place of business at 741 Calle Plano, Camarillo, California 93012.

Either or both Vitesse and Mellanox have disclosed or will disclose to the other certain confidential and proprietary information (“Information”) further described as: The Technology and Intellectual Property Described in Exhibit B of this agreement.

The parties desire that Information exchanged be used solely for the purpose of conducting business with each other and desire to set forth their agreement regarding the limited use and preservation of confidentiality of such Information. Each of the parties acknowledges that the other party’s Information is a valuable, special, and unique asset of such party. Each party therefore agrees, for itself and on behalf of its officers, directors, agents, employees and affiliates, to use reasonable care to keep all such Information in confidence, to use Information solely for conducting business with the other, and not to disclose any portion of the Information to any third party without the prior written consent of the disclosing party.

In order to ensure that the Information disclosed by one party to the other is used only in accordance with the purposes stated above, the parties agree to the following:

1.	Information that is easily markable, whether in hard copy or electronic form, that the disclosing party in good faith regards as confidential and/or proprietary will be clearly marked as “Confidential”, “Proprietary”, or with other words indicating the sensitive nature of the Information. Any information orally disclosed by one party to the other will be deemed Information hereunder if, within thirty (30) days after the disclosure, the disclosing party so identifies it in writing to the other. Neither party will disclose to third parties or fail to treat as Information any information received orally from the disclosing party unless the disclosing party fails for thirty (30) days after such disclosure to identify the Information disclosed as being confidential or proprietary.
2.	Information otherwise protected hereunder will not include Information that the receiving party can demonstrate: (i) is now in or hereafter enters the public domain without any violation of this Agreement, (ii) was known to the receiving party prior to the time of disclosure by the disclosing party; or (iii) was disclosed in good faith to the receiving party by a third party legally entitled to disclose the same; provided, however, that specific Information will not be deemed to be within any of The foregoing exceptions merely because it is in the scope of more general Information.
3.	If the receiving party is confronted with legal action to disclose Information, the receiving party will promptly notify the disclosing party. The receiving party will reasonably assist the disclosing party in obtaining a protective order requiring that any portion of the Information required to be disclosed be used only for the purpose for which a court issues an order or for such other purposes as required by law. Each party will bear its own legal expenses.
4.	All Information will remain the property of the disclosing party. At the disclosing party’s written request, the Information in any tangible form will be promptly returned or destroyed together with all copies thereof. Upon written request, the receiving party will provide written certification of the destruction.
5.	The parties each acknowledge that should this Agreement be breached, remedies available at law are inadequate, and proving damages impracticable. The parties therefore agree that, in addition to all other rights and remedies available at law or in equity, the aggrieved party will be entitled to injunctive relief upon any such breach. The breaching party will pay to the aggrieved party all attorneys’ fees and costs incurred by the aggrieved party as a result of such breach.
6	All notices required under this Agreement will be considered given if sent by certified mail, postage prepaid, and addressed as shown in Section 9.6.1 of this agreement (unless the addresses have been changed by written notice):
7.	The term of this Agreement is three (3) years from the effective date. The obligations under this Agreement will survive for five (5) years following termination of the parties’ association regardless of the manner of such termination, and will be binding upon their successors and assigns.
8.	This Agreement will be governed by, and interpreted in accordance with, the laws of the State of California.
9.	The receiving party will comply in all respects with U.S. Export and Re-Export laws and regulations applicable to any Information.
	IN WITNESS WHEREOF, the parties have executed this Agreement in duplicate originals.

Vitesse Semiconductor Corporation	Mellanox Technologies, Ltd.
/s/ Michael Millhollen	/s/ E. Waldman, CEO
Name & Title	Name & Title
Date 9/10/01	Date Sept 11, 2001
Vitesse Semiconductor, Corp.
Michael Millhollen
Vice President & General Manager Data Communications

12

EX-10.6

Exhibit 10.6

[*] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

Contract No.:                                        

Effective Date:                    

LICENSE AGREEMENT

     This Agreement (“Agreement”) between Vitesse Semiconductor Corporation (“Vitesse”), a Delaware corporation with its principal office at 741 Calle Plano, Camarillo, California 93012, U.S.A. and Mellanox Technologies, Ltd. (“Mellanox”), an Israeli Company with its principal office at PO Box 586 Yokneam, Israel 20692, is dated as of December 16, 2002.

Background.

     Vitesse is a leading provider of high-speed physical layer semiconductor products for the Communications Market. Mellanox is a fabless semiconductor company with special knowledge of Infiniband technology for switching and routing applications. Mellanox desires to license certain intellectual property of Vitesse to produce and market certain devices and Vitesse is willing to license such intellectual property to Mellanox on the terms and conditions set forth in this Agreement.

     In consideration of the mutual covenants contained in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. License:

1.1 Subject to the payment of Royalties to Vitesse by Mellanox (described in Section 2), Vitesse hereby grants to Mellanox a non-exclusive, worldwide, perpetual right and license (the “License”) to:

1.1.1.	use the Vitesse Technology, more specifically described on Exhibit A, and all patents, copyrights, trade secrets, and documentation related thereto, in existence or hereafter created, modified or developed, that comprise the Vitesse Technology (collectively, the “Technology”) for the development of the Mellanox devices specified in Exhibit B and upgrades to those devices (the “Products”) and,
1.1.2.	use, make, have made, distribute, market, transfer and sell the Products that incorporate the Technology.

1.2 Vitesse agrees to provide the following to Mellanox:

1.2.1.	The 3.1Gb/s SerDes macro cell embodying the Vitesse Technology implemented in TSMC 0.13 micron CMOS process.
1.2.2.	Access to future versions of the 3.1Gb/s SerDes macro implemented in more advanced CMOS technologies as they become available, as negotiated between Mellanox and Vitesse.
1.2.3.	Technical support on issues related to functionality as reasonably requested by Mellanox.
1.2.4.	Sufficient documentation to enable Mellanox to utilize the Vitesse Technology.

1.2.5.	Technical and performance information as developed by Vitesse.
1.2.6.	Access to relevant 13um test chips

2. Royalty Payment:

2.1	Royalty payments for products sold by Mellanox that use the Vitesse Technology will be based on a per SerDes Port basis described in section 2.2 below.
2.2	Royalty Calculation:

2.2.1.	Mellanox will pay Vitesse [*].
2.2.2.	The maximum per-chip royalty in CY2003 and 2004 will be [*] regardless of the number of ports. The maximum per-chip royalty in CY2005 and beyond will be [*] regardless of the number of ports.
2.2.3.	Mellanox will [*] in payments to Vitesse within [*] years from such time that Mellanox begins production shipments of its products incorporating Vitesse 0.13u SERDES technology.
2.2.4.	In the event that Mellanox has not paid Vitesse [*] within [*] per item 2.2.3 above, Mellanox will pay Vitesse a one time balloon payment equal to the difference between the cumulative amount paid at the end of [*].
2.2.5.	Based on Mellanox’s current forecast, [*] dollars in fees paid by Mellanox to Vitesse will be achieved by Q4, 2005.
2.2.6.	Mellanox’s obligation to pay Vitesse a per-port fee will terminate at such a time that Mellanox has paid Vitesse [*] dollars in total fees for use of Vitesse 0.13u SERDES Technology.

2.3

Royalties shall be paid quarterly on or before 30 days after the end of the quarter in which sales of Products giving rise to the Royalty payment obligation occurred. Each Royalty payment shall be accompanied by a report (the “Report”) setting forth the number of Mellanox products sold, the number of SerDes ports per product, and the calculation of the Royalty due thereon.

2.4

Mellanox shall each keep accurate and correct records of Products sold under this Agreement appropriate to determine the amount of royalties due to Vitesse. Such records shall be retained for at least five (5) years from their creation and shall be available for audit at the expense of the questioning party by an independent accountant, approved by both parties, for the sole purpose of verifying royalty payments hereunder. The selected accountant shall only disclose to the questioning party information relating to the accuracy of reports and payments made under this Agreement. If an audit shows a discrepancy in excess of five percent (5%) for any twelve (12) month period, then the party in error shall reimburse the other for the cost of the audit plus any funds owed (including an interest rate that equals U.S. federal funds rate plus 5 % on a yearly basis), such payment to be due within thirty (30) days from the notice of payment due. An audit may be requested on thirty (30) days prior written notice and not more than once in any calendar year. Any audit shall be conducted from 9 a.m. to 5 p.m.

[*] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

2.

	Monday through Friday other than on holidays generally recognized by government agencies in the location where the audited records are located.
2.5	Other Considerations

2.5.1.	Mellanox agrees that it will only use Vitesse Technology for integrated SerDes, for those products defined in Exhibit B, during the term of this Agreement.
2.5.2.	Mellanox will recommend Vitesse products to customers.

3. Intellectual Property.

3.1	Without written approval by Vitesse, Mellanox has no right to reverse engineer, copy, duplicate in any way, disassemble, de-compile, or use in any way not specified by this Agreement, any form of the Technology which is provided to Mellanox under this Agreement.
3.2	Title to all materials and all documentation furnished by Vitesse to Mellanox will remain in Vitesse. Mellanox will deliver to Vitesse any and all materials, documentation and property, including all copies thereof on whatever media rendered, upon the first to occur of:

3.2.1.	Vitesse’s request;
3.2.2.	termination of this Agreement.

4. Warranties.

4.1 Vitesse represents and warrants to Mellanox as follows:

4.1.1.	Vitesse has the authority to grant the rights and License describe herein.
4.1.2.	Vitesse owns or has rights to use and exploit the Technology. No material claims have been made against Vitesse asserting the invalidity or unenforceability of, or with respect to Technology, the misuse of, the Technology, nor is Vitesse aware that any such claims exist. Vitesse has not received a notice of conflict of the Technology with the asserted rights of others, or otherwise challenging its rights to use any of the Technology. None of the rights of Vitesse under the Technology will be adversely affected by the execution, delivery or performance of this Agreement, or the consummation of the transactions contemplated herein.
4.1.3.	The Technology will in all relevant ways conform with the Function Data Sheet, of which a preliminary version is attached hereto as Exhibit A (collectively, the “Specifications”).
4.1.4.	If the Technology fails to conform to the Specifications in Exhibit A, Vitesse shall seek to correct such defect or deficiency as soon as reasonably practicable following receipt of a notice of such defect or deficiency. If Vitesse does not or cannot correct

3.

the defect or deficiency Mellanox shall have the option of terminating this Agreement in accordance with Section 8.

5. Confidential Information.

5.1

Both parties agree that all confidential and proprietary information will be subject to the terms and conditions contained in the Non-Disclosure Agreement executed by the parties, dated as of December 16, 2002 (the “NDA”), which is incorporated herein by reference as Exhibit C. Both parties shall take all necessary and appropriate steps to maintain the confidentiality of the intellectual property and trade secrets comprising the Technology and to keep such from entering the public domain. Mellanox will promptly notify Vitesse of all names of employees, consultants or any other who has been given access to the Technology by Mellanox.

5.2

Neither party will, without the prior written consent of the other party in each instance:

5.2.1.	use in advertising, publicity or otherwise the other’s name or the names of the other’s personnel, nor any trade name, trademark or logo owned by the other or
5.2.2.	make any disclosure of the existence or terms of this Agreement other than to a party’s attorneys, accountants, auditors, investment bankers and other similar advisers who (a) need to know the information, (b) are informed by you of the confidential nature of the information and (c) agree to keep the information confidential.

6. Indemnity.

6.1	Vitesse will indemnify, defend and hold Mellanox harmless from and against any and all claims, demands, liabilities, losses, damages, judgments or settlements, including all reasonable costs and expenses related thereto, including attorneys’ fees (“Losses”), to the extent arising from a claim that the Technology infringes or violates any patent, copyright, mask work right, trade secret or other intellectual property right of a third party.
6.2	Mellanox will indemnify, defend and hold Vitesse harmless from and against any and all claims, demands, liabilities, losses, damages, judgments or settlements, including all reasonable costs and expenses related thereto, including attorney’s fees (“Losses”) to the extent the Products cause damage to property, personal injury and losses resulting therefrom, and Mellanox is liable for such damage.
6.3	Each party will provide the other with reasonable written notice of claims that might trigger the indemnification obligations above. Vitesse and Mellanox each agrees to provide reasonable assistance to and cooperate with the other in the defense of any claims of infringement or violation. The obligations of each party to indemnify the other pursuant to this Agreement apply only if the party seeking indemnification provides reasonable notice of and reasonable assistance in defense of any claim or violation as provided above. Further, the obligations of an indemnifying party to indemnify the indemnified party pursuant to this Agreement will apply only if, at the indemnifying party’s request, the indemnifying party is given sole and exclusive control of the defense of such claim or violation and any and all negotiations relating to such claim or violation. Notwithstanding the foregoing, (a) the

4.

indemnified party may, at its own cost and expense, participate, through attorneys or otherwise, in such investigation, study and defense of such claim or violation and any appeal arising therefrom and (b) no settlement of such claim or violation that involves a remedy other than the payment of money by the indemnifying party will be entered into by the indemnifying party without the prior written consent of the indemnified party, which consent will not be unreasonably withheld.

7. Disclaimer of Damages.

7.1 Except for its obligations under Section 6, neither party will be liable to the other for indirect, punitive, special or consequential damages of any nature.

8. Term and Termination.

8.1	This Agreement shall terminate on the failure of a party to cure any material default under this Agreement within ninety (90) days from the giving of written notice of such default by the other party (or, if cure cannot be accomplished within ninety days, then failure to use its best efforts to cure the default within such period).
8.2	Effective immediately and without any requirement of notice, either party may, at its option, terminate this Agreement and/or suspend its performance in the event that:

8.2.1.	the other party files a petition in bankruptcy, files a petition seeking any reorganization, arrangement, composition, or similar relief under any law regarding insolvency or relief for debtors, or makes an assignment for the benefit of creditors;
8.2.2.	a receiver, trustee or similar officer is appointed for all or substantially all of the business or property of such party;
8.2.3.	any involuntary petition or proceeding under bankruptcy or insolvency laws is instituted against such party and not stayed, enjoined or discharged within sixty days; or
8.2.4.	the other party adopts a resolution for discontinuance of its business or for dissolution.

8.3 Upon termination of this Agreement by Mellanox without cause, Mellanox shall have the right thereafter and for a period of one year from the effective date of the termination, to:

8.3.1.	market or have marketed the Products in stock or production as of the effective date of termination; and,
8.3.2.	complete or have completed all orders and firm commitments for Products accepted or made prior to the effective date of termination, subject to the payment by Mellanox to Vitesse of Royalties.

8.4 In the event Mellanox ceases to market the Products or fails to keep the Products reasonably available in the market, Vitesse shall have the right to terminate this Agreement, and all rights in the Technology shall revert back to Vitesse, subject to Mellanox’s rights to continue to:

5.

8.4.1.	market or have marketed the Products for a period of one year from the effective date of termination; and
8.4.2.	complete or have completed all orders and firm commitments for Products accepted or made prior to the effective date of termination, subject to the payment by Mellanox to Vitesse of Royalties.

8.5	Termination pursuant to this Agreement shall be without prejudice to any rights or remedies of the parties at law or in equity and shall not relieve any party from any liabilities arising prior to such termination.
8.6	Royalties are non-refundable and cannot be claimed back by Mellanox upon termination.

9. Miscellaneous.

9.1	Neither party may assign or transfer any interest in this Agreement without the prior written consent of the other, provided, however, that either party may assign its rights and obligations to an affiliate or to a successor in interest to substantially all of that party’s business and assets. This Agreement is binding upon and will inure to the benefit of the parties and their respective successors, assigns, and legal representatives.
9.2	The parties are independent contractors and not partners, agents, or employees of each other.
9.3	This Agreement, the NDA and the Exhibits hereto contain the entire agreement between the parties relating to their subject matter and there are no agreements or understandings except as set forth herein and therein.
9.4	This Agreement will be governed by and construed in accordance with the laws of California. Contractor agrees that, at Vitesse’s election, all actions and proceedings arising from or related to this Agreement will be litigated in courts within Los Angeles, California. Contractor consents and submits to the jurisdiction and venue of any local, state or federal court located within Los Angeles, California.
9.5	If either party employs attorneys to enforce any rights arising out of or relating to this Agreement, the prevailing party shall be entitled to recover reasonable attorneys’ fees and costs.
9.6	This Agreement may not be modified or amended except by a writing signed by both parties.

9.6.1.

Any notice required or permitted to be given hereunder shall, except where specifically provided otherwise, be given in writing to the person listed below by personal delivery, registered or certified mail, return receipt requested, express delivery service or facsimile. The date upon which any such notice is personally delivered, (or if the notice is given by registered or certified mail, three (3) business days from sending, or if by express delivery service or facsimile upon receipt) shall be deemed to be the date of such notice, irrespective of the date appearing therein.

9.6.2.

If to Vitesse: Vitesse Semiconductor Corporation

                     741 Calle Plano
                    Camarillo, California 93012
                    USA

6.

                     Attention: Lynn Jones, Manager of Legal Relations

9.6.3. If to Mellanox: Mellanox Technologies Inc.

                     2900 Stender Way
                     Santa Clara, California 95054
                     USA
                     Attention: Merle McClendon

	or addressed to a person or party at such other address as that party may have given by written notice in accordance with this provision.
9.7	In the event of a breach or threatened breach of the provisions of Section 5, the non-breaching party will be entitled to an injunction restraining such breach or threatened breach without having to prove actual damages or threatened irreparable harm. Such injunctive relief as the non-breaching party may obtain will be in addition to all of the rights and remedies available at law and in equity.
9.8	The invalidity in whole or in part of any provision of this Agreement shall not affect the validity of other provisions.
9.9	Either party’s failure to insist on performance of any provision of this Agreement, or to exercise any right herein conferred, will not be construed as a waiver of the other party’s right to assert or rely on that provision or right, or any similar provision or right, in any later instance.
9.10	This Agreement may be signed in counterparts and all signed copies of this Agreement will together constitute one original of this Agreement.

10.	The parties shall perform such further acts and shall execute and deliver such further instruments as are reasonably necessary to carry out the purposes of this Agreement.
11.	If Mellanox desires to produce devices with additional or other functionality containing Vitesse’s intellectual property the parties will negotiate, in good faith, the terms and conditions of a separate agreement.
12.	Sections 2, 3, 4, 5, 6, 7, 8.3, 8.4, 8.5, and 9 will survive the expiration or termination of this Agreement.

VITESSE SEMICONDUCTOR		MELLANOX TECHNOLOGIES, LTD.
CORPORATION
By:	/s/ [ILLEGIBLE]	By:	/s/ E. Waldman
Title: VP/GM		Title: CEO
Date: Feb 06, 2003		Date: Jan 31, 2003

Exhibits:
A: Specification of Vitesse Technology

B: Definition of Mellanox Products Using the Technology

C: NDA

7.

Exhibit A

The “Technology”

Summary of Vitesse 3.125Gb/s SerDes IP in 0.13um CMOS
- - Vitesse Confidential -

Overview

This summary outlines the salient features of the SerDes intellectual properties (IP’s) developed by Vitesse Corp. in 0.13um CMOS technology. In order to support a wide variety of configuration, the [*] are [*] into [*] as following:

• [*]

• [*]

• [*]

• [*]

• [*]

• [*]

These [*] are designed to require [*] when combining them into [*] [*]. Following figure shows the [*] of these [*] to form a typical [*].

[*]

[*] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

8.

[*] Descriptions

This section provides a short description of each Serdes IP cell. These cells are [*] to [*] the [*] up to [*]. Detailed specifications for each [*] are available.

[*]

Following are features of the [*]

• Provide a [*] which can [*] at the [*] to the [*].

• Provide [*] at the [*] to support [*] when [*] from the [*] into the [*].

• Provide [*] to the [*] to [*].

• Provide features to [*] [*] [*] for the [*] and the [*] [*] of the [*] itself.

[*]

Following are features of the [*].

• Provide a [*] which can [*] the [*] into [*] [*] [*].

• Provide [*] to [*]the [*] from the [*].

• Provide [*] to the [*] to [*].

• Provide features to [*] [*] [*] for the [*] and the [*] [*] of the [*] itself.

[*]

Following are features of the [*].

• [*] designed to be [*] with [*] and [*] standard[*].

• [*] to [*] due to [*]. The [*] of the [*] can be [*] up to [*].

• Provide [*] [*]. The [*] for [*] can be [*] up to [*].

• [*] and [*] function.

[*]

Following are features of the [*].

• [*] designed to be [*] with [*] and [*] standard [*].

• [*] to [*]. The [*] of the [*] can be [*] up to [*].

• [*] and [*] function.

[*]

Following are features of the [*].

• [*] to [*] the [*] to [*]. It provides a [*] [*] of [*].

[*] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

9.

• [*] of the [*] at [*] to the [*] and [*].

• [*] to [*] This [*] can be [*] to be a [*] [*] of the [*].

• Provide [*] and [*] [*] functions. Provide functions to force the [*] to [*] to [*] or [*].

• [*] [*] and [*].

[*]

Following are features of the [*].

• Provide a [*] and [*] method to support [*] on the [*]. This method allows a [*] to address a [*] of [*] or to [*] of [*] of [*] on the [*].

• Provide [*] to [*] the [*] between the [*] of the [*].

• Provide [*] to [*] [*] of the [*] over [*] or [*] [*].

• Provide [*] of the [*] to [*] [*] and [*].

[*] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

10.

Exhibit B

The “Products”

Mellanox Infiniband products: [*] [*].

The Technology may be used to implement a [*] in Infiniband [*] [*].

[*] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

11.

Contract No.:                                                            

Effective Date:                                         

Exhibit C

Bi-Lateral Confidentiality and Non-Disclosure Agreement

This Bi-Lateral Confidentiality and Non-Disclosure Agreement is entered into and effective on December 16, 2002 by and between Mellanox Technologies, Ltd. having a principal place of business at PO Box 586, Yokneam, Israel 20692 (“Customer”) and Vitesse Semiconductor Corporation, a Delaware, U.S.A. corporation with a principal place of business at 741 Calle Plano, Camarillo, California 93012.

Either or both Vitesse and Mellanox have disclosed or will disclose to the other certain confidential and proprietary information (“Information”) further described as: the Technology and Intellectual Property described in Exhibit B of this agreement.

The parties desire that Information exchanged be used solely for the purpose of conducting business with each other and desire to set forth their agreement regarding the limited use and preservation of confidentiality of such Information. Each of the parties acknowledges that the other party’s Information is a valuable, special, and unique asset of such party. Each party therefore agrees, for itself and on behalf of its officers, directors, agents, employees and affiliates, to use reasonable care to keep all such Information in confidence, to use Information solely for conducting business with the other, and not to disclose any portion of the Information to any third party without the prior written consent of the disclosing party.

In order to ensure that the Information disclosed by one party to the other is used only in accordance with the purposes stated above, the parties agree to the following:

1.	Information that is easily markable, whether in hard copy or electronic form, that the disclosing party in good faith regards as confidential and/or proprietary will be clearly marked as “Confidential”, “Proprietary”, or with other words indicating the sensitive nature of the Information. Any information orally disclosed by one party to the other will be deemed Information hereunder if, within thirty (30) days after the disclosure, the disclosing party so identifies it in writing to the other. Neither party will disclose to third parties or fail to treat as Information any information received orally from the disclosing party unless the disclosing party fails for thirty (30) days after such disclosure to identify the Information disclosed as being confidential or proprietary.
2.	Information otherwise protected hereunder will not include Information that the receiving party can demonstrate: (i) is now in or hereafter enters the public domain without any violation of this Agreement; (ii) was known to the receiving party prior to the time of disclosure by the disclosing party; or (iii) was disclosed in good faith to the receiving party by a third party legally entitled to disclose the same; provided, however, that specific Information will not be deemed to be within any of the foregoing exceptions merely because it is in the scope of more general Information.
3.	If the receiving party is confronted with legal action to disclose Information, the receiving party will promptly notify the disclosing party. The receiving party will reasonably assist the disclosing party in obtaining a protective order requiring that any portion of the Information required to be disclosed be used only for the purpose for which a court issues an order or for such other purposes as required by law. Each party will bear its own legal expenses.
4.	All Information will remain the property of the disclosing party. At the disclosing party’s written request, the Information in any tangible form will be promptly returned or destroyed together with all copies thereof. Upon written request, the receiving party will provide written certification of the destruction.
5.	The parties each acknowledge that should this Agreement be breached, remedies available at law are inadequate, and proving damages impracticable. The parties therefore agree that, in addition to all other rights and remedies available at law or in equity, the aggrieved party will be entitled to injunctive relief upon any such breach. The breaching party will pay to the aggrieved party all attorneys’ fees and costs incurred by the aggrieved party as a result of such breach.
6.	All notices required under this Agreement will be considered given if sent by certified mail, postage prepaid, and addressed as shown in Section 9.6 of the agreement (unless the addresses have been changed by written notice):
7.	The term of this Agreement is three (3) years from the effective date. The obligations under this Agreement will survive for five (5) years following termination of the parties’ association regardless of the manner of such termination, and will be binding upon their successors and assigns.
8.	This Agreement will be governed by, and interpreted in accordance with, the laws of the State of California.
9.	The receiving party will comply in all respects with U.S. Export and Re-Export laws and regulations applicable to any Information.

IN WITNESS WHEREOF, the parties have executed this Agreement in duplicate originals.

Vitesse Semiconductor Corporation	Mellanox Technologies, Ltd.
/s/ Mark E. Koenig	/s/ E. Waldman
Name & Title Mark E. Koenig VP/GM	Name & Title Eyal Waldman CEO
Date Feb 06, 2003	Date Jan 31, 2003

EX-10.7

Exhibit 10.7

NET LEASE AGREEMENT

(Single Tenant)

For and in consideration of the rentals, covenants, and conditions hereinafter set forth, Landlord hereby leases to Tenant, and Tenant hereby rents from Landlord, the herein described Premises for the term, at the rental and subject to and upon all of the terms, covenants and agreements set forth in this Net Lease Agreement (“Lease”):

     1. Summary of Lease Provisions.

          1.1 Tenant: Mellanox Technologies, Inc., a California corporation (“Tenant”).

          1.2 Landlord: S.I. Hahn, LLC, a California limited liability company (“Landlord”).

          1.3 Date of Lease, for reference purposes only: January 1, 2002.

          1.4 Premises: That entire building (“Building”), consisting of approximately twenty three thousand eight hundred (23,800) square feet, more or less, located at 2900-2902 Stender Way in the City of Santa Clara, County of Santa Clara, State of California, shown cross- hatched on the site plan attached hereto as Exhibit “A”, together with certain rights appurtenant thereto. (Paragraph 2.1)

          1.5 Term: Fifty-four (54) months, unless earlier terminated in accordance with the terms of this Lease. (Paragraph 3)

          1.6 Commencement Date: January 1, 2002. (Paragraph 3)

          1.7 Ending Date: June 30, 2006. (Paragraph 3)

          1.8 Rent:

Months Initial Lease Term	Monthly Rent NNN
1-6	$	24,000	1 - 02
7-18	$	40,000	7 - 02
19-30	$	41,600	7 - 03
31-42	$	43,264	7 - 04
43-54	$	44,995	7 - 05

(Paragraph 4)

Receipt of the first month’s Rent is payable by Tenant at execution of this Lease and shall be applied by Landlord to such first month’s Rent.

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          1.9 Use of Premises: General office, research and development and product demonstration. (Paragraph 6)

          1.10 Security Deposit: Forty-four Thousand Nine Hundred Ninety-five Dollars ($44,995). Landlord acknowledges that it already is in receipt of Thirty Thousand Dollars ($30,000) from Tenant and concurrently with the execution of this Lease, Tenant shall pay to Landlord the remaining Fourteen Thousand Nine Hundred Ninety-five Dollars ($14,995) of the Security Deposit (Paragraph 5)

          1.11 Addresses for Notices:

          To Landlord:

          SI Hahn LLC

          c/o SIH Investment, Inc.

          21580 Stevens Creek Blvd., Suite 107

          Cupertino, CA. 95014

          Attn: Sang Hahn

          To Tenant: To the Premises.

          1.12 Non-exclusive Right to Use No More than ninety-two (92) parking spaces within the Common Area. (Paragraph 2.1)

          1.13 Summary Provisions in General. Parenthetical references in this Paragraph 1 to other paragraphs in this Lease are for convenience of reference, and designate some of the other Lease paragraphs where applicable provisions are set forth. All of the terms and conditions of each such referenced paragraph shall be construed to be incorporated within and are made a part of each of the above referring Summary of Lease Provisions. In the event of any conflict between any Summary of Lease Provision as set forth above and the balance of the Lease, the latter shall control.

     2. Property Leased.

          2.1 Premises. Landlord hereby leases to Tenant and Tenant hereby leases from Landlord, upon the terms and conditions herein set forth, that certain building (“Premises”) referred to in Paragraph 1.4 above, shown cross-hatched on the site plan attached hereto as Exhibit “A”. In addition, Tenant shall have the following rights with respect to the real property (excluding buildings located thereon) more particularly described in the legal description attached as Exhibit “B” hereto (if applicable) and outlined in red on Exhibit “A” (“Common Area”): (i) the non-exclusive right to use no more than the number of parking spaces set forth in Paragraph 1.12 above, within the Common Area (and not allocated for the exclusive use of another tenant of Landlord); and (ii) such other rights as are necessary and convenient to Tenant’s possession of the Premises or performance of Tenant’s obligations under this Lease. Notwithstanding the number of parking spaces designated for Tenant’s non-exclusive use, in the

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event by reason of any rule, regulation, order, law, statute, ordinance or other requirement of any governmental or quasi-governmental authority now or hereafter in effect (collectively, “Laws”) relating to or affecting parking on the Common Area, or any other cause beyond Landlord’s reasonable control, Landlord is required to reduce the number of parking spaces on the Common Area, Landlord shall have the right to proportionately reduce the number of parking spaces designated herein for Tenant’s non-exclusive use, but not below 75% of such number of parking spaces referred to in Paragraph 1.12. In addition, Landlord grants to Tenant a non-exclusive easement for vehicular ingress and egress in and over the paved roadways in the Common Area and pedestrian ingress and egress in and over the Common Area.

     Landlord reserves the right to grant to tenants of the buildings or improvements which now exist or may hereafter be constructed upon the Common Area or upon real property owned by Landlord adjacent to the Common Area, and to the agents, employees, servants, invitees, contractors, guests, customers and representatives of such tenants or to any other user authorized by Landlord, the non-exclusive right to use the Common Area for pedestrian and vehicular ingress and egress and vehicular parking unless the grant of such rights to tenants of such other buildings or improvements would adversely affect access to the Premises or to the parking areas, or would reduce the number of parking spaces available to Tenant, or would add or increase any costs or expenses charged to Tenant by Landlord under this Lease (including, but not limited to, Common Area Operating Expenses) beyond those costs reasonably anticipated to be incurred as a result of the customary use of the parking areas by such other tenants and their respective agents, employees, servants, invitees, contractors, guests, customers and representatives.

          2.2 Acceptance of Premises. Tenant acknowledges that prior to the execution of this Lease, Tenant was occupying approximately 8,230 rentable square feet of the Building pursuant to the terms of a Standard Form Sublease dated May 18, 2001, between Set Engineering, a California corporation, as Sublease, and Tenant, as Sublessee (the “Mellanox Sublease”). Sublessor’s rights and interests under the Mellanox Sublease referred to in the immediately preceding sentence were assigned by Set Engineering to Landlord pursuant to the terms of that certain Assignment of Tenant’s Interest in Lease and Sublease dated November 27, 2001. Landlord and Tenant acknowledge and agree that the Sublease shall be deemed terminated as of December 31, 2001 (except that all of Tenant’s obligations under the Sublease accruing prior to the Commencement Date of this Lease, including, without limitation, all of Tenant’s indemnification obligations under the Sublease, shall survive the termination of the Sublease), and this Lease shall govern the rights and obligations of Landlord and Tenant with respect to the entire Premises as of the Commencement Date and throughout the Lease Term (as defined in Paragraph 3.1. By taking possession of the balance of the Premises not previously covered by the aforementioned Sublease, Tenant shall be deemed to have accepted the entire Premises as being in good and sanitary order, condition and repair. Tenant agrees to accept possession of the entire Premises in its then existing condition, “as-is”, including all latent and patent defects, and subject to all applicable laws, covenants, conditions, restrictions, easements and other matters of public record and the reasonable rules and regulations from time to time promulgated by Landlord governing the use of the Premises and Common Area. Landlord hereby represents to Tenant that, to the current actual knowledge of Landlord (without any duty of inquiry or investigation), the structural roof and roof surface, structural and exterior walls and foundations of the Premises are

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in good order and repair and the electrical, plumbing, lighting, heating and air conditioning systems and any other building systems within the Premises are in good order, condition and repair. Except as otherwise expressly provided in this Paragraph 2.2, Tenant acknowledges that neither Landlord nor Landlord’s agents have made any representation or warranty as to the suitability of the Premises for the conduct of Tenant’s business, the condition of the Premises, or the use or occupancy which may be made thereof and Tenant has independently investigated and is satisfied that the Premises are suitable for Tenant’s intended use and that the Premises meets all governmental requirements for such intended use.

     In the event the Building is not in compliance with any applicable laws, rules, regulations or ordinances in effect as of the Commencement Date of this Lease, Tenant shall have no obligation to contribute to the cost of bringing the Building into such compliance. In the event any seismic improvements are required as a result of any tenant improvement work contemplated to be performed by Tenant pursuant to the terms of this Lease, then Tenant shall bear 100% of the costs of undertaking such seismic improvements. Tenant shall not be liable under this Lease for the costs of correcting defects in the construction of the Building or cleaning up or remediating any environmental conditions that exist on, in or under the Premises or Building or Common Areas as of the Commencement Date of this Lease, except to the extent caused by or contributed to by Tenant or any of its agents, employees, contractors or other representatives.

     3. Term.

          3.1 Commencement Date. The term of this Lease (“Lease Term”) shall be for the period specified in Paragraph 1.5 above, commencing on the date set forth in Paragraph 1.6 (“Commencement Date”). The expiration of the Lease Term or sooner termination of this Lease is referred to herein as the “Lease Termination”.

          3.2 Delay of Commencement Date. Landlord shall not be liable for any damage or loss incurred by Tenant for Landlord’s failure for whatever cause to deliver possession of the Premises, or any portion thereof, by any particular date (including the Commencement Date), nor shall this Lease be void or voidable on account of such failure to deliver possession of the Premises; provided that if Landlord does not deliver possession of the Premises to Tenant by the date which is ninety (90) days from the date this Lease is executed by both parties, Tenant shall have the right to terminate this Lease by written notice delivered to Landlord within five (5) days thereafter, and Landlord and Tenant shall be relieved of their respective obligations hereunder; provided further that said ninety (90) day period shall be extended by the number of days work on the Premises is delayed due to fault or neglect of Tenant, acts of Tenant or Tenant’s agents, or due to acts of God, labor disputes, strikes, fires, rainy or stormy weather, acts or failures to act of public agencies, inability to obtain labor or materials, earthquake, war, insurrection, riots and other causes beyond Landlord’s reasonable control.

          3.3 Early Occupancy. Landlord hereby agrees that Tenant may enter the balance of the Premises not covered by the Sublease referred to above prior to the

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Commencement Date for purposes of installing its telephone and other data and telecommunications systems therein, to fixturize and perform general clean up. If Tenant takes possession of the Premises prior to the Commencement Date, Tenant shall do so subject to all of the terms and conditions hereof except that Tenant shall not be obligated to commence paying Rentals (defined in Paragraph 4.3) provided for herein until the Commencement Date (i.e. January 1, 2002).

     4. Rent.

          4.1 Rent. Tenant shall pay to Landlord as rent for the Premises (“Rent”), in advance, on the first day of each calendar month, commencing on the date specified in Paragraph 1.6 and continuing throughout the Lease Term the Rent set forth in Paragraph 1.8 above. Rent shall be prorated, based on thirty (30) days per month, for any partial month during the Lease Term. Rent shall be payable without deduction, offset, prior notice or demand in lawful money of the United States to Landlord at the address herein specified for purposes of notice or to such other persons or such other places as Landlord may designate in writing.

          4.2 Late Charge. Tenant hereby acknowledges that late payment by Tenant to Landlord of Rent or any other sums required to be paid by Tenant to Landlord under this Lease will cause Landlord to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. Such costs include, but are not limited to, processing and accounting charges, and late charges which may be imposed on Landlord by the terms of any mortgage or deed of trust covering the Premises. Accordingly, Tenant shall pay to Landlord, as Additional Rent (as defined in Paragraph 4.3 below), without the necessity of prior notice or demand, a late charge equal to four percent (4%) of any installment of Rent or other sum required to be paid by Tenant to Landlord under this Lease which is not received by Landlord within five (5) days after the due date for such installment. The parties hereby agree that such late charge represents a fair and reasonable estimate of the costs Landlord will incur by reason of late payment by Tenant. In no event shall this provision for a late charge be deemed to grant to Tenant a grace period or extension of time within which to pay any installment of Rent or Additional Rent (defined in Paragraph 4.3 below) or prevent Landlord from exercising any right or remedy available to Landlord upon Tenant’s failure to pay such installment of Rent or Additional Rent when due, including without limitation the right to terminate this Lease. In the event any installment of Rent or any other sum required to be paid by Tenant to Landlord under this Lease is not received by Landlord by the thirtieth (30th) day after the due date for such installment or sum, such installment or sum shall bear interest at the annual rate set forth in Paragraph 35 below, commencing on the due date for such installment or sum and continuing until such installment or sum is paid in full.

          4.3 Additional Rent. All taxes, charges, costs and expenses and other sums which Tenant is required to pay hereunder (together with all interest and charges that may accrue thereon in the event of Tenant’s failure to pay the same), and all damages, costs and expenses which Landlord may incur by reason of any Default by Tenant shall be deemed to be additional rent hereunder (“Additional Rent”). Additional Rent shall accrue commencing on the

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Commencement Date. In the event of nonpayment by Tenant of any Additional Rent, Landlord shall have all the rights and remedies with respect thereto as Landlord has for the nonpayment of Rent. The term “Rentals” as used in this Lease shall mean Rent and Additional Rent.

     5. Security Deposit. Concurrently with Tenant’s execution of this Lease, Tenant shall deposit with Landlord an additional Fourteen Thousand Nine Hundred Ninety-five Dollars ($14,995) which, when added to the Thirty Thousand Dollar ($30,000) currently held by Landlord as the security deposit paid by Tenant, as sublessee, under the Sublease referred to above, shall constitute a Forty-four Thousand Nine Hundred Ninety-five Dollar ($44,995) security deposit under this Lease (“Security Deposit”). Tenant acknowledges that Landlord shall not be obligated to return such Thirty Thousand Dollars ($30,000) to Tenant following the termination of the Sublease referred to above and, instead, such Thirty Thousand Dollars ($30,000) shall be part of the Security Deposit paid by Tenant under this Lease. The $44,995 Security Deposit shall be held by Landlord as security for the faithful performance by Tenant of each and every term, covenant and condition of this Lease applicable to Tenant; and not as prepayment of Rent. Landlord shall not be obligated to segregate such Security Deposit in a separate account or not commingle such Security Deposit with other funds of Landlord. Landlord shall not be obligated to pay Tenant any interest on the Security Deposit. If Tenant shall at any time fail to keep or perform any term, covenant or condition of this Lease applicable to Tenant, including, without limitation, the payment of Rentals or those provisions requiring Tenant to repair damage to the Premises caused by Tenant or to surrender the Premises in the condition required pursuant to Paragraph 35 below, Landlord may, but shall not be obligated to and without waiving or releasing Tenant from any obligation under this Lease, use, apply or retain the whole or any part of the Security Deposit reasonably necessary for the payment of any amount which Landlord may spend by reason of Tenant’s default or as necessary to compensate Landlord for any loss or damage which Landlord may suffer by reason of Tenant’s default. In the event Landlord uses or applies any portion of the Security Deposit, Tenant shall, within five (5) days after written demand by Landlord, remit to Landlord sufficient funds to restore the Security Deposit to its original sum (i.e. $44,995). Failure by Tenant to so remit funds shall be a Default by Tenant. Should Tenant comply with all of the terms, covenants and conditions of this Lease applicable to Tenant, the balance of the Security Deposit shall be returned to Tenant within fourteen (14) days after Lease Termination and surrender of the Premises by Tenant; provided, however, if any portion of the Security Deposit is to be applied to repair damages to the Premises caused by Tenant or Tenant’s agents, to clean the Premises, or to remove alterations and restore the Premises pursuant to Paragraph 13.2 below, then the balance of the Security Deposit shall be returned to Tenant no later than thirty (30) days after the date Landlord receives possession of the Premises.

     6.  Use of Premises.

          6.1 Permitted Uses. Tenant shall use the Premises and the Common Area only in conformance with applicable Laws for the purposes set forth in Paragraph 1.9 above, and for no other purpose without the prior written consent of Landlord, which consent Landlord may withhold in its sole discretion. Any change in use of the Premises or the Common Area without the prior written consent of Landlord shall be a Default by Tenant. Tenant and Tenant’s agents

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shall comply with the provisions of any Declaration of Covenants, Conditions, and Restrictions affecting the Premises and the Common Area.

          6.2 Tenant to Comply with Legal Requirements. Subject to the terms of the second paragraph of Section 2.2 above, Tenant shall, at its sole cost, promptly comply with all Laws relating to or affecting the use, occupational safety, occupancy or condition of the Premises or the Common Area, now in force, or which may hereafter be in force, including without limitation those relating to utility usage and load or number of permissible occupants or users of the Premises, whether or not the same are now contemplated by the parties; with the provisions of all recorded documents affecting the Premises or the Common Area insofar as the same relate to or affect the use, occupational safety, occupancy, or condition of the Premises or the Common Area; and with the requirements of any board of fire underwriters (or similar body now or hereafter constituted) relating to or affecting the use, occupational safety, occupancy or condition of the Premises or the Common Area. Tenant’s obligations pursuant to this Paragraph 6.2 shall include without limitation maintaining or restoring the Premises and the Common Area and making structural and non-structural alterations and additions in compliance and conformity with all Laws and recorded documents relating to the use, occupational safety, occupancy or condition of the Premises or the Common Area during the Lease Term; provided, however, that Landlord shall make any alteration or addition required to bring the Premises or the Common Area into compliance with legal requirements in effect at the time the Premises, any improvements installed therein by Landlord, or the Common Area, respectively, were originally constructed. At Landlord’s option, Landlord may make the required alteration, addition or change, and Tenant shall pay the cost thereof as Additional Rent. The preceding notwithstanding, subject to the provisions of the second paragraph of Paragraph 2.2 above, Tenant shall have no obligation to correct any code violations or violations of Law that may exist with respect to the Premises, the Building or the Common Area as of the Commencement Date of this Lease. With respect to any structural alterations or additions as may be hereafter required due to a change in Laws and unrelated to Tenant’s specific use of the Premises or the Common Area or Tenant’s alterations or improvements, Tenant shall be required to pay the amortized cost of such structural alteration or addition, which amount shall be determined as follows: (a) all costs paid by Landlord to construct such alteration or addition (including financing costs) shall be fully amortized over the useful life of such alteration or addition (as determined by Landlord in good faith) with interest on the unamortized balance at the prevailing market rate Landlord would pay if it borrowed funds to construct such alteration or addition from an institutional lender, and (b) as Additional Rent, Tenant shall pay the entire monthly amortized payment with respect to such structural alteration or addition. Tenant’s obligation to make payments under the immediately preceding sentence with respect to any structural alteration or addition that is required due to a change in Laws and unrelated to Tenant’s specific use of the Premises or Common Area or Tenant’s alterations or improvements shall commence when such alteration or addition has been substantially completed and shall cease upon the earlier of the expiration of the Lease Term (but not upon a termination due to any Default on the part of Tenant) or the end of the term over which the costs of constructing the particular alteration or addition were amortized. Payments of such Additional Rent shall be made concurrently with payments of monthly Rent. Tenant shall obtain prior to taking possession of the Premises any permits, licenses or other authorizations required for the lawful operation of its

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business at the Premises. The judgment of any court of competent jurisdiction or the admission of Tenant in any action or proceeding against Tenant, regardless of whether Landlord is a party thereto or not, that Tenant has violated such Law or recorded document relating to the use, occupational safety, occupancy or condition of the Premises or the Common Area shall be conclusive of the fact of such violation by Tenant. Any alterations or additions undertaken by Tenant pursuant to this Paragraph 6.2 shall be subject to the requirements of Paragraph 13.1 below.

          6.3 Prohibited Uses. Tenant and Tenant’s agents shall not commit or suffer to be committed any waste upon the Premises. Tenant and Tenant’s agents shall not do or permit anything to be done in or about the Premises or Common Area which will in any way obstruct or interfere with the rights of any authorized users of the Common Area or occupants of neighboring property, or injure or unreasonably annoy them. Tenant shall not conduct or permit any auction or sale open to the public to be held or conducted on or about the Premises or Common Area. Tenant and Tenant’s agents shall not use or allow the Premises to be used for any unlawful, immoral or hazardous purpose or any purpose not permitted by this Lease, nor shall Tenant or Tenant’s agents cause, maintain, or permit any nuisance in, on or about the Premises. Tenant and Tenant’s agents shall not do or permit anything to be done in or about the Premises or Common Area nor bring or keep anything in the Premises or Common Area which will in any way increase the rate of any insurance upon the Premises or Common Area or any part thereof or any of its contents, or cause a cancellation of any insurance policy covering the Premises or Common Area or any part thereof or any of its contents, nor shall Tenant or Tenant’s agents keep, use or sell or permit to be kept, used or sold in or about the Premises any articles which may be prohibited by a standard form policy of fire insurance. In the event the rate of any insurance upon the Premises or Common Area or any part thereof or any of its contents is increased because of the acts or omissions of Tenant or Tenant’s agents, Tenant shall pay, as Additional Rent, the full cost of such increase; provided however this provision shall in no event be deemed to constitute a waiver of Landlord’s right to declare a default hereunder by reason of such increase or of any other rights or remedies of Landlord in connection with such increase. Tenant and Tenant’s agents shall not place any loads upon the floor, walls or ceiling of the Premises which would endanger the Premises or the structural elements thereof, nor place any harmful liquids in the drainage system of the Premises. No waste materials or refuse shall be dumped upon or permitted to remain upon any part of the Premises or Common Area except in enclosed trash containers. No materials, supplies, equipment, finished products (or semifinished products), raw materials, or other articles of any nature shall be stored upon, or be permitted to remain on, any portion of the Common Area.

     Landlord shall have the right to require Tenant, at Tenant’s own expense and within a reasonable period of time, to use Tenant’s commercially reasonable efforts to terminate or control any picketing, work stoppage or other concerted activity related to Tenant’s business operations to the extent necessary to eliminate any interference with the operation of the Common Area or other tenants who use the Common Area. Nothing contained in this paragraph shall be construed as placing Landlord in an employer-employee relationship with any of Tenant’s employees or with any other employees who may be involved in such activity.

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          6.4 Hazardous Materials. Except as otherwise expressly provided in Section 25.1 below, neither Tenant nor Tenant’s agents shall permit the introduction, placement, use, storage, manufacture, transportation, release or disposition (collectively “Release”) of any Hazardous Material(s) (defined below) on or under any portion of the Premises or Common Area without the prior written consent of Landlord, which consent may be withheld in the sole and absolute discretion of Landlord without any requirement of reasonableness in the exercise of that discretion. Notwithstanding the immediately preceding sentence to the contrary, Tenant may use de minimis quantities of the types of materials which are technically classified as Hazardous Materials but commonly used in domestic or office use (such as bathroom cleaners, toner, and white-out) to the extent not in an amount, which, either individually or cumulatively, would be a “reportable quantity” under any applicable Law. Tenant covenants that, at its sole cost and expense, Tenant will comply with all applicable Laws with respect to the Release of such permitted Hazardous Materials. Any Release beyond the scope allowed in this paragraph shall be subject to Landlord’s prior consent, which may be withheld in Landlord’s sole and absolute discretion, and shall require an amendment to the Lease in the event Landlord does consent which shall set forth the materials, scope of use, indemnification and any other matter required by Landlord in Landlord’s sole and absolute discretion. Tenant shall indemnify, defend and hold Landlord and Landlord’s agents harmless from and against any and all claims, losses, damages, liabilities, or expenses arising in connection with the Release of Hazardous Materials by Tenant, Tenant’s agents or any other person using the Premises during the Lease Term. Tenant’s obligation to defend, hold harmless and indemnify pursuant to this Paragraph 6.4 shall survive Lease Termination.

     As used in this Lease, the term “Hazardous Materials” means any chemical, substance, waste or material which has been or is hereafter determined by any federal, state or local governmental authority to be capable of posing risk of injury to health or safety, including without limitation, those substances included within the definitions of “hazardous substances,” “hazardous materials,” “toxic substances,” or “solid waste” under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, the Resource Conservation and Recovery Act of 1976, and the Hazardous Materials Transportation Act, as amended, and in the regulations promulgated pursuant to said laws; those substances defined as “hazardous wastes” in section 25117 of the California Health & Safety Code, or as “hazardous substances” in section 25316 of the California Health & Safety Code, as amended, and in the regulations promulgated pursuant to said laws; those substances listed in the United States Department of Transportation Table (49 CFR 172.101 and amendments thereto) or designated by the Environmental Protection Agency (or any successor agency) as hazardous substances (see, e.g., 40 CFR Part 302 and amendments thereto); such other substances, materials and wastes which are or become regulated or become classified as hazardous or toxic under any Laws, including without limitation the California Health & Safety Code, Division 20, and Title 26 of the California Code of Regulations; and any material, waste or substance which is (i) petroleum, (ii) asbestos, (iii) polychlorinated biphenyls, (iv) designated as a “hazardous substance” pursuant to section 311 of the Clean Water Act of 1977, 33 U.S.C. sections 1251 et seq. (33 U.S.C. Section 1321) or listed pursuant to section 307 of the Clean Water Act of 1977 (33 U.S.C. Section 1317), as amended; (v) flammable explosives; (vi) radioactive materials; or (vii) radon gas.

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     7. Taxes.

          7.1 Personal Property Taxes. Tenant shall cause Tenant’s trade fixtures, equipment, furnishings, furniture, merchandise, inventory, machinery, appliances and other personal property installed or located on the Premises (collectively the “personal property”) to be assessed and billed separately from the Premises. Tenant shall pay before delinquency any and all taxes, assessments and public charges levied, assessed or imposed upon or against Tenant’s personal property. If any of Tenant’s personal property shall be assessed with the real property comprising the Common Area or with the Premises, Tenant shall pay to Landlord, as Additional Rent, the amounts attributable to Tenant’s personal property within ten (10) days after receipt of a written statement from Landlord setting forth the amount of such taxes, assessments and public charges attributable to Tenant’s personal property. Tenant shall comply with the provisions of any Law which requires Tenant to file a report of Tenant’s personal property located on the Premises.

          7.2 Other Taxes Payable Separately by Tenant. Tenant shall pay (or reimburse Landlord, as Additional Rent, if Landlord is assessed), prior to delinquency or within ten (10) days after receipt of Landlord’s statement thereof, any and all taxes, levies, assessments or surcharges relating to the Premises and payable by Landlord or Tenant (other than Taxes (defined in Paragraph 7.3(a) below) otherwise payable as an Operating Expense, and Landlord’s net income, succession, transfer, gift, franchise, estate or inheritance taxes), whether or not now customary or within the contemplation of the parties hereto, whether or not now in force or which may hereafter become effective, including but not limited to taxes:

          (a) Upon, allocable to, or measured by the area of the Premises or the Rentals payable hereunder, including without limitation any gross income, gross receipts, excise, or other tax levied by the state, any political subdivision thereof, city or federal government with respect to the receipt of such Rentals;

          (b) Upon or with respect to the use, possession, occupancy, leasing, operation and management of the Premises or any portion thereof;

          (c) Upon this transaction or any document to which Tenant is a party creating or transferring an interest or an estate in the Premises; or

          (d) Imposed as a means of controlling or abating environmental pollution or the use of energy or any natural resource (including without limitation gas, electricity or water), including, without limitation, any parking taxes, levies or charges or vehicular regulations imposed by any governmental agency. Tenant shall also pay, prior to delinquency, all privilege, sales, excise, use, business, occupation, or other taxes, assessments, license fees or charges levied, assessed or imposed upon Tenant’s business operations conducted at the Premises.

     In the event any such taxes are payable by Landlord and it shall not be lawful for Tenant to reimburse Landlord for such taxes, then the Rentals payable hereunder shall be increased to

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net Landlord the same net Rental after imposition of any such tax upon Landlord as would have been payable to Landlord prior to the imposition of any such tax.

     7.3 Common Taxes.

          (a) Definition of Taxes. The term “Taxes” as used in this Lease shall collectively mean (to the extent any of the following are not paid by Tenant pursuant to Paragraphs 7.1 and 7.2 above) all real estate taxes and general and special assessments (including, but not limited to, assessments for public improvements or benefit); personal property taxes; taxes based on vehicles utilizing parking areas on the Common Area; taxes computed or based on rental income or on the square footage of the Premises (including without limitation any municipal business tax but excluding federal, state and municipal net income taxes); environmental surcharges; excise taxes; gross receipts taxes; sales and/or use taxes; employee taxes; water and sewer taxes, levies, assessments and other charges in the nature of taxes or assessments (including, but not limited to, assessments for public improvements or benefit); and all other governmental, quasi-governmental or special district impositions of any kind and nature whatsoever; regardless of whether any of the foregoing are now customary or within the contemplation of the parties hereto and regardless of whether resulting from increased rate and/or valuation, or whether extraordinary or ordinary, general or special, unforeseen or foreseen, or similar or dissimilar to any of the foregoing and which during the Lease Term are laid, levied, assessed or imposed upon Landlord and/or become a lien upon or chargeable against the Premises and/or Common Area under or by virtue of any present or future laws, statutes, ordinances, regulations, or other requirements of any governmental, quasi-governmental or special district authority whatsoever relating to the Premises and/or Common Area. The term “environmental surcharges” shall include any and all expenses, taxes, charges or penalties imposed by the Federal Department of Energy, Federal Environmental Protection Agency, the Federal Clean Air Act, or any regulations promulgated thereunder, or imposed by any other local, state or federal governmental agency or entity now or hereafter vested with the power to impose taxes, assessments or other types of surcharges as a means of controlling or abating environmental pollution or the use of energy or any natural resource in regard to the use, operation or occupancy of the Premises and/or the Common Area. The term “Taxes” shall include (to the extent the same are not paid by Tenant pursuant to Paragraphs 7.1 and 7.2 above), without limitation, all taxes, assessments, levies, fees, impositions or charges levied, imposed, assessed, measured, or based in any manner whatsoever upon or with respect to the use, possession, occupancy, leasing, operation or management of the Premises and/or Common Area or in lieu of or equivalent to any Taxes set forth in this Paragraph 7.3(a). The term “Taxes” shall include any increase in taxes arising from a “change of ownership” of the Premises (or Common Areas) or new construction. In the event any such Taxes are payable by Landlord and it shall not be lawful for Tenant to reimburse Landlord for such Taxes, then the Rentals payable hereunder shall be increased to net Landlord the same net Rental after imposition of any such Tax upon Landlord as would have been payable to Landlord prior to the imposition of any such Tax.

          (b) Operating Expenses. All Taxes which are levied or assessed or which become a lien upon the Premises and/or Common Area or which become due or accrue during

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the Lease Term shall be an Operating Expense, and Tenant shall pay as Additional Rent each month during the Lease Term 1/12th of such Taxes, based on Landlord’s estimate thereof, pursuant to Paragraph 12 below. Taxes during any partial tax fiscal year(s) within the Lease Term shall be prorated according to the ratio which the number of days during the Lease Term or of actual occupancy of the Premises by Tenant, whichever is greater, during such year bears to 365.

     8. Insurance; Indemnity; Waiver.

          8.1 Insurance by Landlord.

          (a) Landlord shall, during the Lease Term, procure and keep in force the following insurance, the cost of which shall be an Operating Expense, payable by Tenant pursuant to Paragraph 12 below:

               (i) Property Insurance. “All risk” property insurance, including, without limitation, coverage for boiler and machinery (if applicable); sprinkler damage; vandalism; malicious mischief; full coverage plate glass insurance; and demolition, increased cost of construction and contingent liability from change in building laws on the Premises and Common Area, including any improvements or fixtures constructed or installed on the Premises and Common Area by Landlord. Such insurance shall be in the full amount of the replacement cost of the foregoing, with reasonable deductible amounts, which deductible amounts shall be an Operating Expense, payable by Tenant pursuant to Paragraph 12. Such insurance shall also include rental income insurance, insuring that one hundred percent (100%) of the Rentals (as the same may be adjusted hereunder) will be paid to Landlord for a period of up to twelve (12) months if the Premises are destroyed or damaged, or such longer period as may be required by any beneficiary of a deed of trust or any mortgagee of any mortgage affecting the Premises. Such “all risk” insurance may, at Landlord’s election, include coverage for earthquake and/or flood. Such insurance shall not cover any leasehold improvements installed in the Premises by Tenant at its expense, or Tenant’s equipment, trade fixtures inventory, fixtures or personal property located on or in the Premises;

               (ii) Liability Insurance. Comprehensive general liability (lessor’s risk) or commercial general liability insurance against any and all claims for personal injury, death or property damage occurring in or about the Premises or Common Area. Such insurance shall have a combined single limit of not less than One Million Dollars ($1,000,000) per occurrence and Two Million Dollars ($2,000,000) aggregate; and

               (iii) Other. Such other insurance as Landlord deems reasonably necessary and prudent. Landlord shall promptly notify Tenant in writing if Landlord deems any additional insurance reasonably necessary or prudent (which may include, without limitation, any additional insurance reasonably required by Landlord’s lender).

          8.2 Insurance by Tenant. Tenant shall, during the Lease Term, at Tenant’s sole cost and expense, procure and keep in force the following insurance:

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          (a) Personal Property Insurance. “All risk” property insurance, including, without limitation, coverage for earthquake and flood; boiler and machinery (if applicable); sprinkler damage; vandalism; malicious mischief; and demolition, increased cost of construction and contingent liability from changes in building laws on all leasehold improvements installed in the Premises by Tenant at its expense (if any) and on all equipment, trade fixtures, inventory, fixtures and personal property located on or in the Premises, including improvements or fixtures hereinafter constructed or installed on the Premises. Such insurance shall be in an amount equal to the full replacement cost of the aggregate of the foregoing and shall provide coverage comparable to the coverage in the standard ISO all risk form, when such form is supplemented with the coverages required above.

          (b) Liability Insurance. Comprehensive general liability insurance or commercial general liability insurance for the mutual benefit of Landlord and Tenant, against any and all claims for personal injury, death or property damage occurring in or about the Premises and Common Area, or arising out of Tenant’s or Tenant’s agents’ use of the Common Area, use or occupancy of the Premises or Tenant’s operations on or in the Premises. Such insurance shall have a combined single limit of not less than Three Million Dollars ($3,000,000) per occurrence and Five Million Dollars ($5,000,000) aggregate. Such insurance shall contain a cross-liability (severability of interests) clause and an extended (“broad form”) liability endorsement, including blanket contractual coverage. The minimum limits specified above are the minimum amounts required by Landlord, and may be reasonably revised by Landlord from time to time to meet changed circumstances, including without limitation to reflect changes consistent with the standards required by other landlords in the county in which the Premises are located. Such liability insurance shall be primary and not contributing to any insurance available to Landlord, and Landlord’s insurance (if any) shall be in excess thereto. Such insurance shall specifically insure Tenant’s performance of the indemnity, defense and hold harmless agreements contained in Paragraph 8.4, although Tenant’s obligations pursuant to Paragraph 8.4 shall not be limited to the amount of any insurance required of or carried by Tenant under this Paragraph 8.2(b). Tenant shall be responsible for insuring that the amount of insurance maintained by Tenant is sufficient for Tenant’s purposes.

          (c) Other. Such other insurance as required by law, including, without limitation, workers’ compensation insurance.

          (d) Form of the Policies. The policies required to be maintained by Tenant pursuant to Paragraphs 8.2(a), (b), and (c) above shall be with companies, on forms, with deductible amounts (if any), and loss payable clauses satisfactory to Landlord, shall include Landlord and the beneficiary or mortgagee of any deed of trust or mortgage encumbering the Premises and/or the real property comprising the Common Area as additional insureds, and shall provide that such parties may, although additional insureds recover for any loss suffered by Tenant’s negligence. Certified copies of policies or certificates of insurance shall be delivered to Landlord prior to the Commencement Date: a new policy or certificate shall be delivered to Landlord at least thirty (30) days prior to the expiration date of the old policy. Tenant shall have the right to provide insurance coverage which it is obligated to carry pursuant to the terms

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hereof in a blanket policy, provided such blanket policy expressly affords coverage to the Premises and to Tenant as required by this Lease. Tenant shall obtain a written obligation on the part of Tenant’s insurer(s) to notify Landlord and any beneficiary or mortgagee of a deed of trust or mortgage encumbering the Premises and/or the real property comprising the Common Area in writing of any delinquency in premium payments and at least thirty (30) days prior to any cancellation or modification of any policy. Tenant’s policies shall provide coverage on an occurrence basis and not on a claims made basis. In no event shall the limits of any policies maintained by Tenant be considered as limiting the liability of Tenant under this Lease.

          8.3 Failure by Tenant to Obtain Insurance. If Tenant does not take out the insurance required pursuant to Paragraph 8.2 or keep the same in full force and effect, Landlord may, but shall not be obligated to, take out the necessary insurance and pay the premium therefor, and Tenant shall repay to Landlord, as Additional Rent, the amount so paid promptly upon demand. In addition, Landlord may recover from Tenant and Tenant agrees to pay, as Additional Rent, any and all reasonable expenses (including attorneys’ fees) and damages which Landlord may sustain by reason of the failure of Tenant to obtain and maintain such insurance, it being expressly declared that the expenses and damages of Landlord shall not be limited to the amount of the premiums thereon.

          8.4 Indemnification. Tenant shall indemnify, hold harmless, and defend (using counsel selected by Tenant and reasonably approved by Landlord) Landlord (except for Landlord’s gross negligence or willful misconduct) against all claims, losses, damages, actions, causes of action, penalties, demands, expenses or liabilities for injury or death to any person or for damage to or loss of use of any property arising out of any occurrence in, on or about the Premises or Common Area, if caused or contributed to by Tenant or Tenant’s agents, or arising out of any occurrence in, upon or at the Premises or on account of the use, condition, occupational safety or occupancy of the Premises. Tenant’s obligations under the immediately preceding sentence shall not be applicable to the extent claims, losses, damages, actions, causes of action, penalties, demands, expenses or liabilities for injury or death to any person or for damage to or loss of use of any property arise out of any breach by Landlord of any of its obligations under Sections 10.1, 11.2 and 15, respectively, of this Lease. Tenant’s indemnification, defense and hold harmless obligations under this Lease shall include and apply to attorneys’ fees, investigation costs, and other costs actually incurred by Landlord. Tenant shall further indemnify, defend (using counsel selected by Tenant and reasonably approved by Landlord) and hold harmless Landlord from and against any and all claims, losses, damages, liabilities or expenses arising from any breach or default in the performance of any obligation on Tenant’s part to be performed under the terms of this Lease. Landlord agrees to notify Tenant promptly of any claim for indemnity hereunder and Landlord shall reasonably cooperate, at no cost or expense to Landlord, in the defense of any claim for which Tenant is to indemnify Landlord. In any circumstance in which Tenant is to indemnify Landlord hereunder, if in the good faith judgment of Landlord (i) the defense of Landlord is not proceeding or being conducted in a satisfactory manner, or (ii) there may be a conflict of interest between any of the parties to the claim, Landlord may employ its own legal counsel and consultants to prosecute, negotiate or defend any claim, action, or cause of action against Landlord. Notwithstanding anything in this Agreement to the contrary, Tenant shall not, without the prior written consent of

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Landlord (which consent shall not be unreasonably withheld or delayed), (x) settle or compromise any claim against Landlord or consent to the entry of any judgment that does not include the delivery by the claimant or plaintiff to Landlord of a written release of Landlord (in form, scope and substance satisfactory to Landlord in its sole discretion) from all liability in respect of such claim; or (y) settle or compromise any claim in any manner that may materially and adversely affect Landlord as determined by Landlord in the good faith exercise of its discretion. Tenant shall reimburse Landlord upon demand for the amount of all costs of settlements so entered into for which Tenant is obligated to indemnify Landlord hereunder and the reasonable fees and other costs and expenses of its attorneys and consultants pursuant to clauses (i) or (ii) above, including, without limitation, those incurred in connection with monitoring and participating in any action or proceeding. The provisions of this Paragraph 8.4 shall survive Lease Termination with respect to any damage, injury, death, breach or default occurring prior to such termination. This Lease is made on the express condition that Landlord shall not be liable for, or suffer loss by reason of, injury to person or property, from whatever cause (other than Landlord’s gross negligence or willful misconduct), in any way connected with the condition, use, occupational safety or occupancy of the Premises specifically including, without limitation, any liability for injury to the person or property of Tenant or Tenant’s agents. The preceding to the contrary notwithstanding, under no circumstances shall Landlord be liable for any claim by Tenant of lost profits, loss of income or lost business.

          8.5 Claims by Tenant. Landlord shall not be liable to Tenant, and Tenant waives all claims against Landlord, for injury or death to any person, damage to any property, or loss of use of any property in the Premises or Common Area by and from all causes, including without limitation, any defect in the Premises or Common Area and/or any damage or injury resulting from fire, steam, electricity, gas, water or rain, which may leak or flow from or into any part of the Premises, or from breakage, leakage, obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures, whether the damage or injury results from conditions arising upon the Premises or Common Area or from other sources. Landlord shall not be liable for any damages arising from any act or neglect of any other user of the Common Area. Tenant or Tenant’s agents shall immediately notify Landlord in writing of any known defect in the Premises or Common Area. The provisions of this Paragraph 8.5 shall not apply to any damage or injury caused by Landlord’s willful misconduct or gross negligence.

          8.6 Mutual Waiver of Subrogation. Landlord hereby releases Tenant, and Tenant hereby releases Landlord, and their respective officers, agents, employees and servants, from any and all claims or demands of damages, loss, expense or injury to the Premises or the Common Area, or to the furnishings, fixtures, equipment, inventory or other property of either Landlord or Tenant in, about or upon the Premises or the Common Area, which is caused by or results from perils, events or happenings which are the subject of insurance carried by the respective parties pursuant to this Paragraph 8 and in force at the time of any such loss, whether due to the negligence of the other party or its agents and regardless of cause or origin; provided, however, that such waiver shall be effective only to the extent permitted by the insurance covering such loss, to the extent such insurance is not prejudiced thereby, and to the extent insured against.

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     9. Utilities. Tenant shall pay during the Lease Term and prior to delinquency all charges for water, gas, light, heat, power, electricity, telephone or other communication service, janitorial service, trash pick-up, sewer and all other services supplied to or consumed on the Premises (collectively the “Services”) and all taxes, levies, fees or surcharges therefor. Tenant shall arrange for Services to be supplied to the Premises and shall contract for all of the Services in Tenant’s name prior to the Commencement Date. The Commencement Date shall not be delayed by reason of any failure by Tenant to so contract for Services. In the event that any of the Services cannot be separately billed or metered to the Premises, or if any of the Services are not separately metered as of the Commencement Date, the cost of such Services shall be an Operating Expense and Tenant shall pay such cost to Landlord, as Additional Rent, as provided in Paragraph 12 below, except that Tenant’s proportionate share of such Services shall be the percentage obtained by dividing the gross leasable square footage contained in the Premises by the total gross leasable square footage located in all buildings utilizing such Services. The lack or shortage of any Services due to any cause whatsoever shall not affect any obligation of Tenant hereunder, and Tenant shall faithfully keep and observe all the terms, conditions and covenants of this Lease and pay all Rentals due hereunder, all without diminution, credit or deduction.

     10. Repairs and Maintenance.

          10.1 Landlord’s Responsibilities. Subject to the provisions of Paragraph 15 below, Landlord shall maintain in reasonably good order and repair the structural roof and roof surface, structural and exterior walls (including painting thereof) and foundations of the Premises, except for any repairs required because of the wrongful act of Tenant or Tenant’s agents, which repairs shall be made at the expense of Tenant and as Additional Rent. In addition, Landlord may elect at any time, at its option, to maintain the heating and air conditioning systems of the Premises. Tenant shall give prompt written notice to Landlord of any known maintenance work required to be made by Landlord pursuant to this Paragraph 10.1. The costs of repairs and maintenance which are the obligation of Landlord hereunder or which Landlord elects to perform hereunder shall be an Operating Expense and Tenant shall pay such costs to Landlord as Additional Rent, as provided in Paragraph 12 below.

     To the extent any labor dispute in which Tenant is involved or of which Tenant is the object interferes with the performance of Landlord’s duties hereunder, Landlord shall be excused from the performance of such duties and Tenant hereby waives any and all claims against Landlord for damages or losses in regard to such duties.

          10.2 Tenant’s Responsibilities. Except as expressly provided in Paragraph 10.1 above, Tenant shall, at its sole cost, maintain the entire Premises and every part thereof, including without limitation, windows, skylights, window frames, plate glass, freight docks, doors and related hardware, interior walls and partitions, and the electrical, plumbing, lighting, heating and air conditioning systems (unless Landlord has elected to keep and maintain the heating and air conditioning systems pursuant to Paragraph 10.1 above) in good order, condition and repair. If Landlord has not elected to keep and maintain the heating and air conditioning

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systems, Tenant shall deliver to Landlord, every six (6) months during the Lease Term, a certificate of maintenance or its equivalent, signed by a licensed HVAC repair and maintenance contractor and stating that the heating and air conditioning systems servicing the Premises have been inspected, serviced and are in good order, condition and repair. Tenant’s failure to deliver said certificate or its equivalent shall be a Default by Tenant (subject to any grace period applicable under Paragraph 14 below). If Tenant fails to make repairs or perform maintenance work required of Tenant hereunder within five (5) days after notice from Landlord specifying the need for such repairs or maintenance work, Landlord or Landlord’s agents may, in addition to all other rights and remedies available hereunder or by law and without waiving any alternative remedies, enter into the Premises and make such repairs and/or perform such maintenance work. If Landlord makes such repairs and/or performs such maintenance work, Tenant shall reimburse Landlord upon demand and as Additional Rent, for the cost of such repairs and/or maintenance work. Landlord shall have no liability to Tenant for any damage, inconvenience or interference with the use of the Premises by Tenant or Tenant’s agents as a result of Landlord performing any such repairs or maintenance. Tenant shall reimburse Landlord, on demand and as Additional Rent, for the cost of damage to the Premises and/or Common Area caused by Tenant or Tenant’s agents. Tenant expressly waives the benefits of any statute now or hereafter in effect (including without limitation the provisions of subsection 1 of Section 1932, Section 1941 and Section 1942 of the California Civil Code and any similar law, statute or ordinance now or hereafter in effect) which would otherwise afford Tenant the right to make repairs at Landlord’s expense (or to deduct the cost of such repairs from Rentals due hereunder) or to terminate this Lease because of Landlord’s failure to keep the Premises in good and sanitary order.

     11. Common Area.

          11.1 In General. Subject to the terms and conditions of this Lease and such rules and regulations as Landlord may from time to time prescribe, Tenant and Tenant’s agents shall have the nonexclusive right to use during the Lease Term the access roads, sidewalks, landscaped areas and other common facilities on the Common Area. This right to use the Common Area shall terminate upon Lease Termination. Neither Tenant nor Tenant’s agents shall at any time park or permit the parking of their vehicles in any portion of the Common Area not designated by Landlord as a parking area.

     Landlord reserves the right from time to time to make changes in the shape, size, location, amount and extent of the Common Area; provided, however, such changes shall not unreasonably impair Tenant’s access to or use of the Premises. Landlord further reserves the right to promulgate such reasonable rules and regulations relating to the use of all or any portion of the Common Area and to amend such rules and regulations from time to time, with or without advance notice, as Landlord may deem appropriate. Any amendments to the rules and regulations shall be effective as to Tenant, and binding on Tenant, upon delivery of a copy of such rules and regulations to Tenant. Tenant and Tenant’s agents shall observe such rules and regulations and any failure by Tenant or Tenant’s agents to observe and comply with the rules and regulations shall be a Default by Tenant. Landlord shall not be responsible for the nonperformance of the rules and regulations by any tenants or occupants of the buildings or

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improvements which now exist or may hereafter be constructed upon the Common Area or upon the real property owned by Landlord adjacent to the Common Area or by any other user authorized by Landlord.

     Landlord furthermore reserves the right, after having given Tenant reasonable notice, to have any vehicles owned by Tenant or Tenant’s agents which are parked in violation of the provisions of this Paragraph 11.1 or in violation of Landlord’s rules and regulations relating to parking, to be towed away at the expense of the owner of the vehicle so towed.

     Landlord shall have the right to close, at reasonable times, all or any portion of the Common Area for any reasonable purpose, including without limitation, the prevention of a dedication thereof, or the accrual of rights of any person or public therein.

          11.2 Maintenance by Landlord. Landlord shall operate, manage and maintain the Common Area. The manner in which the Common Area shall be maintained and the expenditures for such maintenance shall be at the reasonable discretion of Landlord. The cost of such maintenance, operation and management, shall be an “Operating Expense”, and Tenant shall pay such costs to Landlord, as Additional Rent, as provided in Paragraph 12 below.

     12. Operating Expenses. It is intended by Landlord and Tenant that this Lease be a “triple net” lease.

          12.1 Definition. “Operating Expense” or “Operating Expenses” as used in this Lease shall mean and include all items identified in other paragraphs of this Lease as an Operating Expense and the total cost paid or incurred by Landlord for the operation, maintenance, repair, and management of the Premises and Common Area, which costs shall include, without limitation: the cost of Services and utilities supplied to the Premises and Common Area (to the extent the same are not separately charged or metered to Tenant); water; sewage; fuel; electricity; lighting systems; professional management fee (not to exceed four percent (4%) of the Premises’ gross rental income); fire protection systems; storm drainage and sanitary sewer systems; HVAC including air conditioning (to the extent the heating and air conditioning systems in the Premises are not maintained by Tenant at Tenant’s sole cost and expense); repairing the roof structure and roof surface; maintenance and repair of the structural parts of the Premises (including foundation, floor slab and load bearing walls); property and liability insurance covering the Premises and any other insurance carried by Landlord pursuant to Paragraph 8 above; cleaning, sweeping, striping, resurfacing of parking and driveway areas; cleaning the Common Area following storms or other severe weather; cleaning and repairing of sidewalks, curbs, stairways; costs related to irrigation systems; the cost of complying with Laws, including, without limitation, maintenance, alterations and repairs required in connection therewith; costs related to landscape maintenance; and the cost of contesting the validity or applicability of any governmental enactments which may affect Operating Expenses. Because the Common Area is used by more than one (1) building during the Lease Term, the term “Operating Expenses” shall mean and include all of the Operating Expenses allocable to the Premises and a proportionate share (based on the square footage of gross leasable area in the Premises as a percentage of the total of square footage of gross leasable area of the buildings

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utilizing the Common Area at the time in question) of all Operating Expenses which are related to such buildings in general and are not allocated to any one building utilizing the Common Area. The cost of cost of capital improvements made to the Building by Landlord that have the effect of reducing Operating Expenses or avoiding increases in Operating Expenses or that are required under any governmental law or regulation that was not in effect as of the Commencement Date of the Lease shall be fully amortized over the useful life of the capital improvement (as reasonably determined by Landlord in good faith) with interest on the unamortized balance at the prevailing market rate Landlord would pay if it borrowed funds to construct such capital repair item or capital improvement from an institutional lender, and shall be paid monthly by Tenant from the date of substantial completion of construction, installation or repair of the capital improvement through the earlier of the expiration of the Lease Term, as the same may be extended pursuant to the terms of this Lease, or the expiration of the useful life of the capital improvement. The specific examples of Operating Expenses stated in this Paragraph 12.1 are in no way intended to and shall not limit the costs comprising Operating Expenses, nor shall such examples be deemed to obligate Landlord to incur such costs or to provide such services or to take such actions except as Landlord may be expressly required in other portions of this Lease, or except as Landlord, in its sole discretion, may elect. The term “Operating Expenses” shall not include any costs paid or incurred by Landlord to correct any code violation or any violation of Law that exists with respect to the Premises, the Building or Common Area as of the Commencement Date of this Lease.

          12.2 Payment of Operating Expenses by Tenant. Tenant shall pay the Operating Expenses to Landlord as Additional Rent and without deduction or offset. Payment of Operating Expenses by Tenant shall be made by whichever of the following methods is from time to time designated by Landlord, and Landlord may change the method of payment at any time. Operating Expenses actually incurred or paid by Landlord but not theretofore billed to Tenant, as invoiced by Landlord, shall be payable by Tenant within twenty (20) days after receipt of Landlord’s invoice, but not more often than once each calendar month. Alternatively, Tenant’s payment of Operating Expenses shall be based upon Landlord’s estimate of Operating Expenses and shall be payable in equal monthly installments in advance on the first day of each calendar month commencing with the month following receipt of Landlord’s estimate (and subject to Landlord’s right to change the method of payment). Within one hundred twenty (120) days after the end of each calendar year (or at Lease Termination), or as soon thereafter as practicable under the circumstances, Landlord shall furnish Tenant a reconciliation statement showing the actual Operating Expenses for the period to which Landlord’s estimate pertains and shall concurrently either bill Tenant for the balance due (payable upon demand by Landlord) or credit Tenant’s account for the excess previously paid.

          12.3 Audit Right. In the event of any dispute as to any Operating Expenses payable by Tenant as shown in a reconciliation statement as provided in the last sentence of Paragraph 12.2 above, Tenant shall have the right, within ninety (90) days after the date of Tenant’s receipt of such reconciliation statement and after reasonable notice and at reasonable times, to inspect Landlord’s records pertaining to Operating Expenses for the applicable calendar year in question at Landlord’s office. Tenant’s failure to exercise its right to inspect records pertaining to Operating Costs for any calendar year within ninety (90) days after the date

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of Tenant’s receipt of the reconciliation statement for such calendar year shall be deemed Tenant’s waiver of its right to inspect Landlord’s records for such calendar year and acceptance of the Operating Expenses paid by Tenant for such calendar year (or applicable portion thereof). If, after such inspection, Tenant still disputes the Operating Costs paid by Tenant for such calendar year (or applicable portion thereof), Tenant may have a certification as to Tenant’s Operating Expenses for such calendar year made by an independent certified public accountant. The accountant or accounting firm retained by Tenant shall be subject to the prior written approval of Landlord, which approval shall not be unreasonably withheld. It shall not be unreasonable for Landlord to withhold its consent if the certified public accountant or accounting firm has any conflict of interest with respect to Landlord, as determined by Landlord, or is then involved in a dispute which also involves Landlord. In no event, however, shall Tenant retain an independent certified public accountant or accounting firm whose compensation is based on a percentage of any savings to Tenant of Operating Expenses resulting from such certification. Promptly upon receipt of the certification from its accountant, Tenant shall deliver a copy of the certification to Landlord. When a final determination has been made as to the amount in dispute, Landlord shall pay the amount determined to be owed to Tenant, or Tenant shall pay the amount determined to be owed to Landlord, as applicable, within thirty (30) days after the date of the final determination. As a condition precedent to its exercise of its rights of dispute as set forth herein, Tenant shall timely pay to Landlord all amounts set forth in the reconciliation statement which Tenant wishes to dispute.

     13. Alterations.

          13.1 In General. Tenant shall not make, or permit to be made, any alterations, changes, enlargements, improvements or additions (collectively “Alterations”) in, on, about or to the Premises, or any part thereof, including Alterations required pursuant to Paragraph 6.2, without the prior written consent of Landlord and without acquiring and complying with the conditions of all permits required for such Alterations by any governmental authority having jurisdiction thereof. The term “Alterations” as used in this Paragraph 13 shall also include all heating, lighting, electrical (including all wiring, conduit, outlets, drops, buss ducts, main and subpanels), air conditioning, and partitioning in the Premises made by Tenant, regardless of how affixed to the Premises. As a condition to the giving of its consent, Landlord may impose such requirements as Landlord may deem necessary in its sole discretion, including without limitation, the manner in which the work is done; a right of approval of the contractor by whom the work is to be performed (which approval shall not be unreasonably withheld); the requirement that Tenant post a completion bond in an amount and form satisfactory to Landlord; and the requirement that Tenant reimburse Landlord, as Additional Rent, for Landlord’s actual costs incurred in reviewing any proposed Alteration, whether or not Landlord’s consent is granted. In the event Landlord consents to the making of any Alterations by Tenant, the same shall be made by Tenant at Tenant’s sole cost and expense, in accordance with the plans and specifications approved by Landlord. Tenant shall give written notice to Landlord five (5) days prior to employing any laborer or contractor to perform services related to, or receiving materials for use upon the Premises, and prior to the commencement of any work of improvement on the Premises. Any Alterations to the Premises made by Tenant shall be made in accordance with applicable Laws and in a good and workmanlike manner. In making any

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such Alterations, Tenant shall, at Tenant’s sole cost and expense, file for and secure and comply with any and all permits or approvals required by any governmental departments or authorities having jurisdiction thereof and any utility company having an interest therein. In no event shall Tenant make any structural changes to the Premises or make any changes to the Premises which would weaken or impair the structural integrity of the Premises.

          13.2 Removal Upon Lease Termination. At the time Landlord consents in writing to any Alterations requested to be made to the Premises by Tenant, Landlord shall notify Tenant in writing as to whether Landlord will require Tenant, at Tenant’s expense, to remove any such Alterations and restore the Premises to their prior condition at Lease Termination. Any Alterations so requested by Landlord to be removed shall be removed by Tenant, at its sole cost, and Tenant shall, at its sole cost, restore the Premises at Lease Termination to their condition existing prior to the installation or construction of such Alterations requested by Landlord to be removed (ordinary wear and tear excepted). In the event Tenant fails to earlier obtain Landlord’s written decision as to whether Tenant will be required to remove any Alteration, then no less than ninety (90) nor more than one hundred twenty (120) days prior to the expiration of the Lease Term, Landlord shall inform Tenant whether or not Landlord desires to have any Alterations made to the Premises by Tenant removed at Lease Termination. Following receipt of such notice, Tenant shall, at its sole cost and expense, remove at Lease Termination such Alterations designated by Landlord for removal and repair all damage to the Premises and Common Area arising from such removal. In the event Tenant fails to remove any Alterations designated by Landlord for removal, Landlord may remove such Alterations made to the Premises by Tenant and repair all damage to the Premises and Common Area arising from such removal, and may recover from Tenant all reasonable costs and expenses incurred thereby. Tenant’s obligation to pay such costs and expenses to Landlord shall survive Lease Termination. Unless Landlord elects to have Tenant remove any such Alterations, all such Alterations, except for moveable furniture and trade fixtures of Tenant not affixed to the Premises, shall become the property of Landlord upon Lease Termination (without any payment therefor) and remain upon and be surrendered with the Premises at Lease Termination.

          13.3 Landlord’s Improvements. All fixtures, improvements or equipment which are installed, constructed on or attached to the Premises or Common Area by Landlord shall be a part of the realty and belong to Landlord.

     14. Default and Remedies.

          14.1 Events of Default. The term “Default by Tenant” as used in this Lease shall mean the occurrence of any of the following events:

          (a) Tenant’s failure to pay when due any Rentals, where such failure is not cured by Tenant within five (5) days following the date written notice of such failure is given by Landlord to Tenant;

          (b) Tenant’s vacation or abandonment of the Premises which is not cured within thirty days after written notice is given to Tenant (or if such breach or default cannot be

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reasonably cured within such thirty (30) days, then if Tenant does not commence to cure such breach or default within the thirty (30) day period or does not diligently and in good faith prosecute the cure to completion);

          (c) Commencement and continuation for at least sixty (60) days of any case, action or proceeding by, against or concerning Tenant under any federal or state bankruptcy, insolvency or other debtor’s relief law, including without limitation, (i) a case under Title 11 of the United States Code concerning Tenant, whether under Chapter 7, 11, or 13 of such Title or under any other Chapter, or (ii) a case, action or proceeding seeking Tenant’s financial reorganization or an arrangement with any of Tenant’s creditors;

          (d) Voluntary or involuntary appointment of a receiver, trustee, keeper, or other person who takes possession for more than sixty (60) days of substantially all of Tenant’s assets or of any asset used in Tenant’s business on the Premises, regardless of whether such appointment is as a result of insolvency or any other cause;

          (e) Execution of an assignment for the benefit of creditors of substantially all assets of Tenant available by law for the satisfaction of judgment creditors which continues and is not cured within thirty days after written notice of the same is given to Tenant (or if such breach cannot be reasonably cured within such thirty (30) days, then if Tenant does not commence to cure such breach within the thirty (30) day period or does not diligently and in good faith prosecute the cure to completion);

          (f) Commencement of proceedings for winding up or dissolving (whether voluntary or involuntary) the entity of Tenant, if Tenant is a corporation or a partnership, which continues and is not cured within thirty days after written notice of the same is given to Tenant (or if such breach cannot be reasonably cured within such thirty (30) days, then if Tenant does not commence to cure such breach within the thirty (30) day period or does not diligently and in good faith prosecute the cure to completion);

          (g) Levy of a writ of attachment or execution on Tenant’s interest under this Lease, if such writ continues for a period of thirty (30) days;

          (h) Transfer or attempted Transfer of this Lease or the Premises by Tenant contrary to the provisions of Paragraph 24 below which is not cured within thirty days after written notice of the same is given to Tenant (or if such breach cannot be reasonably cured within such thirty (30) days, then if Tenant does not commence to cure such breach within the thirty (30) day period or does not diligently and in good faith prosecute the cure to completion); or

          (i) Breach by Tenant of any term, covenant, condition, warranty, or other provision contained in this Lease or of any other obligation owing or due to Landlord which is not cured within thirty days after written notice of such breach is given to Tenant (or if such breach cannot be reasonably cured within such thirty (30) days, then if Tenant does not

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commence to cure such breach within the thirty (30) day period or does not diligently and in good faith prosecute the cure to completion).

          14.2 Remedies. Upon any Default by Tenant, Landlord shall have the following remedies, in addition to all other rights and remedies provided by law, to which Landlord may resort cumulatively, or in the alternative:

               14.2.1 Termination. Upon any Default by Tenant, Landlord shall have the right (but not the obligation) to terminate this Lease and Tenant’s right to possession of the Premises. The parties agree that any notice given by Landlord to Tenant pursuant to this Paragraph 14.1 shall be sufficient notice for purposes of California Code of Civil Procedure Section 1161 and Landlord shall not be required to give any additional notice in order to be entitled to commence an unlawful detainer proceeding. Upon termination of this Lease and Tenant’s right to possession of the Premises, Landlord shall have the right to recover from Tenant:

                    a. The worth at the time of award of the unpaid Rentals which had been earned at the time of termination;

                    b. The worth at the time of award of the amount by which the Rentals which would have been earned after termination until the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided;

                    c. The worth at the time of award (computed by discounting at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent) of the amount by which the Rentals for the balance of the Lease Term after the time of award exceed the amount of such rental loss that Tenant proves could be reasonably avoided;

                    d. Any other amounts necessary to compensate Landlord for all detriment proximately caused by the Default by Tenant or which in the ordinary course of events would likely result, including without limitation the following:

                         (i) Expenses in retaking possession of the Premises;

                         (ii) Expenses for cleaning, repairing or restoring the Premises;

                         (iii) Any unamortized real estate brokerage commission paid in connection with this Lease;

                         (iv) Expenses for removing, transporting, and storing any of Tenant’s property left at the Premises (although Landlord shall have no obligation to remove, transport, or store any such property);

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                         (v) Expenses of reletting the Premises, including without limitation, brokerage commissions and attorneys’ fees;

                         (vi) Attorneys’ fees and court costs; and

                         (vii) Costs of carrying the Premises such as repairs, maintenance, taxes and insurance premiums, utilities and security precautions (if any).

                    (e) The “worth at the time of award” of the amounts referred to in subparagraphs (a) and (b) of this Paragraph 14.2.1 is computed by allowing interest at an annual rate equal to the greater of: ten percent (10%); or five percent (5%) plus the rate established by the Federal Reserve Bank of San Francisco, as of the twenty-fifth (25th) day of the month immediately preceding the Default by Tenant, on advances to member banks under Sections 13 and 13(a) of the Federal Reserve Act, as now in effect or hereafter from time to time amended, not to exceed the maximum rate allowable by law.

               14.2.2 Continuance of Lease. Upon any Default by Tenant and unless and until Landlord elects to terminate this Lease pursuant to Paragraph 14.2.1 above, this Lease shall continue in effect after the Default by Tenant and Landlord may enforce all its rights and remedies under this Lease, including without limitation, the right to recover payment of Rentals as they become due. Neither efforts by Landlord to mitigate damages caused by a Default by Tenant nor the acceptance of any Rentals shall constitute a waiver by Landlord of any of Landlord’s rights or remedies, including the rights and remedies specified in Paragraph 14.2.1 above. The Landlord shall have the remedy described in California Civil Code Section 1951.4 (landlord may continue lease in effect after tenant’s breach and abandonment and recover rent as it becomes due, if landlord has the right to sublet or assign, subject only to reasonable limitations).

     15. Damage or Destruction.

          15.1 Definition of Terms. For the purposes of this Lease, the term: (a) “Insured Casualty means damage to or destruction of the Premises from a cause actually insured against, for which the insurance proceeds paid or made available to Landlord are sufficient to rebuild or restore the Premises under then-existing building codes to the condition existing immediately prior to the damage or destruction; and (b) “Uninsured Casualty” means damage to or destruction of the Premises from a cause not actually insured against, or from a cause actually insured against but for which the insurance proceeds paid or made available to Landlord are for any reason insufficient to rebuild or restore the Premises under then-existing building codes to the condition existing immediately prior to the damage or destruction, or from a cause actually insured against but for which the insurance proceeds are not paid or made available to Landlord within sixty (60) days of the event of damage or destruction.

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          15.2 Insured Casualty.

               15.2.1 Rebuilding Required. In the event of an Insured Casualty where the extent of damage or destruction is less than twenty percent (20%) of the then full replacement cost of the Premises, Landlord shall rebuild or restore the Premises to the condition existing immediately prior to the damage or destruction, provided the damage or destruction was not a result of a negligent or willful act of Tenant, and that there exist no governmental codes or regulations that would interfere with Landlord’s ability to so rebuild or restore.

               15.2.2 Landlord’s Election. In the event of an Insured Casualty where the extent of damage or destruction is equal to or greater than twenty percent (20%) of the then full replacement cost of the Premises, Landlord may, at its option and at its sole discretion, rebuild or restore the Premises to the condition existing immediately prior to the damage or destruction, or terminate this Lease. Landlord shall notify Tenant in writing within sixty (60) days after the event of damage or destruction of Landlord’s election to either rebuild or restore the Premises or terminate this Lease.

               15.2.3 Continuance of Lease. If Landlord is required to rebuild or restore the Premises pursuant to Paragraph 15.2.1 or if Landlord elects to rebuild or restore the Premises pursuant to Paragraph 15.2.2, this Lease shall remain in effect and Tenant shall have no claim against Landlord for compensation for inconvenience or loss of business during any period of repair or restoration.

          15.3 Uninsured Casualty.

               15.3.1 Landlord’s Election. In the event of an Uninsured Casualty, Landlord may, at its option and at its sole discretion (i) rebuild or restore the Premises as soon as reasonably possible at Landlord’s expense (unless the damage or destruction was caused by a negligent or willful act of Tenant, in which event Tenant shall pay all costs of rebuilding or restoring), in which event this Lease shall continue in full force and effect or (ii) terminate this Lease, in which event Landlord shall give written notice to Tenant within sixty (60) days after the event of damage or destruction of Landlord’s election to terminate this Lease as of the date of the event of damage or destruction, and if the damage or destruction was caused by a negligent or willful act of Tenant, Tenant shall be liable therefor to Landlord.

               15.3.2 Tenant’s Ability to Continue Lease. If Landlord elects to terminate this Lease and the extent of damage or destruction is less than twenty percent (20%) of the then full replacement cost of the Premises or the proceeds paid or made available to Landlord are for any reason insufficient to rebuild or restore the Premises under then-existing building codes to the condition existing immediately prior to the damage or destruction, and if there exist no governmental codes or regulations that would interfere with Landlord’s ability to so repair or restore, then Tenant may nevertheless cause the Lease to continue in effect by (i) notifying Landlord in writing within ten (10) days after Landlord’s notice of termination of Tenant’s agreement to pay all costs of rebuilding or restoring not covered by insurance, and (ii) providing

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Landlord with reasonable security for or assurance of such payment. Tenant shall pay to Landlord in cash no later than thirty (30) days prior to the date of commencement of construction the reasonable estimated cost of rebuilding or restoring. In the event Tenant fails to pay such cost to Landlord by the date specified, Landlord may immediately terminate the Lease and recover from Tenant all costs incurred by Landlord in preparation for construction. If the actual cost of rebuilding or restoring exceeds the estimated cost of such work, Tenant shall pay the difference to Landlord in cash upon notification by Landlord of the final cost. If the cost of rebuilding or restoring is less than the estimated cost of such work, Tenant shall be entitled to a refund of the difference upon completion of the rebuilding or restoring and determination of final cost.

          15.4 Tenant’s Election. Notwithstanding anything to the contrary contained in this Paragraph 15, Tenant may elect to terminate this Lease in the event the Premises are damaged or destroyed and, in the reasonable opinion of Landlord’s architect or construction consultants, the restoration of the Premises cannot be substantially completed within one two hundred ten (210) days after the event of damage or destruction. Tenant’s election shall be made by written notice to Landlord within ten (10) days after Tenant receives from Landlord the estimate of the time needed to complete repair or restoration of the Premises, If Tenant does not deliver said notice within said ten (10) day period, Tenant may not later terminate this Lease even if substantial completion of the rebuilding or restoration occurs subsequent to said two hundred ten (210) day period, provided that Landlord is proceeding with diligence to rebuild or restore the Premises. If Tenant delivers said notice within said ten (10) day period, this Lease shall terminate as of the date of the event of damage or destruction.

          15.5 Damage or Destruction Near End of Lease Term. Notwithstanding anything to the contrary contained in this Paragraph 15, in the event the Premises are damaged or destroyed in whole or in part (regardless of the extent of damage) from any cause during the last twelve (12) months of the Lease Term, Landlord may, at Landlord’s option, terminate this Lease as of the date of the event of damage or destruction by giving written notice to Tenant of Landlord’s election to do so within thirty (30) days after the event of such damage or destruction. For purposes of this Paragraph 15.5, if Tenant has been granted an option to extend or renew the Lease Term pursuant to another provision of this Lease, then the damage or destruction shall be deemed to have occurred during the last twelve (12) months of the Lease Term if Tenant fails to exercise its option to extend or renew within twenty (20) days after the event of damage or destruction.

          15.6 Termination of Lease. If the Lease is terminated pursuant to this Paragraph 15, the unused balance of the Security Deposit shall be refunded to Tenant. The current Rent and Rentals shall be proportionately reduced during the period following the event of damage or destruction until the date on which Tenant surrenders the Premises, based upon the extent to which the damage or destruction interferes with Tenant’s business conducted in the Premises, as reasonably determined by Landlord. The proceeds of insurance carried by Tenant pursuant to Paragraph 8.2 shall be paid to Landlord and Tenant, as their interests appear.

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          15.7 Abatement of Rentals. If the Premises are to be rebuilt or restored pursuant to this Paragraph 15, the then current Rent and Rentals shall be proportionately reduced during the period of repair or restoration, based upon the extent to which the making of repairs interferes with Tenant’s business conducted in the Premises, as reasonably determined by Landlord.

          15.8 Liability for Personal Property. In no event shall Landlord have any liability for, nor shall it be required to repair or restore, any injury or damage to any Alterations to the Premises made by Tenant, trade fixtures, equipment, merchandise, furniture, or any other property installed by Tenant or at the expense of Tenant. If Landlord or Tenant do not elect to terminate this Lease pursuant to this Paragraph 15, Tenant shall be obligated to promptly rebuild or restore any Alterations made to the Premises by Tenant (except for any Alterations which Landlord has previously notified Tenant in writing to remove at Lease Termination) to the same to the condition existing immediately prior to the damage or destruction in accordance with the provisions of Paragraph 13.1.

          15.9 Waiver of Civil Code Remedies. Landlord and Tenant acknowledge that the rights and obligations of the parties upon damage or destruction of the Premises are as set forth herein; therefore Tenant hereby expressly waives any rights to terminate this Lease upon damage or destruction of the Premises, except as specifically provided by this Lease, including without limitation any rights pursuant to the provisions of subdivision 2 of Section 1932 and subdivision 4 of Section 1933 of the California Civil Code, as amended from time to time, and the provisions of any similar law hereinafter enacted, which provisions relate to the termination of the hiring of a thing upon its substantial damage or destruction.

     16. Condemnation.

          16.1 Definition of Terms. For the purposes of this Lease, the term: (a) “Taking” means a taking of the Premises or Common Area or damage related to the exercise of the power of eminent domain and includes, without limitation, a voluntary conveyance, in lieu of court proceedings, to any agency, authority, public utility, person or corporate entity empowered to condemn property; (b) “Total Taking” means the Taking of the entire Premises or so much of the Premises or Common Area as to prevent or substantially impair the use thereof by Tenant for the uses herein specified; provided, however, that in no event shall the Taking of less than twenty percent (20%) of the Premises be considered a Total Taking; (c) “Partial Taking” means the Taking of only a portion of the Premises or Common Area which does not constitute a Total Taking; (d) “Date of Taking” means the date upon which the title to the Premises or Common Area or a portion thereof, passes to and vests in the condemnor or the effective date of any order for possession if issued prior to the date title vests in the condemnor; (e) “Award” means the amount of any award made, consideration paid, or damages ordered as a result of a Taking.

          16.2 Rights. The parties agree that in the event of a Taking all rights between them or in and to an Award shall be as set forth herein.

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          16.3 Total Taking. In the event of a Total Taking during the Lease Term: (a) the rights of Tenant under this Lease and the leasehold estate of Tenant in and to the Premises shall cease and terminate as of the Date of Taking; (b) Landlord shall refund to Tenant any prepaid Rent and the unused balance of the Security Deposit; (c) Tenant shall pay Landlord any Rentals due Landlord under the Lease, prorated as of the Date of Taking; (d) to the extent the Award is not payable to the beneficiary or mortgagee of a deed of trust or mortgage affecting the Premises, Tenant shall receive from the Award those portions of the Award attributable to trade fixtures of Tenant, moving expenses and Tenant’s loss of goodwill, if any; and (e) the remainder of the Award shall be paid to and be the property of Landlord.

          16.4 Partial Taking. In the event of a Partial Taking during the Lease Term: (a) the rights of Tenant under the Lease and the leasehold estate of Tenant in and to the portion of the Premises taken shall cease and terminate as of the Date of Taking; (b) from and after the Date of Taking the Rent shall be an amount equal to the product obtained by multiplying the then current Rent by the quotient obtained by dividing the fair market value of the Premises immediately after the Taking by the fair market value of the Premises immediately prior to the Taking; (c) to the extent the Award is not payable to the beneficiary or mortgagee of a deed of trust or mortgage affecting the Premises, Tenant shall receive from the Award the portions of the Award attributable to trade fixtures of Tenant; and (d) the remainder of the Award shall be paid to and be the property of Landlord. Each party waives the provisions of California Code of Civil Procedure Section 1265.130 allowing either party to petition the Superior Court to terminate this Lease in the event of a Partial Taking.

     17. Liens.

          17.1 Premises to Be Free of Liens. Tenant shall pay for all labor and services performed for, and all materials used by or furnished to Tenant, Tenant’s agents, or any contractor employed by Tenant with respect to the Premises. Tenant shall indemnify, defend and hold Landlord harmless from and keep the Premises and Common Area free from any liens, claims, demands, encumbrances, or judgments, including all costs, liabilities and attorneys’ fees with respect thereto, created or suffered by reason of any labor or services performed for, or materials used by or furnished to Tenant or Tenant’s agents or any contractor employed by Tenant with respect to the Premises. Landlord shall have the right, at all times, to post and keep posted on the Premises any notices permitted or required by law, or which Landlord shall deem proper, for the protection of Landlord and the Premises and Common Area, and any other party having an interest therein, from mechanics’ and materialmen’s liens, including without limitation a notice of nonresponsibility. In the event Tenant is required to post an improvement bond with a public agency in connection with any work performed by Tenant on or to the Premises, Tenant shall include Landlord as an additional obligee.

          17.2 Notice of Lien, Bond. Should any claims of lien be filed against, or any action be commenced affecting, the Premises, Tenant’s interest in the Premises or the Common Area, Tenant shall give Landlord notice of such lien or action within five (5) business days after Tenant receives notice of the filing of the lien or the commencement of the action. In the event that Tenant shall not, within twenty (20) days following the imposition of any such lien, cause

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such lien to be released of record by payment or posting of a proper bond, Landlord shall have, in addition to all other remedies provided herein and by law, the right, but not the obligation, to cause the same to be released by such means as Landlord shall deem proper, including payment of the claim giving rise to such lien or posting of a proper bond. All such sums paid by Landlord and all expenses incurred by Landlord in connection therewith, including attorneys’ fees and costs, shall be payable to Landlord by Tenant as Additional Rent on demand.

     18. Landlord’s Right of Access to Premises. Landlord reserves and shall have the right and Tenant and Tenant’s agents shall permit Landlord and Landlord’s agents to enter the Premises at any reasonable time for the purpose of (i) inspecting the Premises, (ii) performing Landlord’s maintenance and repair responsibilities set forth herein, (iii) posting notices of non- responsibility, (iv) placing upon the Premises at any time “For Sale” signs, (v) placing on the Premises ordinary “For Lease” signs at any time within six (6) months days prior to Lease Termination, or at any time a Default by Tenant exists and remains uncured, or at such other times as agreed to by Landlord and Tenant, (vi) protecting the Premises in the event of an emergency, and (vii) exhibiting the Premises to prospective purchasers, lenders or tenants. Landlord shall take reasonable steps to minimize any disruption to Tenant’s business or interference with Tenant’s use and enjoyment of the Premises in connection with Landlord’s entry into the Premises. Subject to the foregoing sentence, Tenant hereby waives any claims for damages for any injury or inconvenience to or interference with Tenant’s business, any loss of occupancy or quiet enjoyment of the Premises, and any other loss occasioned by Landlord’s or Landlord’s agents’ entry into the Premises as permitted by this Paragraph 18 or any other provision of this Lease. Landlord consents to a representative of Tenant, at Tenant’s cost, accompanying Landlord or its representative during any entry onto the Premises, except in the case of any emergency if such an escort is not available. In the event of an emergency, Landlord shall have the right to use any and all means which Landlord may deem proper to gain access to the Premises. Any entry to the Premises by Landlord or Landlord’s agents in accordance with this Paragraph 18 or any other provision of this Lease shall not under any circumstances be construed or deemed to be a forcible or unlawful entry into, or a detainer of the Premises, or an eviction of Tenant from the Premises or any portion thereof nor give Tenant the right to abate the Rentals payable under this Lease.

     19. Landlord’s Right to Perform Tenant’s Covenants. Except as otherwise expressly provided herein, if Tenant shall at any time fail to make any payment or perform any other act required to be made or performed by Tenant under this Lease, Landlord may upon ten (10) days written notice to Tenant, but shall not be obligated to and without waiving or releasing Tenant from any obligation under this Lease, make such payment or perform such other act to the extent that Landlord may deem desirable, and in connection therewith, pay expenses and employ counsel. All sums so paid by Landlord and all penalties, interest and costs in connection therewith shall be due and payable by Tenant as Additional Rent upon demand.

     20. Lender Requirements.

          20.1 Subordination. This Lease, at Landlord’s option, shall be subject and subordinate to the lien of any mortgages or deeds of trust (including all advances thereunder,

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renewals, replacements, modifications, supplements, consolidations, and extensions thereof) in any amount(s) whatsoever now or hereafter placed on or against or affecting the Premises and/or the real property comprising the Common Area or Landlord’s interest or estate therein, without the necessity of the execution and delivery of any further instruments on the part of Tenant to effectuate such subordination. If any mortgagee or beneficiary shall elect to have this Lease prior to the lien of its mortgage or deed of trust, and shall give written notice thereof to Tenant, this Lease shall be deemed prior to such mortgage or deed of trust, whether this Lease is dated prior or subsequent to the date of such mortgage or deed of trust or the date of the recording thereof. Promptly following the execution of this Lease, Landlord agrees to request in writing of the mortgagee or beneficiary under the existing deed of trust encumbering the Premises (the “Existing Lender”) that such Existing Lender execute and deliver to Landlord (for delivery to Tenant) a subordination, non-disturbance and attornment agreement, pursuant to which such Existing Lender agrees in writing that this Lease shall not be terminated in the event of any foreclosure or deed in lieu of foreclosure if Tenant is not in default under this Lease. Landlord shall not be in breach or default under this Lease if such Existing Lender will not execute and deliver such subordination, non-disturbance and attornment agreement, and the parties hereto acknowledge and agree that the effectiveness of this Lease is not conditioned upon receipt of such subordination, non-disturbance and attornment agreement from the Existing Lender.

          20.2 Subordination Agreements. Tenant shall execute and deliver without charge therefor, such further instruments evidencing subordination of this Lease to the lien of any mortgages or deeds of trust affecting the Premises and/or real property comprising the Common Area as may be required by Landlord within ten (10) days following Landlord’s request therefor; provided that such mortgagee or beneficiary under such mortgage or deed of trust agrees in writing that this Lease shall not be terminated in the event of any foreclosure or deed in lieu of foreclosure if Tenant is not in default under this Lease, and provided further than any subordination, nondisturbance agreement required by a mortgagee or beneficiary under a deed of trust shall be in such mortgagee’s or beneficiary’s standard form and reasonably approved by Tenant.

          20.3 Approval by Lenders. Tenant recognizes that the provisions of this Lease may be subject to the approval of any financial institution that may make a loan secured by a new or subsequent deed of trust or mortgage affecting the Premises and/or real property comprising the Common Area. If the financial institution should reasonably require, as a condition to such financing, any modifications of this Lease in order to protect its security interest in the Premises, including without limitation, modification of the provisions relating to damage to and/or condemnation of the Premises, Tenant agrees to execute the appropriate amendments; provided, however, that no modification shall substantially change the size, location or dimension of the Premises, increase the Rentals payable by Tenant hereunder or increase the obligations of Tenant hereunder. If Tenant unreasonably refuses to execute any such amendment, Landlord may, in Landlord’s discretion, terminate this Lease.

          20.4 Attornment. In the event of foreclosure or the exercise of the power of sale under any mortgage or deed of trust made by Landlord and covering the Premises and/or real property comprising the Common Area, Tenant shall attorn to the foreclosing lender and to

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the purchaser upon any such foreclosure or sale and recognize such lender or such purchaser as the Landlord under the Lease.

          20.5 Estoppel Certificates.

          (a) Delivery by Tenant. Tenant shall, within ten (10) days following request by Landlord therefor and without charge, execute and deliver to Landlord any and all documents, estoppel certificates, and current financial statements of Tenant reasonably requested by Landlord in connection with the sale or financing of the Premises and/or real property comprising the Common Area, or reasonably requested by any lender making a loan affecting the Premises and/or real property comprising the Common Area. Landlord may require that Tenant deliver to Landlord and/or such lender an estoppel certificate in the form of Exhibit F attached hereto and incorporated herein by this reference. Any such estoppel certificate may be conclusively relied upon by any prospective purchaser or encumbrancer of the Premises, and/or real property comprising the Common Area provided such party (or its affiliate) is named therein.

          (b) Nondelivery by Tenant. Tenant’s failure to deliver an estoppel certificate as required pursuant to Paragraph 20.5(a) above shall be conclusive upon Tenant that (i) this Lease is in full force and effect, without modification except as may be represented by Landlord and has not been assigned, (ii) there are now no uncured defaults in Landlord’s performance, (iii) no Rentals have been paid in advance except those that are set forth in this Lease, (iv) no beneficiary of any security instrument encumbering the Premises and/or real property comprising the Common Area shall be liable for the Security Deposit in the event of a foreclosure or sale under such security instrument (unless such beneficiary shall receives such Security Deposit), (v) the improvements to be constructed on the Premises by Landlord have been completed, and (vi) Tenant has entered into occupancy of the Premises on such date as may be represented by Landlord and is open and conducting business at the Premises. Tenant’s failure to deliver any financial statements, estoppel certificates or other documents as required pursuant to Paragraph 20.5(a) above shall be a Default by Tenant.

          20.6 Annual Financial Statements. If requested by a lender that has made a loan secured by a deed of trust or mortgage affecting the Premises and/or real property comprising the Common Area, Tenant shall deliver during the term of such loan an annual financial statement of Tenant reasonably required by lender, which financial statement shall be certified by Tenant and otherwise be in form and substance reasonably satisfactory to lender. All Tenant financial statements delivered to a lender pursuant to this section shall be further subject to and submitted in accordance with the provisions of Section 31.10 hereof. Landlord agrees to keep such financial statements of Tenant delivered to it confidential, except that Landlord may deliver such Tenant financial statements to any lender or prospective lender. Landlord shall request that any lender or prospective lender or prospective purchaser of the Premises to whom Landlord delivers such financial statements keep the same confidential and not disclose the same to any third parties except those who may be assisting such lender or prospective lender or purchaser in deciding whether to advance loan proceeds or purchase the Premises.

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     21. Holding Over. This Lease shall terminate without further notice at the expiration of the Lease Term. Any holding over by Tenant after Lease Termination shall not constitute a renewal or extension of the Lease Term, nor give Tenant any rights in or to the Premises except as expressly provided in this Lease. Any holding over after Lease Termination with the consent of Landlord shall be construed to be a tenancy from month to month, at one hundred fifty percent (150%) of the monthly Rent for the month preceding Lease Termination in addition to all Additional Rent payable hereunder, and shall otherwise be on the terms and conditions herein specified insofar as applicable. If Tenant remains in possession of the Premises after Lease Termination without Landlord’s consent Tenant shall indemnify, defend and hold Landlord harmless from and against any loss, damage, expense, claim or liability resulting from Tenant’s failure to surrender the Premises, including without limitation, any claims made by any succeeding tenant based on delay in the availability of the Premises.

     22. Notices. Any notice required or desired to be given under this Lease shall be in writing, and all notices shall be given by personal delivery or mailing. All notices personally given on Tenant may be delivered to any person apparently in charge at the Premises, on any corporate officer of Tenant or agent for service of process designated by Tenant if Tenant is a corporation, or on any one signatory party if more than one party signs this Lease on behalf of Tenant; any notice so given shall be binding upon all signatory parties as if served upon each such party personally. Any notice given pursuant to this Paragraph 22 shall be deemed to have been given when personally delivered, or if mailed, when seventy-two (72) hours have elapsed from the time when such notice was deposited in the United States mail, certified or registered mail and postage prepaid, addressed to the party at the last address given for purposes of notice pursuant to the provisions of this Paragraph 22. At the date of execution of this Lease, the addresses of Landlord and Tenant are set forth in Paragraph 1.11 above.

     23. Attorneys’ Fees. In the event either party hereto shall bring any action or legal proceeding for damages for an alleged breach of any provision of this Lease, to recover Rentals, to enforce an indemnity defense or hold harmless obligation, to terminate the tenancy of the Premises, or to enforce, protect, interpret, or establish any term, condition, or covenant of this Lease or right or remedy of either party, the prevailing party shall be entitled to recover, as a part of such action or proceeding, reasonable attorneys’ fees and court costs, including attorneys’ fees and costs for appeal, as may be fixed by the court or jury.

     24. Assignment, Subletting and Hypothecation.

          24.1 In General. Tenant shall not voluntarily sell, assign or transfer all or any part of Tenant’s interest in this Lease or in the Premises or any part thereof, sublease all or any part of the Premises, or permit all or any part of the Premises to be used by any person or entity other than Tenant or Tenant’s employees, except as specifically provided in this Paragraph 24.

          24.2 Voluntary Assignment and Subletting.

          (a) Notice to Landlord. Tenant shall, by written notice, advise Landlord of Tenant’s desire on a stated date (which date shall not be less than thirty (30) days nor more than

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ninety (90) days after the date of Tenant’s notice) to assign this Lease or to sublet all or any part of the Premises for any part of the Lease Term. Subject to the provisions of Section 24.11 below, said notice shall constitute an offer to terminate the Lease or Tenant’s interest in the portion of the Premises specified pursuant to Paragraph 24.2(b) if the notice applies to a proposed assignment of the Lease or Tenant’s interest therein, a proposed sublease of all or any part of the Premises for more than fifty percent (50%) of the remainder of the Lease Term, or a proposed sublease of more than fifty percent (50%) of the Premises for any period. Tenant’s notice shall state the name, legal composition and address of the proposed assignee or subtenant, and Tenant shall provide the following information to Landlord with said notice: a true and complete copy of the proposed assignment agreement or sublease; a financial statement of the proposed assignee or subtenant (certified as true and correct by an officer or partner of the proposed assignee or subtenant) prepared in accordance with generally accepted accounting principles within one year prior to the proposed effective date of the assignment or sublease; the nature of the proposed assignee’s or subtenant’s business to be carried on in the Premises; the payments to be made or other consideration to be given on account of the assignment or sublease; a current financial statement of Tenant; and such other pertinent information as may be requested by Landlord, all in sufficient detail to enable Landlord to evaluate the proposed assignment or sublease and the prospective assignee or subtenant. Tenant’s notice shall not be deemed to have been served or given until such time as Tenant has provided Landlord with all information reasonably requested by Landlord pursuant to this Paragraph 24.2. Tenant shall immediately notify Landlord of any modification to the proposed terms of such assignment or sublease. Tenant may withdraw its notice at any time prior to exercise by Landlord, if applicable, of Landlord’s right to terminate as described in Paragraph 24.2(b).

          (b) Offer to Terminate. If Tenant notifies Landlord of its desire to assign this Lease or any interest herein, to sublet all or any part of the Premises for more than fifty percent (50%) of the remainder of the Lease Term, or to sublet more than fifty percent (50%) of the Premises for any period, Tenant’s notice shall constitute, subject to the provisions of Section 24.11 below, an offer to terminate this Lease or Tenant’s interest in the portion of the Premises specified and Landlord shall have the right, to be exercised by giving written notice to Tenant within thirty (30) days after receipt of Tenant’s notice, to terminate the Lease (i) entirely, in the event of a proposed assignment or a sublease of the entire Premises for the remainder of the Lease Term, (ii) as to the portion of the Premises which is the subject of a proposed sublease for more than fifty percent (50%) of the remainder of the Lease Term, or (iii) as to the portion of the Premises which is the subject of a proposed sublease of more than fifty percent (50%) of the Premises for any period, as specified in Tenant’s notice. If Tenant’s notice specifies all of the Premises and Landlord elects to terminate, this Lease shall terminate on the date stated in the notice given by Tenant pursuant to Paragraph 24.2(a), subject to any obligations which have accrued and are unfulfilled as of such date. If Tenant’s notice specifies less than all of the Premises and Landlord elects to terminate, this Lease shall terminate on the date stated with respect to that portion of the Premises, and Rent and all other costs and expenses payable by Tenant hereunder shall be adjusted pro rata, based upon the number of net leasable square feet retained by Tenant after the termination, compared to the total number of net leasable square feet in the entire Premises excluding any areas of the Premises designated in the proposed sublease for ingress and egress and common areas, if any. The Lease as so amended shall

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continue thereafter in full force and effect. Landlord and Tenant shall execute an amendment to this Lease specifying the new Premises, the adjusted Rent, a reasonable method for apportioning maintenance and operating obligations based on the multitenant nature of the Premises, and Tenant’s share of costs and expenses; provided, however, that failure by either party to execute such an amendment shall not affect the validity of this Lease.

          (c) Landlord’s Consent. If Landlord does not exercise its right to terminate pursuant to Paragraph 24.2(b) within thirty (30) days after receipt of Tenant’s notice or if a proposed assignment or sublease is not subject to the provisions of Paragraph 24.2(b), Landlord shall not unreasonably withhold its consent to the proposed assignment or subletting, on the terms and conditions specified in said notice. Without otherwise limiting the criteria upon which Landlord may withhold its consent to any proposed assignment or sublease, if Landlord withholds its consent where a Default by Tenant has occurred and is uncured, such withholding of consent shall be presumptively reasonable. Landlord and Tenant agree that fifty percent (50%) of any and all rent paid by an assignee or subtenant in excess of the Rentals required to be paid by Tenant under this Lease (prorated in the event of a sublease by Tenant to a third party or parties) less (i) brokerage fees paid by Tenant in connection with the applicable assignment or sublease, (ii) tenant improvement costs paid or incurred by Tenant in renovating or improving the Premises, or applicable portion thereof, in connection with the applicable assignment or sublease, and (iii) reasonable attorney’s fees paid or incurred by Tenant in connection with the applicable assignment or sublease, shall be paid directly to Landlord, as Additional Rent, at the time and place specified in this Lease. For the purposes of this Paragraph 24, the term “rent” shall include any consideration of any kind received, or to be received, by Tenant from an assignee or subtenant, if such sums are related to Tenant’s interest in this Lease or in the Premises, including, but not limited to key money, bonus money, and payments (in excess of the fair market value thereof) for Tenant’s assets, fixtures, trade fixtures, inventory, accounts, goodwill, equipment, furniture, general intangibles, and any capital stock or other equity ownership interest of Tenant. Any assignment or subletting without Landlord’s consent shall be voidable at Landlord’s option, and shall constitute a Default by Tenant. Landlord’s consent to any one assignment or sublease shall not constitute a waiver of the provisions of this Paragraph 24 as to any subsequent assignment or sublease nor a consent to any subsequent assignment or sublease; further, Landlord’s consent to an assignment or sublease shall not release Tenant from Tenant’s obligations under this Lease, and Tenant shall remain jointly and severally liable with the assignee or subtenant.

          (d) Assumption of Obligations. In the event Landlord consents to any assignment, such consent shall be conditioned upon the assignee expressly assuming and agreeing to be bound by each of Tenant’s covenants, agreements and obligations contained in this Lease, pursuant to a written assignment and assumption agreement in a form approved by Landlord. Landlord’s consent to any assignment or sublease shall be evidenced by Landlord’s signature on said assignment and assumption agreement or on said sublease or by a separate written consent. In the event Landlord consents to a proposed assignment or sublease, such assignment or sublease shall be valid and the assignee or subtenant shall have the right to take possession of the Premises only if an executed original of the assignment or sublease is delivered to Landlord, and such document contains the same terms and conditions as stated in

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Tenant’s notice to Landlord given pursuant to Paragraph 24.2(a) above, except for any such modifications to which Landlord has consented in writing.

          24.3 Collection of Rent. Tenant hereby irrevocably gives to and confers upon Landlord, as security for Tenant’s obligations under this Lease, the right, power and authority to collect all rents from any assignee or subtenant of all or any part of the Premises as permitted by this Paragraph 24, or otherwise, and Landlord, as assignee of Tenant, or a receiver for Tenant appointed on Landlord’s application, may collect such rent and apply it toward Tenant’s obligations under this Lease; provided, however, that until the occurrence of any Default by Tenant or except as provided by the provisions of Paragraph 24.2(c) above, Tenant shall have the right to collect such rent. Upon the occurrence of any Default by Tenant, Landlord may at any time without notice in Landlord’s own name sue for or otherwise collect such rent, including rent past due and unpaid, and apply the same, less costs and expenses of operation and collection, including reasonable attorneys’ fees, toward Tenant’s obligations under this Lease. Landlord’s collection of such rents shall not constitute an acceptance by Landlord of attornment by such subtenants; in the event of a Default by Tenant, Landlord shall have all rights provided by this Lease and by law, and Landlord may, upon re-entry and taking possession of the Premises, eject all parties in possession or eject some and not others, or eject none, as Landlord shall determine in Landlord’s sole discretion.

          24.4 No Bonus Value. It is the intent of the parties hereto that this Lease shall confer upon Tenant only the right to use and occupy the Premises, and to exercise such other rights as are conferred upon Tenant by this Lease. The parties agree that, except to the extent provided in Paragraph 24.2(c) above in which Landlord agrees to split equally rents paid to Tenant in excess of the Rentals required to be paid by Tenant under this Lease (prorated in the event of a sublease by Tenant to a third party or parties) less (i) brokerage fees paid by Tenant in connection with the applicable assignment or sublease, (ii) tenant improvement costs paid or incurred by Tenant in renovating or improving the Premises, or applicable portion thereof, in connection with the applicable assignment or sublease, and (iii) reasonable attorney’s fees paid or incurred by Tenant in connection with the applicable assignment or sublease, this Lease is not intended to have a bonus value, nor to serve as a vehicle whereby Tenant may profit by a future assignment or sublease of this Lease or the right to use or occupy the Premises as a result of any favorable terms contained herein or any future changes in the market for leased space. It is the intent of the parties that any such bonus value that may attach to this Lease shall be and remain, subject to the provisions of Paragraph 24.2(c), the exclusive property of Landlord.

          24.5 Corporations and Partnerships. If Tenant is a partnership, any withdrawal or substitution (whether voluntary, involuntary, or by operation of law and whether occurring at one time or over a period of time) of any partner(s) owning fifty percent (50%) or more (cumulatively) of the partnership, any assignment(s) of fifty percent (50%) or more (cumulatively) of any interest in the capital or profits of the partnership, or the dissolution of the partnership shall be deemed an assignment of this Lease requiring the prior written consent of Landlord. Subject to the provisions of the immediately following paragraph, if Tenant is a corporation, any dissolution, merger, consolidation or other reorganization of Tenant, any sale or transfer (or cumulative sales or transfers) of the capital stock of Tenant in excess of fifty

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percent (50%), or any sale (or cumulative sales) of all of the assets of Tenant shall be deemed an assignment of this Lease requiring the prior written consent of Landlord. Any such withdrawal or substitution of partners or assignment of any interest in or dissolution of a partnership tenant, and any such sale of stock or assets of a corporate tenant without the prior written consent of Landlord shall be a Default by Tenant hereunder. The foregoing notwithstanding, the sale or transfer of any or all of the capital stock of a corporation, the capital stock of which is now or hereafter becomes publicly traded, shall not be deemed an assignment of this Lease.

     Notwithstanding anything contained in this Paragraph 24.5 above to the contrary, Tenant may enter into any of the following transfers (each, a “Permitted Transfer”) without obtaining Landlord’s consent (but Tenant shall give Landlord written notice of such Permitted Transfer either prior to or promptly following the effective date of such Permitted Transfer): (i) a sublease or assignment to any entity which controls, is controlled by or is under common control with Tenant; (ii) a successor corporation related to Tenant by merger, consolidation, non-bankruptcy reorganization or government action; or (iii) a purchaser of substantially all of Tenant’s assets located at the Premises, provided that in either of the latter two instances the successor or purchaser has a net worth not less than the net worth of Tenant at the time that Tenant executes this Lease. Notwithstanding that a Permitted Transfer is made, Tenant shall not be released from any of its obligations under this Lease and such purchaser, successor or transferee described in clause (i), (ii) or (iii) of the immediately preceding sentence, as the case may be, shall be required to assume all of Tenant’s obligations hereunder as a condition to such transfer being permitted without Landlord’s consent. Landlord’s termination right set forth in Paragraph 24.2(b) above and Landlord’s right to receive fifty percent of the bonus rent as set forth in Paragraph 24.2(c) above shall not apply to a Permitted Transfer.

          24.6 Reasonable Provisions. Tenant expressly agrees that the provisions of this Paragraph 24 are not unreasonable standards or conditions for purposes of Section 1951.4(b)(2) of the California Civil Code, as amended from time to time, under bankruptcy laws, or for any other purpose.

          24.7 Attorney’s Fees. Tenant shall pay, as Additional Rent, Landlord’s reasonable attorneys’ fees (not to exceed $1,000 per request) for reviewing, investigating, processing and/or documenting any requested assignment or sublease, whether or not Landlord’s consent is granted.

          24.8 Involuntary Transfer. No interest of Tenant in this Lease shall be assignable, involuntarily or by operation of law, including, without limitation, the transfer of this Lease by testacy or intestacy. Each of the following acts shall be considered an involuntary assignment:

          (a) If Tenant is or becomes bankrupt or insolvent, makes an assignment for the benefit of creditors, or a proceeding under any bankruptcy law is instituted in which Tenant is the bankrupt; or, if Tenant is a partnership or consists of more than one person or entity, if any partner of the partnership or other person or entity is or becomes bankrupt or insolvent, or makes an assignment for the benefit of creditors;

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          (b) Levy of a writ of attachment or execution on this Lease;

          (c) Appointment of a receiver with authority to take possession of the Premises in any proceeding or action to which Tenant is a party; or

          (d) Foreclosure of any lien affecting Tenant’s interest in the Premises, which lien was not consented to by Landlord pursuant to Paragraph 24.9. An involuntary assignment shall constitute a Default by Tenant and Landlord shall have the right to terminate this Lease, in which case this Lease shall not be treated as an asset of Tenant. In the event the Lease is not terminated, the provisions of Paragraph 24.2(c) regarding rents paid by an assignee or subtenant and Paragraph 24.4 shall apply. If a writ of attachment or execution is levied on this Lease, or if any involuntary proceeding in bankruptcy is brought against Tenant or a receiver is appointed, Tenant shall have sixty (60) days in which to cause the attachment or execution to be removed, the involuntary proceeding dismissed, or the receiver removed.

          24.9 Hypothecation. Tenant shall not hypothecate, mortgage or encumber Tenant’s interest in this Lease or in the Premises or otherwise use this Lease as a security device in any manner without the consent of Landlord, which consent Landlord may withhold in its sole and absolute discretion. Consent by Landlord to any such hypothecation or creation of a lien or mortgage shall not constitute consent to an assignment or other transfer of this Lease following foreclosure of any permitted lien or mortgage.

          24.10 Binding on Successors. The provisions of this Paragraph 24 expressly apply to all heirs, successors, sublessees, assignees and transferees of Tenant.

          24.11 Contemplated Subleasing During First Two Years of Lease Term. Landlord acknowledges that Tenant contemplates trying to sublease not more than fifteen thousand (15,000) square feet of the Premises in the aggregate during the first two (2) years of the Lease Term. Anything in Paragraph 24 of this Lease to the contrary notwithstanding, Landlord agrees that Landlord’s termination right set forth in Paragraph 24.2(b) above and Landlord’s right to receive fifty percent of the bonus rent as set forth in Paragraph 24.2(c) above shall not be applicable to any sublease(s) entered into by Tenant with respect to less than fifteen thousand square feet of the Premises (in any one sublease transaction or in the aggregate based on multiple transactions) during the first two (2) years of the Lease Term.

     25. Hazardous Materials.

          25.1 Permitted Materials. Notwithstanding Paragraph 6.4 of the Lease, Tenant may use, keep and store in the Premises those Hazardous Materials listed on Exhibit “D” attached hereto, and such other Hazardous Materials which may be approved by Landlord from time to time in Landlord’s reasonable discretion, in such quantities and volumes as are necessary to conduct Tenant’s business in the Premises (“Permitted Materials”). Permitted Materials shall be used, kept, stored, disposed of, removed, and transported in strict compliance with all laws, ordinances, regulations, rules, orders, and policies of any federal, state, county, municipal, or other governmental authority (collectively, “Governmental Authority”) having jurisdiction over

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Hazardous Materials (“Environmental Laws”). Upon Landlord’s written request, Tenant shall provide Landlord with an updated list of all Permitted Materials used, kept, or stored in the Premises. Tenant shall promptly comply with any law, ordinance, or regulation of any Governmental Authority requiring modifications to the Premises or the improvements thereon that are intended to protect the Premises and the environment against the release of Hazardous Materials. Tenant shall obtain all necessary permits from applicable Governmental Authorities required to maintain the Permitted Materials and shall furnish Landlord with copies of such permits or any plans, reports or other material required to be filed with any Governmental Authority relating to the use of the Permitted Materials. Upon the expiration or sooner termination of this Lease, Tenant covenants to remove from the Premises or Common Area, at its sole cost and expense, any and all Hazardous Materials then located on or about the Premises or Common Area due to a Release of Hazardous Materials by Tenant or Tenant’s agents.

     Tenant and Tenant’s agents shall not release or dispose, or allow the release or disposal, of any Hazardous Materials, including Permitted Materials, in, on, under, or in the vicinity of the Premises; provided, however, that Tenant shall dispose, remove and transport from the Premises and Common Area any and all Permitted Materials in accordance with all Environmental Laws. Tenant shall immediately notify Landlord of any inquiry, test, investigation, or enforcement proceeding by or against Tenant or the Premises or Common Area concerning Hazardous Materials. Tenant acknowledges that Landlord shall have the right, but not the obligation, in Landlord’s own name, to negotiate, contest, defend, and approve, at Tenant’s expense, any action taken or threatened or order issued by a Governmental Authority with regard to Tenant’s Release of Hazardous Materials on the Premises or Common Area. Tenant shall, within five (5) days after receipt by Tenant, submit to Landlord copies of all inquiries, test and investigation results, and enforcement proceedings described above and copies of all reports and responses thereto prepared by or on behalf of Tenant. In connection with the transportation of any Hazardous Materials to or from the Premises, Tenant shall list itself as the transporter and generator.

          25.2 Landlord’s Inspection Rights. Landlord shall have the right, upon reasonable advance notice to Tenant, to inspect, investigate, sample and/or monitor the Premises and Common Area, including any soil, water, groundwater, or other sampling to the extent reasonably necessary to determine whether Tenant is complying with the terms of this Lease with respect to Hazardous Materials. In connection therewith, Tenant shall provide Landlord with reasonable access to all portions of the Premises; provided, however, that Landlord shall avoid any unreasonable interference with the operation of Tenant’s business on the Premises. All costs incurred by Landlord pursuant to this subparagraph 25.2 above shall be reimbursed by Tenant to Landlord within ten (10) days after Landlord’s demand for payment; provided, however, Tenant shall not be obligated to reimburse Landlord for any costs Landlord incurs in inspecting, investigating, sampling or monitoring the groundwater under the Premises or Common Area unless Landlord has reasonable grounds to believe that Tenant has exacerbated such groundwater condition or to the extent such groundwater condition has been exacerbated as a result of the acts of Tenant or any of its agents, employees, contractors, consultants, subtenants, licensees or invitees. If Tenant fails to perform or does not commence and thereafter diligently prosecute any obligation to be performed by Tenant under this Lease with respect to Hazardous Materials within sixty (60) days after the date of Tenant’s receipt of Landlord’s written notice of the

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obligation to be performed, Landlord shall have the right, but not the obligation, without limitation upon any of Landlord’s other rights or remedies under this Lease or at law or in equity, to enter upon the Premises and perform Tenant’s obligations hereunder at Tenant’s expense. All sums reasonably disbursed, deposited, or incurred by Landlord in connection with the performance of such obligation, including, but not limited to, all costs, expenses, and actual attorneys’ fees, shall be due and payable by Tenant to Landlord as an item of additional rent on demand by Landlord, together with interest thereon at the maximum rate allowed by law from the date of such demand until paid by Tenant.

          25.3 Investigation and Remediation. If any investigation of the Premises or Common Area reveals the presence of a Hazardous Material that was listed in Tenant’s list of Permitted Materials, or any supplement or amendment thereto, or which was used by Tenant in the Premises but not listed on the list of Permitted Materials and was not present on the Premises (or applicable portion thereof) or the Common Area prior to the Commencement Date or at the time Tenant took possession of such applicable portion of the Premises, then Tenant shall have the burden of proving that Tenant is not responsible for the presence of such Hazardous Materials in the Premises and/or Common Area. In such event, Tenant shall cause its environmental consultant, which consultant shall be subject to the prior written approval of Landlord, which approval shall not be unreasonably withheld, to promptly investigate the lateral and vertical extent of the Hazardous Materials contamination. Within sixty (60) days after completion of such investigation, Tenant shall also prepare and submit to Landlord or within such period commence to prepare and thereafter diligently complete and submit to Landlord a comprehensive plan specifying the actions to be taken by Tenant to remediate the Hazardous Materials to levels permitted by applicable Environmental Laws (“Remediation Plan”). Any Remediation Plan shall be subject to the prior written approval of Landlord, which approval shall not be unreasonably withheld or delayed. Within thirty (30) days after Landlord’s approval of the Remediation Plan, Tenant shall commence and diligently prosecute to completion all such actions necessary to remediate the Hazardous Materials in accordance with the Remediation Plan. Any and all work performed pursuant to an Investigation Plan and/or Remediation Plan shall be performed at Tenant’s sole cost and expense.

          25.4 Tenant’s Indemnity. Tenant shall indemnify, defend, and hold Landlord and Landlord’s partners, employees, and agents harmless from and against any and all claims, actions, suits, proceedings, orders, judgments, losses, costs, damages, liabilities, or expenses (including, without limitation, attorneys’ fees and costs of investigation, remediation, and/or cleanup) arising in connection with any Hazardous Materials Released in, on, under, or in the vicinity of the Premises or the Common Area by Tenant or any of Tenant’s agents, or any Hazardous Materials shipped thereto or therefrom, by Tenant or any of Tenant’s agents including, without limitation, (a) the investigation or remediation of Hazardous Materials Released by Tenant or Tenant’s agents in, on, or under the Premises or Common Area and the removal, transportation, and disposal of contaminated building materials, soils and/or groundwater arising from the remediation of such contamination, whether voluntary or required by any Governmental Authority; (b) ongoing monitoring of any Hazardous Materials contamination in, on, or under the Premises or Common Area, whether voluntary or required by any Governmental Authority; (c) the migration of any Hazardous Materials contamination to

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nearby properties, (d) personal injury, death, or property damage arising out of the presence of the Hazardous Materials contamination in, on, or under the Premises or Common Area; (e) damage to or loss of use of the Premises or Common Area or the environment or diminution in value of the Premises or Common Area; and (f) fines, penalties, or other assessments levied against the Premises or Common Area or Landlord as a result of the presence of the Hazardous Materials contamination. The foregoing indemnity shall run to the benefit of Landlord, its partners, directors, officers, employees, agents, and successors and assigns, any existing or future lender who extends credit to Landlord, or its successors and assigns, which credit is secured by a mortgage or deed of trust on the Premises, any person or entity who acquires the interest of Landlord in the Premises (except Tenant), and any person who acquires a lender’s interest in the Premises, either through foreclosure, deed in lieu of foreclosure, or exercise of any rights or remedies under the documents governing a loan or extension of credit.

          25.5 Assignment and Subletting. It shall be presumptively reasonable for Landlord to withhold its consent to any proposed assignment or subletting if the proposed assignee or subtenant’s use of the Premises would require the storage, use, handling, generation, disposal or transportation of Hazardous Materials other than the Permitted Materials unless such assignee or subtenant submits to Landlord, prior to occupancy, a list of Permitted Materials, which list shall be subject to the reasonable approval of Landlord.

          25.6 Disclosures by Landlord. Landlord discloses to Tenant that, pursuant to an Order or Orders imposed by the California Regional Water Quality Control Board, certain remedial action has been undertaken or is being undertaken in connection with certain portions of the Common Area or soils or groundwater underlying such Common Area. The terms and conditions of that certain Covenant to Restrict Use of Property executed by RREEF USA FUND-III, a California Group Trust, and the California Regional Water Quality Control Board, recorded December 30, 1991, concerning the remedial action referred to above is incorporated herein by reference. This recorded document affects that property at 3050 Coronado Drive and the parking lot adjacent thereto. Tenant hereby acknowledges that Landlord has delivered or made available to Tenant, without representation as to accuracy or completeness, those certain environmental reports or studies referred to in Exhibit “E” attached hereto. Landlord hereby acknowledges and agrees that Tenant shall not be liable to Landlord for the clean up or remediation of, or cost to clean up or remediate, any Hazardous Materials existing on, in or under the Premises or the Common Area as of the Commencement Date of this Lease (unless Tenant or any of its agents caused or exacerbates the pre-existing environmental condition of the Premises or the Common Area).

          25.7 Environmental Assessments by Lender. Tenant shall permit any lender who has made or will make a loan secured by a deed of trust or mortgage affecting the Premises and/or real property comprising the Common Area, and/or such lender’s agents, employees and consultants, to enter onto the Premises and/or the real property comprising the Common Area at reasonable times and with reasonable notice to Tenant in order to perform and/or cause to perform environmental testing and/or site assessments of such property, including, without limitation, Phase II environmental assessments, to the extent permitted under the deed or trust or mortgage and/or under any other loan documents executed in connection with such deed of trust

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or mortgage, provided that the performance and conduct of such environmental testing assessments shall not unreasonably interfere with Tenant’s possession of the Premises or otherwise impede the conduct of Tenant’s operations on the Premises and/or the real property comprising the Common Area.

          25.8 Survival. The provisions of this Paragraph 25 shall survive any termination of the Lease.

     26. Successors. Subject to the provisions of Paragraph 24 above and Paragraph 31.2(a) below, the covenants, conditions, and agreements contained in this Lease shall be binding on the parties hereto and on their respective heirs, successors and assigns.

     27. Landlord Default; Mortgage Protection. Landlord shall not be in default under this Lease unless Tenant shall have given Landlord written notice of the breach and, within thirty (30) days after notice, Landlord has not cured the breach or, if the breach is such that it cannot reasonably be cured under the circumstances within thirty (30) days, has not commenced diligently to prosecute the cure to completion. Any money judgment obtained by Tenant based upon Landlord’s breach of this Lease shall be satisfied only out of the proceeds of the sale or disposition of Landlord’s interest in the Premises (whether by Landlord or by execution of judgment). In the event of any default on the part of Landlord under this Lease, Tenant shall give notice by registered or certified mail to any beneficiary of a deed of trust or any mortgagee of a mortgage affecting the Premises and/or the real property comprising the Common Area whose address shall have been furnished to Tenant, and shall offer such beneficiary or mortgagee a reasonable opportunity to cure the default, including time to obtain possession of the Premises by power of sale or judicial foreclosure, if such should prove necessary to effect a cure.

     28. Exhibits. All exhibits attached to this Lease shall be deemed to be incorporated herein by the individual reference to each such exhibit, and all such exhibits shall be deemed to be a part of this Lease as though set forth in full in the body of the Lease.

     29. Surrender of Lease Not Merger. The voluntary or other surrender of this Lease by Tenant, or a mutual cancellation thereof, shall not work a merger and shall, at the option of Landlord, terminate all or any existing subleases or subtenants, or may, at the option of Landlord, operate as an assignment to Landlord of any or all such subleases or subtenants. As provided in Paragraph 2.2 above, the Sublease to which Landlord, as sublessor, and Tenant, as sublessee are currently parties shall terminate as of December 31, 2001 (except that all of Tenant’s obligations under the Sublease accruing prior to January 1, 2002 shall survive the termination of such Sublease).

     30. Waiver. The waiver by Landlord of any breach of any term, covenant or condition herein contained (or the acceptance by Landlord of any performance by Tenant after the time the same shall become due) shall not be deemed to be a waiver of such term, covenant or condition or any subsequent breach thereof or of any other term, covenant or condition herein contained, unless otherwise expressly agreed to by Landlord in writing. The acceptance by Landlord of any

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sum less than that which is required to be paid by Tenant shall be deemed to have been received only on account of the obligation for which it is paid (or for which it is allocated by Landlord, in Landlord’s absolute discretion, if Tenant does not designate the obligation as to which the payment should be credited), and shall not be deemed an accord and satisfaction notwithstanding any provisions to the contrary written on any check or contained in any letter of transmittal. The acceptance by Landlord of any sum tendered by a purported assignee or transferee of Tenant shall not be deemed a consent by Landlord to any assignment or transfer of Tenant’s interest herein. No custom or practice which may arise between the parties hereto in the administration of the terms of this Lease shall be construed as a waiver or diminution of Landlord’s right to demand performance by Tenant in strict accordance with the terms of this Lease.

     31. General.

          31.1 Captions and Headings. The captions and paragraph headings used in this Lease are for convenience of reference only. They shall not be construed to limit or extend the meaning of any part of this Lease, and shall not be deemed relevant in resolving any question of interpretation or construction of any paragraph of this Lease.

          31.2 Definitions.

          (a) Landlord. The term Landlord as used in this Lease, so far as the covenants or obligations on the part of Landlord are concerned, shall be limited to mean and include only the owner at the time in question of the fee title to the Premises. In the event of any transfer(s) of such interest, the Landlord herein named (and in case of any subsequent transfers or conveyances, the then grantor) shall have no further liability under this Lease to Tenant except as to matters of liability which have accrued and are unsatisfied as of the date of such transfer, it being intended that the covenants and obligations contained in this Lease on the part of Landlord shall be binding on Landlord and its successors and assigns only during and in respect of their respective periods of ownership of the fee; provided that any funds in the possession of Landlord or the then grantor and as to which Tenant has an interest, less any deductions permitted by law or this Lease, shall be turned over to the grantee. The covenants and obligations contained in this Lease on the part of Landlord shall, subject to the provisions of this Paragraph 31.2(a), be binding upon each Landlord and such Landlord’s heirs, personal representatives, successors and assigns only during its respective period of ownership. Except as provided in this Paragraph 31.2(a), this Lease shall not be affected by any transfer of Landlord’s interest in the Premises, and Tenant shall attorn to any transferee of Landlord provided that all of Landlord’s obligations hereunder are assumed in writing by such transferee.

          (b) Agents. For purposes of this Lease and without otherwise affecting the definition of the word “agent” or the meaning of an “agency”, the term “agents” shall be deemed to include the agents, employees, officers, directors, servants, invitees, contractors, successors, representatives subcontractors, guests, customers, suppliers, partners, affiliated companies, and any other person or entity related in any way to the respective party, Tenant or Landlord.

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          (c) Interpretation of Terms. The words “Landlord” and “Tenant” as used herein shall include the plural as well as the singular. Words in the neuter gender include the masculine and feminine and words in the masculine or feminine gender include the neuter.

          31.3 Copies. Any executed copy of this Lease shall be deemed an original for all purposes.

          31.4 Time of Essence. Time is of the essence as to each and every provision in this Lease requiring performance within a specified time, except as to the conditions relating to the delivery of possession of the Premises to Tenant.

          31.5 Severability. In case any one or more of the provisions contained herein shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Lease, but this Lease shall be construed as if such invalid, illegal or unenforceable provision had not been contained herein. However, if Tenant’s obligation to pay the Rentals is determined to be invalid or unenforceable, this Lease at the option of Landlord shall terminate.

          31.6 Governing Law. This Lease shall be construed and enforced in accordance with the laws of the State of California.

          31.7 Joint and Several Liability. If Tenant is more than one person or entity, each such person or entity shall be jointly and severally liable for the obligations of Tenant hereunder. If Tenant is a husband and wife, the obligations hereunder shall extend to their sole and separate property as well as community property.

          31.8 Construction of Lease Provisions. Although printed provisions of this Lease were prepared by Landlord, this Lease shall not be construed either for or against Tenant or Landlord, but shall be construed in accordance with the general tenor of the language to reach a fair and equitable result.

          31.9 Conditions. All agreements by Tenant contained in this Lease, whether expressed as covenants or conditions, shall be construed to be both covenants and conditions.

          31.10 Tenant’s Financial Statements. Tenant hereby warrants that all financial statements delivered by Tenant to Landlord are true, correct, and complete, and prepared in accordance with generally accepted accounting principles. Tenant acknowledges and agrees that Landlord is relying on such financial statements in accepting this Lease, and that a breach of Tenant’s warranty as to such financial statements shall constitute a Default by Tenant.

          31.11 Withholding of Landlord’s Consent Notwithstanding any other provision of this Lease, where Tenant is required to obtain the consent (whether written or oral) of Landlord to do any act, or to refrain from the performance of any act, Tenant agrees that if Tenant is in default with respect to any term, condition, covenant or provision of this Lease,

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then Landlord shall be deemed to have acted reasonably in withholding its consent if said consent is, in fact, withheld.

     32. Signs. Tenant shall not place or permit to be placed any sign or decoration on the Common Area or the exterior of the Premises or that would be visible from the exterior of the Premises, without the prior written consent of Landlord, which consent may be withheld in Landlord’s absolute discretion. In no event shall any such sign revolve, rotate, move or create the illusion of revolving, rotating or moving or be internally illuminated and there shall be no exterior spotlighting or other illumination on any such sign. Tenant, upon written notice by Landlord, shall immediately remove any of Tenant’s signs or decorations that are visible from the exterior of the Premises or that Tenant has placed or permitted to be placed on the Common Area or the exterior of the Premises without the prior written consent of Landlord. If Tenant fails to so remove such sign or decoration within five (5) days after Landlord’s written notice, Landlord may enter the Premises and remove such sign or decoration and Tenant shall pay Landlord, as Additional Rent upon demand, the cost of such removal. All signs placed on the Premises or Common Area by Tenant shall comply with all recorded documents affecting the Premises, including but not limited to any Declaration of Conditions, Covenants and Restrictions (as the same may be amended from time to time); and applicable statutes, ordinances, rules and regulations of governmental agencies having jurisdiction thereof. At Landlord’s option, Tenant shall at Lease Termination remove any sign which it has placed on the Premises or the Common Area, and shall, at its sole cost, repair any damage caused by the installation or removal of such sign.

     33. Landlord as Party Defendant. If, by reason of any act or omission by Tenant or Tenant’s agents, Landlord is made a party defendant concerning this Lease, the Premises, or the Common Area, Tenant shall indemnify Landlord against all liability incurred (or threatened against) Landlord as a party defendant, including all damages, costs and attorneys’ fees.

     34. Landlord Not a Trustee. Landlord shall not be deemed to be a trustee of any funds paid to Landlord by Tenant (or held by Landlord for Tenant) pursuant to this Lease, including without limitation the Security Deposit. Landlord shall not be required to keep any such funds separate from Landlord’s general funds. Any funds held by Landlord pursuant to this Lease shall not bear interest.

     35. Interest. Any payment due from Tenant to Landlord, except for Rent or Additional Rent received by Landlord within thirty (30) days after the same is due, shall bear interest from the date due until paid, at an annual rate equal to the greater of: ten percent (10%); or five percent (5%) plus the rate established by the Federal Reserve Bank of San Francisco, as of the twenty-fifth (25th) day of the month immediately preceding the due date, on advances to member banks under Sections 13 and 13(a) of the Federal Reserve Act, as now in effect or hereafter from time to time amended. In addition, Tenant shall pay all reasonable costs and attorneys’ fees incurred by Landlord in the collection of such amounts.

     36. Surrender of Premises. On the last day of the Lease Term or upon the sooner termination of this Lease, Tenant shall, to the reasonable satisfaction of Landlord, surrender the

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Premises to Landlord in good condition (reasonable wear and tear excepted) with all originally painted interior walls washed, or re-painted if marked or damaged and other interior walls cleaned and repaired or replaced, all carpets cleaned and in good condition, the air conditioning, ventilating and heating equipment inspected, serviced and repaired by a reputable and licensed service firm (unless Landlord has elected to maintain heating and air conditioning systems pursuant to Paragraph 10.1 above), and all floors cleaned and waxed. Tenant shall remove all of Tenant’s personal property and trade fixtures from the Premises (but not Tenant’s Alterations not required by Landlord to be removed pursuant to Paragraph 13.2), and all property not so removed shall be deemed abandoned by Tenant. Furthermore, Tenant shall immediately repair all damage to the Premises and Common Area caused by any such removal. If the Premises are not so surrendered at Lease Termination, Tenant shall indemnify, defend and hold Landlord harmless from and against any loss, damage, expense, claim or liability resulting from delay by Tenant in so surrendering the Premises including, without limitation, any claims made by any succeeding tenant or losses to Landlord due to lost opportunities to lease to succeeding tenants.

     37. No Partnership or Joint Venture. Nothing in this Lease shall be construed as creating a partnership or joint venture between Landlord, Tenant, or any other party, or cause Landlord to be responsible for the debts or obligations of Tenant or any other party.

     38. Entire Agreement. Any agreements, warranties, or representations not expressly contained herein shall in no way bind either Landlord or Tenant, and Landlord and Tenant expressly waive all claims for damages by reason of any statement, representation, warranty, promise or agreement, if any, not contained in this Lease. This Lease supersedes and cancels any and all previous negotiations, arrangements, brochures, agreements and understandings, whether written or oral, between Landlord and its agents and Tenant and its agents with respect to the Premises, Common Area or this Lease. This Lease constitutes the entire agreement between the parties hereto and no addition to, or modification of, any term or provision of this Lease shall be effective until and unless set forth in a written instrument signed by both Landlord and Tenant.

     39. Submission of Lease. Submission of this instrument for Tenant’s examination or execution does not constitute a reservation of space nor an option to lease. This instrument shall not be effective until executed by both Landlord and Tenant. Execution of this Lease by Tenant shall constitute an offer by Tenant to lease the Premises, which offer shall be deemed accepted by Landlord when this Lease is executed by Landlord and delivered to Tenant.

     40. Quiet Enjoyment. Landlord covenants and agrees with Tenant that upon Tenant paying Rentals and performing its covenants and conditions under the Lease, Tenant shall and may peaceably and quietly have, hold and enjoy the Premises for the Lease Term, subject, however, to the terms of this Lease and of any mortgages or deeds of trust affecting the Premises and/or the real property comprising the Common Area, and the rights reserved by Landlord hereunder. Any purchaser upon any foreclosure or exercise of the power of sale under any mortgage or deed of trust made by Landlord and covering the Premises to whom Tenant attorns pursuant to Paragraph 20.4 above shall be bound by the terms of this Paragraph 40.

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     41. Authority. The undersigned parties hereby warrant that they have proper authority and are empowered to execute this Lease on behalf of the Landlord and Tenant, respectively. If Tenant is a corporation (or partnership), each individual executing this Lease on behalf of said corporation (or partnership) represents and warrants that he is duly authorized to execute and deliver this Lease on behalf of said corporation in accordance with a duly adopted resolution of the Board of Directors of said corporation or in accordance with the by-laws of said corporation (or on behalf of said partnership in accordance with the partnership agreement of such partnership), and that this Lease is binding upon said corporation (or partnership) in accordance with its terms. If Tenant is a corporation, Tenant shall upon execution of this Lease, deliver to Landlord a certified copy of the resolution of the Board of Directors of said corporation authorizing or ratifying the execution of this Lease. In the event Tenant should fail to deliver such resolution to Landlord upon execution of this Lease, Landlord shall not be deemed to have waived its right to require delivery of such resolution, and at any time during the Lease Term Landlord may request Tenant to deliver the same, and Tenant agrees it shall thereafter promptly deliver such resolution to Landlord. If Tenant is a corporation, Tenant warrants that:

          (a) Tenant is a valid and existing corporation;

          (b) Tenant is qualified to do business in California;

          (c) All fees and all franchise and corporate taxes are paid to date, and will be paid when due;

          (d) All required forms and reports will be filed when due; and

          (e) The signers of this Lease are properly authorized to execute this Lease.

     42. Building Plans. Tenant acknowledges that any plan of the Premises and Common Area which may have been displayed or furnished to Tenant or which may be a part of Exhibit “A” is tentative; Landlord may change the exterior of the Premises and the shape, size, location, number, and extent of the Common Area improvements shown on any such plan and eliminate or add any improvements to the Common Area in Landlord’s sole discretion; provided, however, that the Premises shall be substantially as shown on such plan.

(signature page follows)

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     IN WITNESS WHEREOF, the parties have executed this Lease effective as of the date set forth below.

LANDLORD:		TENANT:
SI HAHN LLC,		MELLANOX TECHNOLOGIES, INC.,
a California limited liability company		A California corporation
By:	/s/ Sang Hahn	By:	/s/ E. Waldman
	SangHahn	Title:	CEO
Title:	Manager
		By:
		Title:
DATE:	JAN. 23, 2002	DATE	1-22-02

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EXHIBITS

A.	Site Plan	Paragraph 1.4	(Premises shown cross-hatched and Common Area outlined in red pursuant to Paragraph 2.1)
B.	Legal Description		Paragraph 2.1
C.	Intentionally
	Omitted
D.	List of Permitted
	Hazardous Materials		Paragraph 25
E.	List of
	Environmental
	Reports		Paragraph 25.6
F.	Form of Estoppel
	Certificate		Paragraph 20.5

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EXHIBIT A

CORONADO/STENDER
BUSINESS PARK

EXHIBIT B

Order No. 516606

LEGAL DESCRIPTION

REAL PROPERTY in the City of Santa Clara. County of Santa Clara. State of California, described as follows:

PARCEL ONE:

“Pcl One”, so designated and delineated on the Parcel Map recorded April 17, 1974 in Book 338 of Maps, page 29, Santa Clara County Records.

PARCEL TWO:

“Pcl Three” and “Pcl Four”, so designated and delineated on the Parcel Map recorded April 24, 1974 in Book 338 of Maps, page 50, Santa Clara County Records.

PARCEL THREE:

Parcel 1 as shown on that certain Parcel Map filed in the Office of the Recorder of the County of Santa Clara, State of California on June 28, 1985 in Book 666 of Maps, page(s) 46, 47 and 48.

PARCEL THREE-A:

PRIVATE ACCESS EASEMENT

An easement for ingress and egress, situate in the City of Santa Clara, across Parcel 2 for the benefit of Parcel 1, as said parcels are shown on the parcel map filed on June 28, 1985 in Book 666 of Maps at pages 46, 47 and 48, in the Office of the County Recorder of Santa Clara State of California, said easement being described as follows:

Beginning at the most Southeasterly corner of said Parcel 2; thence along the Southerly line of said Parcel 2, North 89’00’32’ West 220.01 feet thence leaving said Southerly line, North 00’58’28’ East 12.50 feet thence South 89’00’32’ East 220.01 feet to the Easterly line of said Parcel 2; thence along said Easterly line South 00’59’28’ West 12.50 feet to the point of beginning.

PARCEL THREE-B:

PRIVATE STORM DRAINAGE EASEMENT

An easement for storm drainage purposes, situate in the City of Santa Clara, in, under, on, over and across Parcel 2 for the benefit of Parcel 1, as said parcels are shown on the parcel map filed on June 28, 1985 in Book 666 of Maps at pages 46, 47 and 48, in the Office of the County Recorder of Santa Clara, States of California, said easement being described as follows:

(LEGAL DESCRIPTION CONTINUED NEXT PAGE)

Order No. 515806

LEGAL DESCRIPTION (Continued)

Commencing at the Southeasterly corner of said Parcel 2: thence along the Southerly line of said Parcel 2 North 89ú 00ú 28ú West 12.12 feet to the true point of beginning of this description; thence from said true point of beginning, along said Southerly line North 89ú 00ú 32ú West 4.55 feet; thence leaving said Southerly line North 74ú 38ú 58ú West 205.48 feet; thence North 15ú 21ú 01ú East 5.00 feet; thence South 74ú 38ú 59ú East 199.21 feet; thence North 07ú 11ú 08ú East 116.84 feet; thence South 89ú 00ú 32ú East 8.97 feet to the Easterly line of said Parcel 2: thence along said Easterly line South 00ú 58ú 28ú West 10.00 feet; thence leaving said Easterly line South 07ú 11ú 08ú West 112.32 feet to the true point of beginning.

PARCEL THREE—C:

PRIVATE SANITARY SEWER EASEMENT

An easement for sanitary sewer purposes, situate in the City of Santa Clara. In, under, on, ever and across Parcel 2 for the benefit of Parcel 1, as said parcels are shown on the parcel map filed on June 28, 1985. In Book 666 of Maps at pages 46, 47 and 48. In the Office of the County Recorder of Santa Clara, State of California said easement being described as follows:

The Easterly 10.00 feet of the Southerly 2.50 feet of said Parcel 2.

PARCEL THREE - D:

PRIVATE STORM DRAINAGE EASEMENT FOR SURFACE RUN-OFF

An easement for storm drainage purposes for surface run-off, situate in the City of Santa Clara across Parcel 2 for the benefit of Parcel, as said parcels are shown on the parcel map filed on June 28, 1995 in Book 666 of Maps at pages 48, 47 and 48 in the Office of the County Recorder of Santa Clara State of California said easement being described as follows:

Beginning at the most Southeasterly corner at said Parcel 2: thence along the Southerly line of said Parcel 2 North 88⁰ OC’ 32⁰ West 220.01 feet thence leaving said Southerly line North 00⁰ 58’ 28⁰ East 83.97 feet; thence South 73⁰ 12’ 23’ East 112.73 feet thence South 00⁰ 58’ 28⁰ West 18.38 feet thence South 88⁰ 00⁰ 32’ East 112.09 feet to the Easterly line of said Parcel 2; thence along said Easterly line South 00⁰ 58 28’ West 12.50 feet to the point of beginning.

APN: 216-29-082, 109, 110; 218-48-20
ARB: 218-29-4, 4.08, 4.08, 4.07, 20.02, 20.03, 70.04

EXHIBIT C

INTENTIONALLY OMITTED

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EXHIBIT D

LIST OF PERMITTED HAZARDOUS MATERIALS

-1-

EXHIBIT E

12/30/1994	Phase I Environmental Site Assessment (revised)	From ATC Environmental Inc. for RREEF America Partners as investment Managers for RREEFUSA Fund III on Coronado Stender Business Park	2900-3040 Coronado Drive and 2902 and 2972 Stender Way. Santa Clara
12/30/94	Soil and Groundwater Sampling (revised)	From ATC Environmental Inc. for The RREEF Funds on Coronado Business Park	3000-3040 Coronado Drive, Santa Clara
3/13/95	Revised Phase II Soil and Groundwater Sampling	From ATC Environmental Inc. to RREEF Funds	3000-3040 Corcnado Drive Santa Clara
3/10/98	Workplan For Remedial Activities (Electroglas, Inc.)	From Erter & Kalinowski, Inc.	2901 Coronado Drive, 3001 Coronado Drive, and 2900/2902 Stender Way, Santa Clara
11/3/98	Letter to Sonia Echevenia (Electroglass) from RWQC	No Further Action for Soil Remedial Activities for Electroglass, Inc.	2901 Coronado Drive, 3001 Coronado Drive, and 2900/2902 Stender Way, Santa Clara
11/6/98	Letter to Kevin Archer (RREEF USA Fund III) from Stephen A. Trantino, P.E. and Earl D. James, R.G.,	No further Action Letter, Soil Remediation and Sanitary Sewer and Storm Drain Replacement Activities	2901 Coronado Drive, 3001 Coronado Drive, and 2900/2902 Stender Way, Santa Clara
11/9/98	Letter to Mr. Joe Price (Electroglas) from Loretta Barsamian (Executive Officer of RWQC)	Groundwater Remedial Activities for the Electroglas, Inc. Site	2901 Coronado Drive, 3001 Coronado Drive, and 2900/2902 Stender Way Santa Clara
11/16/98	Letter to Mr. David Barr (RWQC) from Eart D. James, R.G. (Project Manager of Erter & Kalinowski, Inc.)	Request for Clarification of Groudwater Remedial Activities letter Dated November 09, 1998	2901 Coronado Drive, 3001 Coronado Drive, and 2900/2902 Stender Way Santa Clara
11/25/98	Letter to Mr. Joe Price (Electroglas) from Loretta Barsamian (Executive Officer of RWQC) and Stephen Mores (Chief, Toxics Cleanup Division of RWQC)	Groundwater Remedial Activities for the Electroglas, Inc. Site	2901 Coronado Drive, 3001 Coronado Drive, and 2900/2902 Stender Way, Santa Clara
12/22/98	Results of Subsurface Environmental Investigations and	From Erter $ Kalinowski, Inc.	2901 Coronado Drive, 3001 Coronado Drive, and
	Proposed Remedial Activities (Electroglas, Inc.)		2900/2902 Stender Way, Santa Clara
3/3/99	Annual Environmental Audit	From Hygienetics Environmental prepared for RREEF Funds	2901,2920,2970,3000,3001,3016, and 3032 Coronado Drive and 2900 and 2972 Stender Way, Santa Clara

3/18/99	Memo from Larry R. Cummins for Letter dated 4/16/96 to Scott Sargis (Vice President and Corporate Counsel) from William E. Motzer, PhD., R.G. (Director Hydrogeology/Environmental Engineering Services	Underground Utility Incident	2900-3040 Coronado Drive and 2900, 2902, 2962, and 2972 Stender Way, Santa Clara
3/23/99	Phase I	By All West to SI Hahn
6/11/99	Operations & Maintenance Program	By All West

EXHIBIT F

TENANT ESTOPPEL CERTIFICATE

TO:			(“Purchaser”)
		,
	and
			(“Lender”)
		,

RE:	Lease Dated:
	Landlord:
	Tenant:
	Premises:
		Santa Clara, California
			square feet

     The undersigned tenant (herein called “Tenant”) is the lessee of certain space (the “Premises”) located at the above-captioned address (the “Property”) under the terms of a lease (the “Lease”) with                                          (“Landlord”).

     At Landlord’s request, and knowing that Landlord (and its successors or assigns), Purchaser or Lender (or its successors or assigns), as the case may be, will rely upon the accuracy of the information contained herein, Tenant certifies to Landlord and Purchaser or Lender (and to their respective successors and assigns), as the case may be, as follows:

     1. The Lease is dated January 1, 2002. A true, correct and complete copy of the Lease, including all amendments and modifications thereto, if any, is attached hereto as Exhibit A and incorporated herein by this reference.

     2. The commencement date of the Lease is January 1, 2002, and the expiration date of the current term of the Lease is June 30, 2006. The commencement of occupancy was                                         , 2002. The commencement and expiration dates of all renewals to the Lease term are as follows (if none, write “None”): None.

     3.  (a) The fixed monthly rental presently payable under the Lease is $                      and has been paid through                     , ___.

          (b) All additional rent (including, as applicable, operating costs, common area expenses, taxes, utilities, percentage rents, etc.) payable under the terms of the Lease has been paid

through                     , ___, and the Tenant is not presently contesting any amount or Tenant’s share thereof. Percentage rent is payable under the Lease as follows (if none, write “None”):                                                                          .

          (c) Tenant has paid all taxes, charges, maintenance, insurance, utilities and other costs or expenses payable by Tenant under the terms and provisions of the Lease and no amounts remain unpaid as of the date hereof, and Tenant is not presently contesting any amount, or Tenant’s Share, if applicable thereof.

     4. The amount of security deposit being held by Landlord is $                    . No interest is or will in the future become due or payable in connection with the security deposit.

     5. The Lease is in full force and effect and is binding and enforceable against Tenant in accordance with its terms.

     6. The Lease constitutes the entire agreement between Landlord and Tenant with respect to the Premises and the Lease has not been amended, modified, supplemented, renewed or otherwise changed in any way, and there are no agreements or obligations between Tenant and Landlord, either oral or written, to amend, renew, supplement, change or modify the terms or provisions of the Lease, except as follows (if none, write “None”):                                         .

     7. All work and tenant improvements required by the Lease to be completed has been completed in the manner and in accordance with the terms, conditions and covenants set forth in the Lease to the satisfaction of Tenant and have been accepted by Tenant without exception, and no payments are required to be made to Tenant in connection therewith. All tenant improvements constructed by or for Tenant under the terms of the Lease are, as of the date hereof, owned by Landlord (and are subject to Landlord’s right to require such tenant improvements be removed at the expiration or earlier termination of the Lease in accordance with the terms of the Lease).

     8. Tenant has accepted the Premises and is in full and complete possession thereof.

     9. Tenant has not assigned, sublet, or encumbered its interest in the Lease, except as follows:                                                                         .

     10. Tenant has performed no alterations or works of improvement upon the Premises for which any contractor, workman or supplier is still unpaid or for which any mechanic or materialman may be entitled to file a lien against the Premises.

     11. Tenant claims no offsets, set-offs, rebates, concessions, abatements, “free rent” or defenses to the enforcement of the agreements, terms, covenants or conditions of the Lease, including, without limitation, with respect to any base rent, percentage rent, additional rent, or other amount payable under the terms of the Lease. No rent under the Lease has been paid in advance of one (1) month and/or other than as is currently due, and there exists no credits or allowances to which Tenant is entitled.

     12. Neither Landlord nor Tenant is in default in the performance or observance of any of its obligations under the Lease, and no event has occurred and no conditions exist that, with the giving of notice or the passage of time, or both, would constitute a default under the terms of the Lease.

     13. Tenant has no option to renew, extend or expand the Lease, or any rights of first refusal or any other rights to lease any other space in, or to purchase all or any part of, the Property, except as follows:                                                             .

     14. The Tenant has not at any time since the commencement of the Lease and does not presently use the Premises and/or any portion of the Property for the generation, manufacture, refining, transportation, treatment, storage or disposal of any hazardous substances or hazardous wastes for any purpose which poses a substantial risk of imminent damage to public health or safety or to the environment.

     15. No fire, earthquake, flood or other casualty has occurred on the Premises and caused substantial damage to the Premises, and Tenant has no notice of any planned or potential condemnation of the Property or any part thereof.

     16. There are no actions, voluntary or otherwise, pending or, to the best of Tenant’s knowledge, threatened against Tenant under the bankruptcy, reorganization or similar laws of the United States or any state thereof.

     17. Tenant has no notice of any prior assignment, hypothecation or pledge of the Lease or the rents due hereunder.

     18. Notwithstanding any term or provision of the Lease, upon foreclosure by Lender under a deed of trust, or deed-in-lieu thereof, any environmental/hazardous materials indemnity and/or reimbursement provisions made by Landlord in favor of Tenant under the Lease shall not be enforceable against Lender and/or the purchaser at a foreclosure.

     Tenant understands that Purchaser (or its successor or assign) or Lender will rely upon this certificate in deciding whether to purchase the Real Property or fund a loan, as the case may be. Tenant agrees that this certificate shall be binding upon the Tenant and its successors and assigns, or heirs and personal representatives, as applicable, and shall inure to the benefit of Landlord and Lender or Purchaser (or its successor or assign), as the case may be.

Dated:	“Tenant”
	By
	[Printed Name and Title]

EXHIBIT A

LEASE INCLUDING ALL AMENDMENTS THERETO

FIRST AMENDMENT TO LEASE

First amendment to lease dated for reference purposes January 1, 2002 between S.I. Hahn, LLC, a California Limited Partnership as Lessor and Mellanox Technologies, Inc., a California Corporation as Tenant for the premises located at 2900-2902 Stender Way in the City of Santa Clara, County of Santa Clara.

Tenant and Landlord hereby amend the above referenced agreement as follows:

1.	The Term of the lease shall be extended to March 31, 2009.
2.	Rent shall be amended as follows:

a.	April 1, 2004 to March 31, 2005 $29,750 per month
b.	April 1, 2005 to March 31, 2006 $30,940 per month
c.	April 1, 2006 to March 31, 2007 $32,130 per month
d.	April 1, 2007 to March 31, 2008 $33,320 per month
e.	April 1, 2008 to March 31, 2009 $34,510 per month

IN WITNESS WHEREOF, the parties have executed this Lease Amendment as of the date set forth below:

LANDLORD		TENANT
SI HAHN LLC,		MELLANOX TECHNOLOGIES, INC.,
A California limited liability company		A California corporation
By:	/s/ Sang Hahn	By:	/s/ E. Waldman
	Sang Hahn
Title:	Manager	Title:	CEO
Date:	March 31, 2004	Date:	March 31, 2004

EX-10.8

Exhibit 10.8

CREDIT AGREEMENT

     THIS CREDIT AGREEMENT (this “Agreement”) is entered into as of August 16, 2005, by and between MELLANOX TECHNOLOGIES, INC., a California corporation (“Borrower”), and WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”).

RECITALS

     Borrower has requested that Bank extend or continue credit to Borrower as described below, and Bank has agreed to provide such credit to Borrower on the terms and conditions contained herein.

     NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Bank and Borrower hereby agree as follows:

ARTICLE I
CREDIT TERMS

     SECTION 1.1. LINE OF CREDIT.

     (a) Line of Credit. Subject to the terms and conditions of this Agreement, Bank hereby agrees to make advances to Borrower from time to time up to and including June 30, 2007, not to exceed at any time the aggregate principal amount of Five Million Dollars ($5,000,000.00) (“Line of Credit”), the proceeds of which shall be used to finance Borrower’s working capital needs. Borrower’s obligation to repay advances under the Line of Credit shall be evidenced by a promissory note dated as of August 16, 2005 (“Line of Credit Note”), all terms of which are incorporated herein by this reference.

     (b) Limitation on Borrowings. Outstanding borrowings under the Line of Credit, to a maximum of the principal amount set forth above, shall not at any time exceed Two Million Dollars ($2,000,000.00), unless such outstanding borrowings are less than or equal to eighty percent (80%) of Borrower’s eligible accounts receivable. All of the foregoing shall be determined by Bank upon receipt and review of all collateral reports required hereunder and such other documents and collateral information as Bank may from time to time require. Borrower acknowledges that said borrowing base was established by Bank with the understanding that, among other items, the aggregate of all returns, rebates, discounts, credits and allowances for the immediately preceding three (3) months at all times shall be less than five percent (5%) of Borrower’s gross sales for said period. If such dilution of Borrower’s accounts for the immediately preceding three (3) months at any time exceeds five percent (5%) of Borrower’s gross sales for said period, or if there at any time exists any other matters, events, conditions or contingencies which Bank reasonably believes may affect payment of any portion of Borrower’s accounts, Bank, in its sole discretion, may reduce the foregoing advance rate against eligible accounts receivable to a percentage appropriate to reflect such additional dilution and/or establish additional reserves against Borrower’s eligible accounts receivable.

     As used herein, “eligible accounts receivable” shall consist solely of trade accounts created in the ordinary course of Borrower’s business, upon which Borrower’s right to receive payment is absolute and not contingent upon the fulfillment of any condition whatsoever, and in which Bank has a perfected security interest of first priority, and shall not include:

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     (i) any account which is past due more than twice Borrower’s standard selling terms, except with respect to any account for which Borrower has provided extended payment terms not to exceed one hundred eighty (180) days, any such account which is more than thirty (30) days past due;

     (ii) that portion of any account for which there exists any right of setoff, defense or discount (except regular discounts allowed in the ordinary course of business to promote prompt payment) or for which any defense or counterclaim has been asserted;

     (iii) any account which represents an obligation of any state or municipal government or of the United States government or any political subdivision thereof (except accounts which represent obligations of the United States government and for which the assignment provisions of the Federal Assignment of Claims Act, as amended or recodified from time to time, have been complied with to Bank’s satisfaction);

     (iv) any account which represents an obligation of an account debtor located in a foreign country other than an account debtor located in a Canadian province or territory, so long as, in Bank’s determination, such Canadian jurisdiction recognizes Bank’s first priority security interest in and right to collect such account as a consequence of any security agreements and UCC filings in favor of Bank;

     (v) any account which arises from the sale or lease to or performance of services for, or represents an obligation of, an employee, affiliate, partner, member, parent or subsidiary of Borrower;

     (vi) that portion of any account, which represents interim or progress billings or retention rights on the part of the account debtor;

     (vii) any account which represents an obligation of any account debtor when twenty percent (20%) or more of Borrower’s accounts from such account debtor are not eligible pursuant to (i) above;

     (viii) that portion of any account from an account debtor which represents the amount by which Borrower’s total accounts from said account debtor exceeds fifty percent (50%) of Borrower’s total accounts;

     (ix) any account deemed ineligible by Bank when Bank, in its sole discretion, deems the creditworthiness or financial condition of the account debtor, or the industry in which the account debtor is engaged, to be unsatisfactory.

     (c) Letter of Credit Subfeature. As a subfeature under the Line of Credit, Bank agrees from time to time during the term thereof to issue or cause an affiliate to issue standby letters of credit for the account of Borrower (each, a “Letter of Credit” and collectively, “Letters of Credit”); provided however, that the aggregate undrawn amount of all outstanding Letters of Credit shall not at any time exceed Two Million Dollars ($2,000,000.00). The form and substance of each Letter of Credit shall be subject to approval by Bank, in its sole discretion. Each Letter of Credit shall be issued for a term not to exceed twelve (12) months, as designated by Borrower, provided that no Letter of Credit shall have an expiration date more than twelve (12) months beyond the maturity date of the Line of Credit. The undrawn amount of all Letters of Credit shall be reserved under the Line of Credit and shall not be available for borrowings thereunder. Each Letter of Credit shall be subject to the additional terms and conditions of the Letter of Credit

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agreements, applications and any related documents required by Bank in connection with the issuance thereof. Each drawing paid under a Letter of Credit shall be deemed an advance under the Line of Credit and shall be repaid by Borrower in accordance with the terms and conditions of this Agreement applicable to such advances; provided however, that if advances under the Line of Credit are not available, for any reason, at the time any drawing is paid, then Borrower shall immediately pay to Bank the full amount drawn, together with interest thereon from the date such drawing is paid to the date such amount is fully repaid by Borrower, at the rate of interest applicable to advances under the Line of Credit. In such event Borrower agrees that Bank, in its sole discretion, may debit any account maintained by Borrower with Bank for the amount of any such drawing. In the event that the Line of Credit is not renewed or extended and any Letter of Credit will have an expiration date subsequent to the stated maturity of the Line of Credit, Borrower covenants to take all steps necessary prior to such maturity date to grant Bank a perfected, first priority security interest in (i) securities acceptable to Bank and/or (ii) cash in an amount equal to the aggregate amount of Letters of Credit that will be outstanding subsequent to such maturity date, which collateral may be in addition to or in lieu of the collateral described in Section 1.5.

     (d) Borrowing and Repayment. Borrower may from time to time during the term of the Line of Credit borrow, partially or wholly repay its outstanding borrowings, and reborrow, subject to all of the limitations, terms and conditions contained herein or in the Line of Credit Note; provided however, that the total outstanding borrowings under the Line of Credit shall not at any time exceed the maximum principal amount available thereunder, as set forth above.

     SECTION 1.2. INTEREST/FEES.

     (a) Interest. The outstanding principal balance of each credit subject hereto, and the amount of each drawing paid under any Letter of Credit shall bear interest from the date such drawing is paid to the date such amount is fully repaid by Borrower, at the rate of interest set forth in each promissory note or other instrument or document executed in connection therewith.

     (b) Computation and Payment. Interest shall be computed on the basis of a 360-day year, actual days elapsed. Interest shall be payable at the times and place set forth in each promissory note or other instrument or document required hereby.

     (c) Letter of Credit Fees. Borrower shall pay to Bank (i) fees upon the issuance of each Letter of Credit equal to three quarters of one percent (0.75%) per annum (computed on the basis of a 360-day year, actual days elapsed) of the face amount thereof, and (ii) fees upon the payment or negotiation of each drawing under any Letter of Credit and fees upon the occurrence of any other activity with respect to any Letter of Credit (including without limitation, the transfer, amendment or cancellation of any Letter of Credit) determined in accordance with Bank’s standard fees and charges then in effect for such activity.

     SECTION 1.3. COLLECTION OF PAYMENTS. Borrower authorizes Bank to collect all interest and fees due under the Line of Credit by charging Borrower’s deposit account number 4761-058213 with Bank, or any other deposit account maintained by Borrower with Bank, for the full amount thereof. Should there be insufficient funds in any such deposit account to pay all such sums when due, the full amount of such deficiency shall be immediately due and payable by Borrower.

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     SECTION 1.5. COLLATERAL.

     As security for all indebtedness of Borrower to Bank, Borrower hereby grants to Bank security interests of first priority in all Borrower’s accounts receivable and other rights to payment, general intangibles, and inventory.

     Notwithstanding the inclusion of “general intangibles” in the definitions of Collateral in the security agreements executed by Borrower, Bank hereby disclaims a security interest in Borrower’s patents, copyrights, trademarks and other forms of intellectual property (collectively, “IP”), provided that nothing in such disclaimer is intended to or shall be construed so as to deprive Bank of such rights as it may require to foreclose upon Borrower’s personal property collateral (other than IP) in accordance with the terms of the applicable security agreement and relevant law.

     All of the foregoing shall be evidenced by and subject to the terms of such security agreements, financing statements, and other documents as Bank shall reasonably require, all in form and substance satisfactory to Bank. Borrower shall reimburse Bank immediately upon demand for all costs and expenses incurred by Bank in connection with any of the foregoing security, including without limitation, filing and recording fees and costs of audits.

     SECTION 1.6. GUARANTIES. All indebtedness of Borrower to Bank under the Line of Credit shall be guaranteed by Mellanox Technologies, Ltd. (“MTL”) in the principal amount of Five Million Dollars ($5,000,000.00), as evidenced by and subject to the terms of A guaranty in form and substance satisfactory to Bank.

ARTICLE II
REPRESENTATIONS AND WARRANTIES

     Borrower makes the following representations and warranties to Bank, which representations and warranties shall survive the execution of this Agreement and shall continue in full force and effect until the full and final payment, and satisfaction and discharge, of all obligations of Borrower to Bank subject to this Agreement.

     SECTION 2.1. LEGAL STATUS. Borrower is a borrower, duly organized and existing and in good standing under the laws of California, and is qualified or licensed to do business (and is in good standing as a foreign corporation, if applicable) in all jurisdictions in which such qualification or licensing is required or in which the failure to so qualify or to be so licensed could reasonably be expected to have a material adverse effect on Borrower.

     SECTION 2.2. AUTHORIZATION AND VALIDITY. This Agreement and each promissory note, contract, instrument and other document required hereby or at any time hereafter delivered to Bank in connection herewith (collectively, the “Loan Documents”) have been duly authorized, and upon their execution and delivery in accordance with the provisions hereof will constitute legal, valid and binding agreements and obligations of Borrower or the party which executes the same, enforceable in accordance with their respective terms.

     SECTION 2.3. NO VIOLATION. The execution, delivery and performance by Borrower of each of the Loan Documents do not violate any provision of any law or regulation, or contravene any provision of the Articles of Incorporation or By-Laws of Borrower, or result in any breach of or default under any contract, obligation, indenture or other instrument to which Borrower is a party or by which Borrower may be bound.

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     SECTION 2.4. LITIGATION. There are no pending, or to the best of Borrower’s knowledge threatened, actions, claims, investigations, suits or proceedings by or before any governmental authority, arbitrator, court or administrative agency which could reasonably be expected to have a material adverse effect on the financial condition or operation of Borrower other than those disclosed by Borrower to Bank in writing prior to the date hereof.

     SECTION 2.5. CORRECTNESS OF FINANCIAL STATEMENT. The financial statement of Borrower dated March 31, 2005, a true copy of which has been delivered by Borrower to Bank prior to the date hereof, (a) is complete and correct and presents fairly the financial condition of Borrower as of March 31, 2005, (b) discloses all liabilities of Borrower that are required to be reflected or reserved against as of March 31, 2005 under generally accepted accounting principles, whether liquidated or unliquidated, fixed or contingent, and (c) has been prepared in accordance with generally accepted accounting principles in effect as of March 31, 2005, consistently applied. Since the date of such financial statement there has been no material adverse change in the financial condition of Borrower, nor has Borrower mortgaged, pledged, granted a security interest in or otherwise encumbered any of its assets or properties except in favor of Bank or as otherwise permitted by Bank in writing.

     SECTION 2.6. INCOME TAX RETURNS. Borrower has no knowledge of any pending assessments or adjustments of its income tax payable with respect to any year.

     SECTION 2.7. NO SUBORDINATION. There is no agreement, indenture, contract or instrument to which Borrower is a party or by which Borrower may be bound that requires the subordination in right of payment of any of Borrower’s obligations subject to this Agreement to any other obligation of Borrower.

     SECTION 2.8. PERMITS, FRANCHISES. Borrower possesses, and will hereafter possess, all permits, consents, approvals, franchises and licenses required and rights to all trademarks, trade names, patents, and fictitious names, if any, necessary to enable it to conduct the business in which it is now engaged in compliance with applicable law.

     SECTION 2.9. ERISA. Borrower is in compliance in all material respects with all applicable provisions of the Employee Retirement Income Security Act of 1974, as amended or recodified from time to time (“ERISA”); Borrower has not violated any provision of any defined employee pension benefit plan (as defined in ERISA) maintained or contributed to by Borrower (each, a “Plan”); no Reportable Event as defined in ERISA has occurred and is continuing with respect to any Plan initiated by Borrower; Borrower has met its minimum funding requirements under ERISA with respect to each Plan; and each Plan will be able to fulfill its benefit obligations as they come due in accordance with the Plan documents and under generally accepted accounting principles.

     SECTION 2.10. OTHER OBLIGATIONS. Borrower is not in default on any obligation for borrowed money, any purchase money obligation or any other material lease, commitment, contract, instrument or obligation.

     SECTION 2.11. ENVIRONMENTAL MATTERS. Except as disclosed by Borrower to Bank in writing prior to the date hereof, Borrower is in compliance in all material respects with all applicable federal or state environmental, hazardous waste, health and safety statutes, and any rules or regulations adopted pursuant thereto, which govern or affect any of Borrower’s operations and/or properties, including without limitation, the Comprehensive Environmental

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Response, Compensation and Liability Act of 1980, the Superfund Amendments and Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act of 1976, and the Federal Toxic Substances Control Act, as any of the same may be amended, modified or supplemented from time to time. None of the operations of Borrower is the subject of any federal or state investigation evaluating whether any remedial action involving a material expenditure is needed to respond to a release of any toxic or hazardous waste or substance into the environment. Borrower has no material contingent liability in connection with any release of any toxic or hazardous waste or substance into the environment.

ARTICLE III
CONDITIONS

     SECTION 3.1. CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation of Bank to extend any credit contemplated by this Agreement is subject to the fulfillment to Bank’s satisfaction of all of the following conditions:

     (a) Approval of Bank Counsel. All legal matters incidental to the extension of credit by Bank shall be satisfactory to Bank’s counsel.

     (b) Documentation. Bank shall have received, in form and substance satisfactory to Bank, each of the following, duly executed:

(i) This Agreement and each promissory note or other instrument or document required hereby;

(ii) Corporate Resolution: Borrowing;

(iii) Certificate of Incumbency;

(iv) Corporate Resolution: Continuing Guarantee;

(v) Continuing Security Agreement: Rights to Payment and Inventory;

(vi) Exhibit A to UCC Financing Statement;

(vii) Legal Opinion from MTL’s Israeli counsel;

(viii) Continuing Guaranty and Addendum thereto; and

(ix) Such other documents as Bank may require under any other Section of this Agreement.

     (c) Financial Condition. There shall have been no material adverse change, as determined by Bank, in the financial condition or business of Borrower or any guarantor hereunder, nor any material decline, as determined by Bank, in the market value of any collateral required hereunder or a substantial or material portion of the assets of Borrower or any such guarantor.

     (d) Insurance. Borrower shall have delivered to Bank evidence of insurance coverage on all Borrower’s property, in form, substance, amounts, covering risks and issued by companies satisfactory to Bank, and where required by Bank, with loss payable endorsements in favor of Bank.

     SECTION 3.2. CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of Bank to make each extension of credit requested by Borrower hereunder shall be subject to the fulfillment to Bank’s satisfaction of each of the following conditions:

     (a) Compliance, The representations and warranties contained herein and in each of the other Loan Documents shall be true on and as of the date of the signing of this Agreement

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and on the date of each extension of credit by Bank pursuant hereto, with the same effect as though such representations and warranties had been made on and as of each such date (except that representations in the first sentence of Section 2.5 shall be deemed to refer to the then most recent audited financial statement delivered by Borrower to Bank hereunder and to the date of such audited financial statement), and on each such date, no Event of Default as defined herein, and no condition, event or act which with the giving of notice or the passage of time or both would constitute such an Event of Default, shall have occurred and be continuing or shall exist.

     (b) Documentation. Bank shall have received all additional documents which may be required in connection with such extension of credit.

ARTICLE IV
AFFIRMATIVE COVENANTS

     Borrower covenants that so long as Bank remains committed to extend credit to Borrower pursuant hereto, or any liabilities (whether direct or contingent, liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents remain outstanding, and until payment in full of all obligations of Borrower subject hereto, Borrower shall, unless Bank otherwise consents in writing:

     SECTION 4.1. PUNCTUAL PAYMENTS. Punctually pay all principal, interest, fees or other liabilities due under any of the Loan Documents at the times and place and in the manner specified therein.

     SECTION 4.2. ACCOUNTING RECORDS. Maintain adequate books and records in accordance with generally accepted accounting principles consistently applied, and permit any representative of Bank, at any reasonable time, to inspect, audit and examine such books and records, to make copies of the same, and to inspect the properties of Borrower.

     SECTION 4.3. FINANCIAL STATEMENTS. Provide to Bank all of the following, in form and detail satisfactory to Bank:

     (a) not later than 120 days after and as of the end of each fiscal year, an audited consolidated financial statement of Borrower and MTL, prepared by an independent certified public accountant acceptable to Bank, to include a balance sheet, income statement, statement of cash flow, and all supporting schedules and footnotes;

     (b) not later than 45 days after and as of the end of each fiscal quarter, a financial statement of Borrower and MTL, prepared by Borrower and MTL, to include a balance sheet, income statement and statement of cash flow;

     (c) not later than 30 days after the end of each month during which the outstanding borrowings under the Line of Credit at any time exceeded Two Million Dollars ($2,000,000), (i) monthly consolidating financial statements of Borrower and MTL, (ii) a monthly aged accounts receivable and accounts payable report, and (iii) a monthly inventory report reflecting raw materials, work-in-process and finished goods, in each case as at the end of such month;

     (d) from time to time such other information as Bank may reasonably request.

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     SECTION 4.4. COMPLIANCE. Preserve and maintain all licenses, permits, governmental approvals, rights, privileges and franchises necessary for the conduct of its business; and comply with the provisions of all documents pursuant to which Borrower is organized and/or which govern Borrower’s continued existence and with the requirements of all laws, rules, regulations and orders of any governmental authority applicable to Borrower and/or its business.

     SECTION 4.5. INSURANCE. Maintain and keep in force insurance of the types and in amounts customarily carried in lines of business similar to that of Borrower, including but not limited to fire, extended coverage, public liability, flood, property damage and workers’ compensation, with all such insurance carried with companies and in amounts satisfactory to Bank, and deliver to Bank from time to time at Bank’s request schedules setting forth all insurance then in effect.

     SECTION 4.6. FACILITIES. Keep all properties useful or necessary to Borrower’s business in good repair and condition, and from time to time make necessary repairs, renewals and replacements thereto so that such properties shall be fully and efficiently preserved and maintained.

     SECTION 4.7. TAXES AND OTHER LIABILITIES. Pay and discharge when due any and all indebtedness, obligations, assessments and taxes, both real or personal, including without limitation federal and state income taxes and state and local property taxes and assessments, except such (a) as Borrower may in good faith contest or as to which a bona fide dispute may arise, and (b) for which Borrower has made provision, to Bank’s satisfaction, for eventual payment thereof in the event Borrower is obligated to make such payment.

     SECTION 4.8. LITIGATION. Promptly give notice in writing to Bank of any litigation pending or threatened against Borrower.

     SECTION 4.9. FINANCIAL CONDITION. Maintain Borrower’s and MTL’s consolidated financial condition as follows using generally accepted accounting principles consistently applied and used consistently with prior practices (except to the extent modified by the definitions herein), with compliance determined commencing with Borrower’s financial statements for the period ending March 31, 2005:

     (a) At no time less than $5,000,000 of unrestricted cash and/or short-term investments and or short-term marketable securities (including the approximately $1,274,000 of existing restricted cash on MTL’s consolidated balance sheet (in connection with a building lease in Israel)), as reflected on Borrower’s and MTL’s consolidated balance sheet.

     (b) Quarterly net loss before taxes in any one of the first three fiscal quarters of fiscal year 2005 not more than $1,000,000, determined as of the end of each such fiscal quarter; quarterly net loss before taxes in the fourth fiscal quarter of fiscal year 2005 not more than $0, determined as of the end of such fiscal quarter.

     (c) Tangible Net Worth not less than $10,000,000 at any time after fiscal year 2005, with “Tangible Net Worth” defined as the aggregate of total stockholders’ equity plus subordinated debt less any intangible assets.

     SECTION 4.10. NOTICE TO BANK. Promptly (but in no event more than five (5) days after the occurrence of each such event or matter) give written notice to Bank in reasonable

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detail of: (a) the occurrence of any Event of Default, or any condition, event or act which with the giving of notice or the passage of time or both would constitute an Event of Default; (b) any change in the name or the organizational structure of Borrower; (c) the occurrence and nature of any Reportable Event or Prohibited Transaction, each as defined in ERISA, or any funding deficiency with respect to any Plan; or (d) any termination or cancellation of any insurance policy which Borrower is required to maintain, or any uninsured or partially uninsured loss through liability or property damage, or through fire, theft or any other cause affecting Borrower’s property.

ARTICLE V
NEGATIVE COVENANTS

     Borrower further covenants that so long as Bank remains committed to extend credit to Borrower pursuant hereto, or any liabilities (whether direct or contingent, liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents remain outstanding, and until payment in full of all obligations of Borrower subject hereto, Borrower will not without Bank’s prior written consent:

     SECTION 5.1. USE OF FUNDS. Use any of the proceeds of any credit extended hereunder except for the purposes stated in Article I hereof.

     SECTION 5.2. OTHER INDEBTEDNESS. Create, incur, assume or permit to exist any indebtedness or liabilities resulting from borrowings, loans or advances, whether secured or unsecured, matured or unmatured, liquidated or unliquidated, joint or several, except (a) the liabilities of Borrower to Bank, (b) any other liabilities of Borrower existing as of, and disclosed to Bank prior to, the date hereof, (c) purchase money indebtedness and capital lease obligations incurred in the normal course of business not to exceed an aggregate amount of $1,000,000.00 in any fiscal year, and (d) unsecured loans from shareholders.

     SECTION 5.3. MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Merge into or consolidate with any other entity; make any substantial change in the nature of Borrower’s business as conducted as of the date hereof; acquire all or substantially all of the assets of any other entity; nor sell, lease, transfer or otherwise dispose of all or a substantial or material portion of Borrower’s assets except in the ordinary course of its business.

     SECTION 5.4. GUARANTIES. Guarantee or become liable in any way as surety, endorser (other than as endorser of negotiable instruments for deposit or collection in the ordinary course of business), accommodation endorser or otherwise for, nor pledge or hypothecate any assets of Borrower as security for, any liabilities or obligations of any other person or entity, except any of the foregoing in favor of Bank.

     SECTION 5.5. LOANS, ADVANCES, INVESTMENTS. Make any loans or advances to or investments in any person or entity, except any of the foregoing existing as of, and disclosed to Bank prior to, the date hereof, except (a) investments in marketable securities consistent with Borrower’s investment policy approved from time to time by Borrower’s Board of Directors, and (b) loans, advances and additional investments not to exceed an aggregate of $500,000 in any fiscal year.

     SECTION 5.6. PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to exist a security interest in, or lien upon, all or any portion of Borrower’s assets now owned or hereafter acquired (including without limitation, all IP), except (a) any of the foregoing in favor of Bank or

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which is existing as of, and disclosed to Bank in writing prior to, the date hereof, and (b) security interests to secure obligations permitted under Section 5.2(c) hereof.

ARTICLE VI
EVENTS OF DEFAULT

     SECTION 6.1. The occurrence of any of the following shall constitute an “Event of Default” under this Agreement:

     (a) Borrower shall fail to pay when due any principal, interest, fees or other amounts payable under any of the Loan Documents.

     (b) Any financial statement or certificate furnished to Bank in connection with, or any representation or warranty made by Borrower or any other party under this Agreement or any other Loan Document shall prove to be incorrect, false or misleading in any material respect when furnished or made.

     (c) Any default in the performance of or compliance with any obligation, agreement or other provision contained herein or in any other Loan Document (other than those referred to in subsections (a) and (b) above), and with respect to any such default which by its nature can be cured, such default shall continue for a period of twenty (20) days from its occurrence.

     (d) Any default in the payment or performance of any obligation, or any defined event of default, under the terms of any contract or instrument (other than any of the Loan Documents) pursuant to which Borrower, any guarantor hereunder or any general partner or joint venturer in any Borrower which is a partnership or joint venture (with each such guarantor, general partner and/or joint venturer referred to herein as a “Third Party Obligor”) has incurred any debt or other liability to any person or entity, including Bank.

     (e) The filing of a notice of judgment lien against Borrower or any Third Party Obligor; or the recording of any abstract of judgment against Borrower or any Third Party Obligor in any county in which Borrower or such Third Party Obligor has an interest in real property; or the service of a notice of levy and/or of a writ of attachment or execution, or other like process, against the assets of Borrower or any Third Party Obligor; or the entry of a judgment against Borrower or any Third Party Obligor, and in each case, in an aggregate amount greater than $500,000.

     (f) Borrower or any Third Party Obligor shall become insolvent, or shall suffer or consent to or apply for the appointment of a receiver, trustee, custodian or liquidator of itself or any of its property, or shall generally fail to pay its debts as they become due, or shall make a general assignment for the benefit of creditors; Borrower or any Third Party Obligor shall file a voluntary petition in bankruptcy, or seeking reorganization, in order to effect a plan or other arrangement with creditors or any other relief under the Bankruptcy Reform Act, Title 11 of the United States Code, as amended or recodified from time to time, or in the case of MTL, its Israeli counterpart (“Bankruptcy Code”), or under any state, federal or Israeli law granting relief to debtors, whether now or hereafter in effect; or any involuntary petition or proceeding pursuant to the Bankruptcy Code or any other applicable state or federal law relating to bankruptcy, reorganization or other relief for debtors is filed or commenced against Borrower or any Third Party Obligor, or Borrower or any Third Party Obligor shall file an answer admitting the jurisdiction of the court and the material allegations of any involuntary petition; or Borrower or any Third Party Obligor shall be adjudicated a bankrupt, or an order for relief shall be entered

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against Borrower or any Third Party Obligor by any court of competent jurisdiction under the Bankruptcy Code or any other applicable state, federal or Israeli law relating to bankruptcy, reorganization or other relief for debtors.

     (g) The death or incapacity of any individual Borrower or Third Party Obligor. The dissolution or liquidation of any Borrower or Third Party Obligor which is a corporation, partnership, joint venture or other type of entity; or Borrower or any such Third Party Obligor, or any of its directors, stockholders or members, shall take action seeking to effect the dissolution or liquidation of such Borrower or Third Party Obligor.

     (h) Any change in ownership of an aggregate of twenty-five percent (25%) or more of the common stock of Borrower or the ownership interests of MTL.

     SECTION 6.2. REMEDIES. Upon the occurrence of any Event of Default: (a) all indebtedness of Borrower under each of the Loan Documents, any term thereof to the contrary notwithstanding, shall at Bank’s option and without notice become immediately due and payable without presentment, demand, protest or notice of dishonor, all of which are hereby expressly waived by each Borrower; (b) the obligation, if any, of Bank to extend any further credit under any of the Loan Documents shall immediately cease and terminate; and (c) Bank shall have all rights, powers and remedies available under each of the Loan Documents, or accorded by law, including without limitation the right to resort to any or all security for any credit subject hereto and to exercise any or all of the rights of a beneficiary or secured party pursuant to applicable law. All rights, powers and remedies of Bank may be exercised at any time by Bank and from time to time after the occurrence of an Event of Default, are cumulative and not exclusive, and shall be in addition to any other rights, powers or remedies provided by law or equity.

ARTICLE VII
MISCELLANEOUS

     SECTION 7.1. NO WAIVER. No delay, failure or discontinuance of Bank in exercising any right, power or remedy under any of the Loan Documents shall affect or operate as a waiver of such right, power or remedy; nor shall any single or partial exercise of any such right, power or remedy preclude, waive or otherwise affect any other or further exercise thereof or the exercise of any other right, power or remedy. Any waiver, permit, consent or approval of any kind by Bank of any breach of or default under any of the Loan Documents must be in writing and shall be effective only to the extent set forth in such writing.

     SECTION 7.2. NOTICES. All notices, requests and demands which any party is required or may desire to give to any other party under any provision of this Agreement must be in writing delivered to each party at the following address:

BORROWER: MELLANOX TECHNOLOGIES, INC.
2900 Stender Way
Santa Clara, CA 95054

BANK: WELLS FARGO BANK, NATIONAL ASSOCIATION
Peninsula Technology Group #05681
400 Hamilton Avenue
Palo Alto, CA 94301

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or to such other address as any party may designate by written notice to all other parties. Each such notice, request and demand shall be deemed given or made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by mail, upon the earlier of the date of receipt or three (3) days after deposit in the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy, upon receipt.

     SECTION 7.3. COSTS, EXPENSES AND ATTORNEYS’ FEES. Borrower shall pay to Bank immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys’ fees (to include outside counsel fees and all allocated costs of Bank’s in-house counsel), expended or incurred by Bank in connection with (a) the negotiation and preparation of this Agreement and the other Loan Documents, Bank’s continued administration hereof and thereof, and the preparation of any amendments and waivers hereto and thereto, (b) the enforcement of Bank’s rights and/or the collection of any amounts which become due to Bank under any of the Loan Documents, and (c) the prosecution or defense of any action in any way related to any of the Loan Documents, including without limitation, any action for declaratory relief, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by Bank or any other person) relating to any Borrower or any other person or entity. There are no legal expenses to be reimbursed related to the initial documentation.

     SECTION 7.4. SUCCESSORS, ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of the heirs, executors, administrators, legal representatives, successors and assigns of the parties; provided however, that Borrower may not assign or transfer its interest hereunder without Bank’s prior written consent. Bank reserves the right to sell, assign, transfer, negotiate or grant participations in all or any part of, or any interest in, Bank’s rights and benefits under each of the Loan Documents. In connection therewith, Bank may disclose all documents and information which Bank now has or may hereafter acquire relating to any credit subject hereto, Borrower or its business, any guarantor hereunder or the business of such guarantor, or any collateral required hereunder.

     SECTION 7.5. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other Loan Documents constitute the entire agreement between Borrower and Bank with respect to each credit subject hereto and supersede all prior negotiations, communications, discussions and correspondence concerning the subject matter hereof. This Agreement may be amended or modified only in writing signed by each party hereto.

     SECTION 7.6. NO THIRD PARTY BENEFICIARIES. This Agreement is made and entered into for the sole protection and benefit of the parties hereto and their respective permitted successors and assigns, and no other person or entity shall be a third party beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any other of the Loan Documents to which it is not a party.

     SECTION 7.7. TIME. Time is of the essence of each and every provision of this Agreement and each other of the Loan Documents.

     SECTION 7.8. SEVERABILITY OF PROVISIONS. If any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity without invalidating the remainder of such provision or any remaining provisions of this Agreement.

S:\Documentation\TEAM1\PEN\LEGAL\mellanox-	-12-
202NEW.doc
AU #05681     OBGR #51 9713 8389

     SECTION 7.9. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which when executed and delivered shall be deemed to be an original, and all of which when taken together shall constitute one and the same Agreement.

     SECTION 7.10. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of California.

     SECTION 7.11. ARBITRATION.

     (a) Arbitration. The parties hereto agree, upon demand by any party, to submit to binding arbitration all claims, disputes and controversies between or among them (and their respective employees, officers, directors, attorneys, and other agents), whether in tort, contract or otherwise arising out of or relating to in any way (i) the loan and related Loan Documents which are the subject of this Agreement and its negotiation, execution, collateralization, administration, repayment, modification, extension, substitution, formation, inducement, enforcement, default or termination; or (ii) requests for additional credit.

     (b) Governing Rules. Any arbitration proceeding will (i) proceed in a location in California selected by the American Arbitration Association (“AAA”); (ii) be governed by the Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of law provision in any of the documents between the parties; and (iii) be conducted by the AAA, or such other administrator as the parties shall mutually agree upon, in accordance with the AAA’s commercial dispute resolution procedures, unless the claim or counterclaim is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and costs in which case the arbitration shall be conducted in accordance with the AAA’s optional procedures for large, complex commercial disputes (the commercial dispute resolution procedures or the optional procedures for large, complex commercial disputes to be referred to, as applicable, as the “Rules”). If there is any inconsistency between the terms hereof and the Rules, the terms and procedures set forth herein shall control. Any party who fails or refuses to submit to arbitration following a demand by any other party shall bear all costs and expenses incurred by such other party in compelling arbitration of any dispute. Nothing contained herein shall be deemed to be a waiver by any party that is a bank of the protections afforded to it under 12 U.S.C. §91 or any similar applicable state law.

     (c) No Waiver of Provisional Remedies, Self-Help and Foreclosure. The arbitration requirement does not limit the right of any party to (i) foreclose against real or personal property collateral; (ii) exercise self-help remedies relating to collateral or proceeds of collateral such as setoff or repossession; or (iii) obtain provisional or ancillary remedies such as replevin, injunctive relief, attachment or the appointment of a receiver, before during or after the pendency of any arbitration proceeding. This exclusion does not constitute a waiver of the right or obligation of any party to submit any dispute to arbitration or reference hereunder, including those arising from the exercise of the actions detailed in sections (i), (ii) and (iii) of this paragraph.

     (d) Arbitrator Qualifications and Powers. Any arbitration proceeding in which the amount in controversy is $5,000,000.00 or less will be decided by a single arbitrator selected according to the Rules, and who shall not render an award of greater than $5,000,000.00. Any dispute in which the amount in controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel of three arbitrators; provided however, that all three arbitrators must actively participate in all hearings and deliberations. The arbitrator will be a neutral attorney licensed in the State of California or a neutral retired judge of the state or federal judiciary of California, in

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either case with a minimum of ten years experience in the substantive law applicable to the subject matter of the dispute to be arbitrated. The arbitrator will determine whether or not an issue is arbitratable and will give effect to the statutes of limitation in determining any claim. In any arbitration proceeding the arbitrator will decide (by documents only or with a hearing at the arbitrator’s discretion) any pre-hearing motions which are similar to motions to dismiss for failure to state a claim or motions for summary adjudication. The arbitrator shall resolve all disputes in accordance with the substantive law of California and may grant any remedy or relief that a court of such state could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award. The arbitrator shall also have the power to award recovery of all costs and fees, to impose sanctions and to take such other action as the arbitrator deems necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure, the California Rules of Civil Procedure or other applicable law. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief.

     (e) Discovery. In any arbitration proceeding discovery will be permitted in accordance with the Rules. All discovery shall be expressly limited to matters directly relevant to the dispute being arbitrated and must be completed no later than 20 days before the hearing date and within 180 days of the filing of the dispute with the AAA. Any requests for an extension of the discovery periods, or any discovery disputes, will be subject to final determination by the arbitrator upon a showing that the request for discovery is essential for the party’s presentation and that no alternative means for obtaining information is available.

     (f) Class Proceedings and Consolidations. The resolution of any dispute arising pursuant to the terms of this Agreement shall be determined by a separate arbitration proceeding and such dispute shall not be consolidated with other disputes or included in any class proceeding.

     (g) Payment Of Arbitration Costs And Fees. The arbitrator shall award all costs and expenses of the arbitration proceeding.

     (h) Real Property Collateral; Judicial Reference. Notwithstanding anything herein to the contrary, no dispute shall be submitted to arbitration if the dispute concerns indebtedness secured directly or indirectly, in whole or in part, by any real property unless (i) the holder of the mortgage, lien or security interest specifically elects in writing to proceed with the arbitration, or (ii) all parties to the arbitration waive any rights or benefits that might accrue to them by virtue of the single action rule statute of California, thereby agreeing that all indebtedness and obligations of the parties, and all mortgages, liens and security interests securing such indebtedness and obligations, shall remain fully valid and enforceable. If any such dispute is not submitted to arbitration, the dispute shall be referred to a referee in accordance with California Code of Civil Procedure Section 638 et seq., and this general reference agreement is intended to be specifically enforceable in accordance with said Section 638. A referee with the qualifications required herein for arbitrators shall be selected pursuant to the AAA’s selection procedures. Judgment upon the decision rendered by a referee shall be entered in the court in which such proceeding was commenced in accordance with California Code of Civil Procedure Sections 644 and 645.

     (i) Miscellaneous. To the maximum extent practicable, the AAA, the arbitrators and the parties shall take all action required to conclude any arbitration proceeding within 180 days of

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the filing of the dispute with the AAA. No arbitrator or other party to an arbitration proceeding may disclose the existence, content or results thereof, except for disclosures of information by a party required in the ordinary course of its business or by applicable law or regulation. If more than one agreement for arbitration by or between the parties potentially applies to a dispute, the arbitration provision most directly related to the Loan Documents or the subject matter of the dispute shall control. This arbitration provision shall survive termination, amendment or expiration of any of the Loan Documents or any relationship between the parties.

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first written above.

	MELLANOX TECHNOLOGIES, INC.		WELLS FARGO BANK, NATIONAL ASSOCIATION
By:	/s/ E. Waldman	By:
	Eyal Waldman		E. Lawrence Hyde
	President and Chief Executive Officer		Vice President
By:	/s/ Michael Gray
	Michael Gray
	Chief Financial Officer

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FIRST AMENDMENT TO CREDIT AGREEMENT

     THIS AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) is entered into as of June 30, 2006, by and between MELLANOX TECHNOLOGIES, INC., a California corporation (“Borrower”), and WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”).

RECITALS

     WHEREAS, Borrower is currently indebted to Bank pursuant to the terms and conditions of that certain Credit Agreement between Borrower and Bank dated as of August 16, 2005, as amended from time to time (“Credit Agreement”).

     WHEREAS, Bank and Borrower have agreed to certain changes in the terms and conditions set forth in the Credit Agreement and have agreed to amend the Credit Agreement to reflect said changes.

     NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree that the Credit Agreement shall be amended as follows:

     1. Sections 1.5 and 1.6 are hereby renumbered as Sections 1.4 and 1.5, respectively.

     2. Section 4.1 is hereby deleted in its entirety, and the following substituted therefor:

     “SECTION 4.1. PUNCTUAL PAYMENTS. Punctually pay all principal, interest, fees or other liabilities due under any of the Loan Documents at the times and place and in the manner specified therein, and immediately upon demand by Bank, the amount by which the outstanding principal balance of any credit subject hereto at any time exceeds any limitation on borrowings applicable thereto.”

     3. Section 4.9 is hereby deleted in its entirety, and the following substituted therefor:

     “SECTION 4.9. FINANCIAL CONDITION. Maintain Borrower’s and MTL’s consolidated financial condition as follows using generally accepted accounting principles consistently applied and used consistently with prior practices (except to the extent modified by the definitions herein), with compliance determined commencing with Borrower’s financial statements for the period ending June 30, 2006:

     (a) At no time less than $7,500,000.00 of unrestricted cash and/or short-term investments and or short-term marketable securities (including the approximately $1,266,000.00 of existing restricted cash on MTL’s consolidated balance sheet (in connection with a building lease in Israel)), as reflected on Borrower’s and MTL’s consolidated balance sheet.

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     (b) Net income after taxes not less than $1.00 on an annual basis, determined as of each fiscal year end, and pre-tax profit not less than $1.00 on a quarterly basis, determined as of each second, third and fourth quarters end.”

     4. Prior to the effectiveness of this Amendment, the Credit Agreement included a minimum Tangible Net Worth requirement. As of March 31, 2006, Borrower may have been in violation of its Tangible Net Worth requirement depending on the accounting treatment to be accorded to Borrower’s Series D Redeemable Convertible Preferred Shares. To the extent that Borrower may have been in violation thereof, Bank hereby waives said violation.

     5. The following is added to the Credit Agreement as Section 4.11:

     “4.11. Accounts, Maintain, and cause MTL to maintain, its respective primary depository and investment accounts at Bank.”

     6. Except as specifically provided herein, all terms and conditions of the Credit Agreement remain in full force and effect, without waiver or modification. All terms defined in the Credit Agreement shall have the same meaning when used in this Amendment. This Amendment and the Credit Agreement shall be read together, as one document.

7. Borrower hereby remakes all representations and warranties contained in the Credit Agreement and reaffirms all covenants set forth therein. Borrower further certifies that as of the date of this Amendment there exists no Event of Default as defined in the Credit Agreement, nor any condition, act or event which with the giving of notice or the passage of time or both would constitute any such Event of Default.

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the day and year first written above.

	MELLANOX TECHNOLOGIES, INC.		WELLS FARGO BANK, NATIONAL ASSOCIATION
By:	/s/ E. Waldman	By:	/s/ E. Lawrence Hyde
	Eyal Waldman		E. Lawrence Hyde
	President and Chief Executive Officer		Vice President
By:	/s/ Michael Gray
	Michael Gray
	Chief Financial Officer

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WELLS FARGO	REVOLVING LINE OF CREDIT NOTE
$5,000,000.00	Palo Alto, California August 16, 2005

FOR VALUE RECEIVED, the undersigned Mellanox Technologies, Inc. (“Borrower”) promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”) at its office at Peninsula Technology RCBO, 400 Hamilton Avenue, Palo Alto, CA 94301, or at such other place as the holder hereof may designate, in lawful money of the United States of America and in immediately available funds, the principal sum of $5,000,000.00, or so much thereof as may be advanced and be outstanding, with Interest thereon, to be computed on each advance from the date of its disbursement as set forth herein.

1. DEFINITIONS:

     As used herein, the following terms shall have the meanings set forth after each, and any other term defined in this Note shall have the meaning set forth at the place defined:

1.1 “Business Day” means any day except a Saturday, Sunday or any other day on which commercial banks in California are authorized or required by law to close.

1.2 “Fixed Rate Term” means a period commencing on a Business Day and continuing for 1, 2, 3, 6 or 12 months, as designated by Borrower, during which all or a portion of the outstanding principal balance of this Note bears interest determined in relation to LIBOR; provided however, that no Fixed Rate Term may be selected for a principal amount less than $5,000,000.00; and provided further, that no Fixed Rate Term shall extend beyond the scheduled maturity date hereof. If any Fixed Rate Term would end on a day which is not a Business Day, then such Fixed Rate Term shall be extended to the next succeeding Business Day.

1.3 “LIBOR” means the rate per annum (rounded upward, if necessary, to the nearest whole 1/8 of 1%) determined by dividing Base LIBOR by a percentage equal to 100% less any LIBOR Reserve Percentage.

(a) “Base LIBOR” means the rate per annum for United States dollar deposits quoted by Bank as the Inter-Bank Market Offered Rate, with the understanding that such rate is quoted by Bank for the purpose of calculating effective rates of interest for loans making reference thereto, on the first day of a Fixed Rate Term for delivery of funds on said date for a period of time approximately equal to the number of days in such Fixed Rate Term and in an amount approximately equal to the principal amount to which such Fixed Rate Term applies. Borrower understands and agrees that Bank may base its quotation of the Inter-Bank Market Offered Rate upon such offers or other market indicators of the Inter-Bank Market as Bank in its discretion deems appropriate including, but not limited to, the rate offered for U.S. dollar deposits on the London Inter-Bank Market.

(b) “LIBOR Reserve Percentage” means the reserve percentage prescribed by the Board of Governors of the Federal Reserve System (or any successor) for “Eurocurrency Liabilities” (as defined in Regulation D of the Federal Reserve Board, as amended), adjusted by Bank for expected changes in such reserve percentage during the applicable Fixed Rate Term.

1.4 “Prime Rate” means at any time the rate of interest most recently announced within Bank at its principal office as its Prime Rate, with the understanding that the Prime Rate is one of Bank’s base rates and serves as the basis upon which effective rates of interest are calculated for those loans making reference thereto, and is evidenced by the recording thereof after its announcement in such internal publication or publications as Bank may designate.

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05681, #5197138389

2. INTEREST:

2.1 Interest. The outstanding principal balance of this Note shall bear interest (computed on the basis of a 360-day year, actual days elapsed) either (a) at a fluctuating rate per annum .7500% below the Prime Rate in effect from time to time, or (b) at a fixed rate per annum determined by Bank to be 2.100% above LIBOR in effect on the first day of the applicable Fixed Rate Term. When interest is determined in relation to the Prime Rate, each change in the rate of interest hereunder shall become effective on the date each Prime Rate change is announced within Bank. With respect to each LIBOR selection option selected hereunder, Bank is hereby authorized to note the date, principal amount, interest rate and Fixed Rate Term applicable thereto and any payments made thereon on Bank’s books and records (either manually or by electronic entry) and/or on any schedule attached to this Note, which notations shall be prima facie evidence of the accuracy of the information noted.

2.2 Selection of Interest Rate Options. At any time any portion of this Notes bears interest determined in relation to LIBOR, it may continued by Borrower at the end of the Fixed Rate Term applicable thereto so that all or a portion thereof bears interest determined in relation to the Prime Rate or to LIBOR for a new Fixed Rate Term designated by Borrower. At any time any portion of this Note bears Interest determined in relation to the Prime Rate, Borrower may convert all or a portion thereof so that it bears interest determined in relation to LIBOR for a Fixed Rate Term designated by Borrower. At such time as Borrower requests an advance hereunder or wishes to select a LIBOR option for all or a portion of the outstanding principal balance hereof, and at the end of each Fixed Rate Term, Borrower shall give Bank notice specifying: (a) the interest rate option selected by Borrower; (b) the principal amount subject thereto; and (c) for each LIBOR selection, the length of the applicable Fixed Rate Term. Any such notice may be given by telephone (or such other electronic method as Bank may permit) so long as, with respect to each LIBOR selection, (i) if requested by Bank, Borrower provides to Bank written confirmation thereof not later than 3 Business Days after such notice is given, and (ii) such notice is given to Bank prior to 10:00 a.m. on the fist day of the Fixed Rate Term, or at a later time during any Business Day if Bank, at its sole option but without obligation to do so, accepts Borrower’s notice and quotes a fixed rate to Borrower. If Borrower does not immediately accept a fixed rate when quoted by Bank, the quoted rate shall expire and any subsequent LIBOR request from Borrower shall be subject to a redetermination by Bank of the applicable fixed rate. If no specific designation of interest is made at the time any advance is requested hereunder or at the end of any Fixed Rate Term, Borrower shall be deemed to have made a Prime Rate interest selection for such advance or the principal amount to which such Fixed Rate Term applied.

2.3 Taxes and Regulatory Costs. Borrower shall pay to Bank immediately upon demand, in addition to any other amounts due or to become due hereunder, any and all (a) withholdings, interest equalization taxes, stamp taxes or other taxes (except income and franchise taxes) imposed by any domestic or foreign governmental authority and related in any manner to LIBOR, and (b) future, supplemental, emergency or other changes in the LIBOR Reserve Percentage, assessment rates imposed by the Federal Deposit Insurance Corporation, or similar requirements or costs imposed by any domestic or foreign governmental authority or resulting from compliance by Bank with any request or directive (whether or not having the force of law) from any central bank or other governmental authority and related in any manner to LIBOR to the extent they are not included in the calculation of LIBOR. In determining which of the foregoing are attributable to any LIBOR option available to Borrower hereunder, any reasonable allocation made by Bank among its operations shall be conclusive and binding upon Borrower.

2.4 Payment of Interest. Interest accrued on this Note shall be payable on the last day of each month, commencing August 31, 2005.

2.5 Default Interest. From and after the maturity date of this Note, or such earlier date as all principal owing hereunder becomes due and payable by acceleration or otherwise, the outstanding principal balance of this Note shall bear interest until paid in full at an increased rate per annum (computed on the basis of a 360-day year, actual days elapsed) equal to 4% above the rate of interest from time to time applicable to this Note.

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05681,#5197138389

3. BORROWING AND REPAYMENT:

3.1 Borrowing and Repayment. Borrower may from time to time during the term of this Note borrow, partially or wholly repay its outstanding borrowings, and reborrow, subject to all of the limitations, terms and conditions of this Note and of the Credit Agreement between Borrower and Bank defined below; provided however, that the total outstanding borrowings under this Note shall not at any time exceed the principal amount stated above. The unpaid principal balance of this obligation at any time shall be the total amounts advanced hereunder by the holder hereof less the amount of principal payments made hereon by or for any Borrower, which balance may be endorsed hereon from time to time by the holder. The outstanding principal balance of this Note shall be due and payable in full on June 30, 2007.

3.2 Advances. Advances hereunder, to the total amount of the principal sum available hereunder, may be made by the holder at the oral or written request of (a) Eyal Waldman or Michael Gray, any one acting alone, who are authorized to request advances and direct the disposition of any advances until written notice of the revocation of such authority is received by the holder at that office designated above, or (b) any person, with respect to advances deposited to the credit of any deposit account of any Borrower, which advances, when so deposited, shall be conclusively presumed to have been made to or for the benefit of each Borrower regardless of the fact that persons other than those authorized to request advances may have authority to draw against such account. The holder shall have no obligation to determine whether any person requesting an advance is or has been authorized by any Borrower.

3.3. Application of Payments. Each payment made on this Note shall be credited first, to any interest then due and second, to the outstanding principal balance hereof. All payments credited to principal shall be applied first, to the outstanding principal balance of this Note which bears interest determined in relation to the Prime Rate, if any, and second, to the outstanding principal balance of this Note which bears interest determined in relation to LIBOR, which such payments applied to the oldest Fixed Rate Term first.

4. PREPAYMENT:

4.1 Prime Rate. Borrower may repay principal on any portion of this Note which bears interest determined in relation to the Prime Rate at any time, in any amount and without penalty.

4.2 LIBOR. Borrower may prepay principal on any portion of this Note which bears interest determined in relation to LIBOR at any time and in the minimum amount of $500,000.00; provided however, that if the outstanding principal balance of such portion of this Note is less than said amount, the minimum prepayment amount shall be the entire outstanding principal balance thereof. In consideration of Bank providing this prepayment option to Borrower; or if any such portion of this Note shall become due and payable at any time prior to the last day of the Fixed Rate Term applicable thereto by acceleration or otherwise, Borrower shall pay to Bank immediately upon demand a fee which is the sum of the discounted monthly differences for each month from the month of prepayment through the month in which such Fixed Rate Term matures, calculated as follows for each such month:

(a) Determine the amount of interest which would have accrued each month on the amount prepaid at the interest rate applicable to such amount had it remained outstanding until the last day of the Fixed Rate Term applicable thereto.

(b) Subtract from the amount determined in (a) above the amount of interest which would have accrued for the same month on the amount prepaid for the remaining term of such Fixed Rate Term at LIBOR in effect on the date of prepayment for new loans made for such term and in a principal amount equal to the amount prepaid.

(c) If the result obtained in (b) for any month is greater than zero, discount that difference by LIBOR used in (b) above.

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05681, #5197138389

Each Borrower acknowledges that prepayment of such amount may result in Bank incurring additional costs, expenses and/or liabilities, and that it is difficult to ascertain the full extent of such costs, expenses and/or liabilities. Each Borrower, therefore, agrees to pay the above-described prepayment fee and agrees that said amount represents a reasonable estimate of the prepayment costs, expenses and/or liabilities of Bank. If Borrower fails to pay any prepayment fee when due, the amount of such prepayment fee shall thereafter bear interest until paid at a rate per annum 2.000% above the Prime Rate in effect from time to time (computed on the basis of a 360-day year, actual days elapsed). Each change in the rate of interest on any such past due prepayment fee shall become effective on the date each Prime Rate change is announced within Bank.

5. EVENTS OF DEFAULT:

     This Note is made pursuant to and is subject to the terms and conditions of that certain Credit Agreement between Borrower and Bank dated as of August 16, 2005, as amended from time to time (the “Credit Agreement”). Any default in the payment or performance of any obligation under this Note, or any defined event of default under the Credit Agreement, shall constitute an “Event of Default” under this Note.

6. MISCELLANEOUS:

6.1 Remedies. Upon the occurrence of any Event of Default, the holder of this Note, at the holder’s option, may declare all sums of principal and interest outstanding hereunder to be immediately due and payable without presentment, demand, notice of nonperformance, notice of protest, protest or notice of dishonor, all of which are expressly waived by each Borrower, and the obligation, if any, of the holder to extend any further credit hereunder shall immediately cease and terminate. Each Borrower shall pay to the holder immediately upon the demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys’ fees (to include outside counsel fees and all allocated costs of the holder’s in-house counsel), expended or incurred by the holder in connection with the enforcement of the holder’s rights and/or the collection of any amounts which become due to the holder under this Note, and the prosecution or defense of any action in any way related to this Note, including without limitation, any action for declaratory relief, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by Bank or any other person) relating to any Borrower or any other person or entity.

6.2 Obligations Joint and Several. Should more than one person or entity sign this Note as a Borrower, the obligations of each such Borrower shall be joint and several.

6.3 Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of California.

IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first written above.

Mellanox Technologies, Inc.

By:	/s/ Eyal Waldman
	Eyal Waldman, President & Chief Executive Officer
By:	/s/ Michael Gray
	Michael Gray, Chief Financial Officer

PROMNOTE.CA (04/05)	20050603057 / Page 4
Revolving Line of Credit Note
05681,#5197138389

ADDENDUM TO PROMISSORY NOTE

     THIS ADDENDUM is attached to and made a part of that certain promissory note executed by MELLANOX TECHNOLOGIES, INC. (“Borrower”) and payable to WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”), or order, dated as of August 16, 2005, in the principal amount of Five Million Dollars ($5,000,000.00) (the “Note).

     The first sentence of Section 2.1 of the Note is hereby amended to read in its entirety as follows:

The outstanding principal balance of this Note shall bear interest (computed on the basis of a 360-day year, actual day elapsed), as follows: (1) at any time the outstanding principal balance is less than or equal to $2,000,000.00, either (a) at a fluctuating rate per annum .7500% below the Prime Rate in effect from time to time, or (b) at a fixed rate per annum determined by Bank to be 2.1000% above LIBOR in effect on the first day of the applicable Fixed Rate Term, and (2) at any time the outstanding principal balance is greater than $2,000,000.00, either (x) at a fluctuating rate per annum 1.7500% below the Prime Rate in effect from time to time, or (y) at a fixed rate per annum determined by Bank to be 1.100% above LIBOR in effect on the first day of the applicable Fixed Rate Term.

     IN WITNESS WHEREOF, this Addendum has been executed as of the same date as the Note.

Mellanox Technologies, Inc.
By:	/s/ Eyal Waldman
	Eyal Waldman, President & Chief Executive Officer
By:	/s/ Michael Gray
	Michael Gray, Chief Financial Officer

EX-21.1

Exhibit 21.1

List of Subsidiaries

     Mellanox Technologies, Inc., a California corporation, formed on March 5, 1999, is the only wholly-owned subsidiary of Mellanox Technologies, Ltd.

EX-23.3

Exhibit 23.3

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the use in this Registration Statement on Form S-1 of our report dated September 28, 2006 relating to the financial statements and financial statement schedules of Mellanox Technologies, Ltd. which appears in such Registration Statement. We also consent to the references to us under the headings “Experts” and “Selected Financial Data” in such Registration Statement.

/s/ PricewaterhouseCoopers, LLP
San Jose, California
September 28, 2006

EX-23.4

Exhibit 23.4

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the use in this Registration Statement on Form S-1 of our report dated June 29, 2006 relating to the financial statements and financial statement schedules of Mellanox Technologies, Ltd. which appears in such Registration Statement. We also consent to the references to us under the headings “Experts” and “Selected Financial Data” in such Registration Statement.

/s/ Kesselman & Kesselman
Haifa, Israel
September 28, 2006